2017 (12) TMI 1440 - AT - Service Tax

Rejection of VCES application - the Revenue noticed that the appellant has failed to declare his service tax liability properly and by-alleging substantial misdeclration of service tax dues in the VCES declaration, a SCN was issued - Held that - the total amount of consideration received by the appellant has not been found to be any different from what was declared - Revenue has not made out a case of substantial misdeclaration in this case. They have not brought on record any contract or document which indicates that the appellant has not made full declaration of the service tax liability for the disputed period. The Revenue has only taken a different interpretation as far as the classification of services. This cannot tantamount to substantial misdeclaration - tax liability accepted in the VCES by the appellant is not being interfered - appeal allowed - decided in favor of appellant.

Summary

Issues:
Delay in filing appeal, Classification of services under Service Tax Voluntary Compliance Encouragement Scheme (VCES), Misdeclaration of service tax liability, Abatement under Notification No.26/2012, Works contract services vs. construction of complex services.

Analysis:
The appeal was filed with a delay of 266 days due to health issues of the partner and change of counsel. The Tribunal condoned the delay and proceeded to hear the appeal on merit with the consent of both parties. The appellant, engaged in construction activities, had declared service tax liability under VCES for April 2011 to December 2012. The Revenue alleged substantial misdeclaration and demanded additional service tax of ?4,88,415 along with penalties. The main contention was the classification of services under VCES and the denial of abatement under Notification No.26/2012.

The appellant claimed abatement under Notification No.26/2012 for construction of complex services, but the Revenue alleged misdeclaration based on VAT returns categorizing services as works contract services. The appellant argued that the consideration received included the cost of land, justifying classification under construction of complex services. The Revenue relied on a Supreme Court decision classifying services involving goods transfer as works contract services. The Tribunal noted the Revenue's reclassification based on VAT returns but found no substantial misdeclaration in the service tax liability declaration under VCES.

The Tribunal emphasized that the VCES aimed to encourage voluntary compliance and accepted declarations unless substantially misdeclared. The Revenue's differing interpretation of service classification did not constitute substantial misdeclaration as no evidence showed incomplete declaration of service tax liability. Consequently, the Tribunal set aside the impugned order, affirming the tax liability accepted under VCES while allowing the appeal. The decision highlighted the distinction between works contract and construction of complex services under the Finance Act, 1994, and VAT law, emphasizing the importance of accurate service classification for tax purposes.