2019 (8) TMI 259 - AT - Service Tax

Taxability - amount of penalty deducted by the principal from their bills - work relating to road construction done for M/s.Bhagwati Construction and Supplier, Jhansi - chargeability to service tax - extended period of limitation - HELD THAT - In spite of audit conducted from time to time, no such objection was raised by the Department even in the aforesaid Audit Report dated 15.3.2011 - the demand of service tax for the extended period of limitation is bad, thus is set aside. So far as the demand for normal period is concerned, we hold that if the amount of penalty has been deducted in terms of the contract between the parties, and the appellant is not entitled to receive the same, at any further point of time, in such case, the amount of consideration under Section 67 of the Act stands ipso facto reduced - on such penalty, no service tax is exigible or chargeable - demand set aside. Construction of road done for M/s.Bhagwati construction Suppliers, Jhansi - HELD THAT - The demand has been confirmed for want of sufficient evidence by the court below. This demand is set aside and the matter is remanded to the file of the Adjudicating Authority for de novo consideration - Penalty set aside as there is no suppression of facts or deliberate default on the part of the appellant. Appeal allowed in part and part matter on remand.

Summary

Issues:
1. Charging of service tax on penalty deducted by principal from bills.
2. Charging of service tax on road construction work for a specific company.

Analysis:
1. The appellant appealed against the service tax charged on the penalty deducted by the principal from their bills. The appellant provided consulting engineer services to various clients and was audited by the Revenue, which raised objections regarding non-payment of service tax on the amount of TDS deducted by the principal. The appellant accepted the objection and deposited the service tax on TDS for the specified period. The Revenue issued a show cause notice demanding service tax on the penalty deducted by the principal, which was adjudicated, resulting in a confirmed amount towards tax on penalty deducted. The appellant contested this and appealed to the Commissioner (Appeals), who dismissed the appeal. The Tribunal held that the demand for service tax for the extended period of limitation was invalid and set it aside. They also ruled that if the penalty amount was deducted as per the contract and the appellant was not entitled to receive it, then no service tax was chargeable on that penalty amount. Therefore, the demand on this account was set aside.

2. Regarding the charging of service tax on road construction work done for a specific company, the Tribunal found that the demand was confirmed due to insufficient evidence. This demand was set aside, and the matter was remanded to the Adjudicating Authority for reevaluation. The Tribunal noted that there was no suppression of facts or deliberate default by the appellant, and thus, they set aside the penalty imposed under Section 76 and Section 78 of the Act. The appeal was allowed in part, and the case was remanded for re-adjudication specifically concerning the road construction work for the mentioned company. The appellant was directed to submit necessary documents and explanations to the Adjudicating Authority within a specified timeframe.