2022 (3) TMI 1320 - AT - Service Tax

Levy of service tax - Construction of Residential Complex Services/ Construction of Commercial Complex Services - corroborative evidence is produced by the department to show that the Appellant have received unaccounted cash towards provision of construction services during the disputed period or not - Reliability on the statements - Admissible evidence or not - Jurisdiction to issue SCN - penalties on co-appellant - HELD THAT - The revenue has proceeded in confirmation of the demand on the basis of documents and information provided by the Income Tax Department. The entire case of Revenue in the present matter is based on .xls sheets retrieved by the Income Tax Authorities and Statement of Smt. Kalindi Shah recorded by the Income tax Authorities. However, it is seen that apart from recording the statement of Shri Venkataramana Ganesa in the present matter no independent investigation has been carried out by the department. We observed that Department has not brought out any independent facts or evidence as who is the service receiver, whether the cash receipts shown in the xls. Files pertaining to the service component only or otherwise and no corroborative evidence produced in support of details mentioned in the said xls. Files. In the present matter collection of a huge amount of cash in respect of provisions of services involved. However not a single rupee of unaccounted cash was found during the search conducted by the income tax. Reliability on the statements - Admissible evidence or not - HELD THAT - In the whole matter revenue rely upon the statement of Ms. Kalindi Shah and Shri Venkataramana Ganesna both are the employees of the Assessee s company. No statement of Directors of the Appellant company recorded by the revenue to find out the truth of employee s statements. It was on records that Assessee company have raised the dispute on both the statements of employees recorded during the course of investigation by Income tax Authority and revenue. Therefore the said statement cannot be relied upon as admissible evidence in terms of the provisions of Section 9D of the Act. In the present case the Revenue has raised the Service tax demand merely on the ground of investigation conducted by the Income Tax Authorities. We find that demand cannot be raised merely on the basis of assessment made by the Income Tax Authorities. Tribunal in the case of M/S. RAVI FOODS PVT. LTD. OTHERS VERSUS CCE, HYDERABAD 2010 (12) TMI 290 - CESTAT, BANGALORE has held that admission by assessee to Income Tax department as regards undisclosed/suppressed sales turnover cannot be held to be on account of clandestine removal of their final products, in the absence of any other corroborative evidence. In the present matter entire demand of service tax as proposed in the show cause notice is not sustainable. Construction of Residential Complex Service/ Construction of Commercial Complex Service - period from 01.04.2014 to 30.06.2017 - Ld. Adjudicating Authority in present case dropped the demand on the ground that in all cases where the assessee have entered into a sales deed or an Agreement to sale prior to 01.04.2014, the amount have been received prior to the said date - HELD THAT - The Ld. Adjudicating Authority failed to extend the same logic where the booking amount is received by cheque and the letters of reservation have been issued prior to 01.04.2014. The demand of Service tax confirmed by the Ld. Adjudicating authority pertaining the period where the letters of reservation have been issued prior to 01.04.2014 and cheque received by Appellant prior to 01.04.2014 not sustainable on this ground. The Revenue could not establish the charge of cash receipt beyond doubt, accordingly entire demand raised in the Show Cause Notice will not sustain even without going to the grounds of the department s appeal - the Adjudicating Authority with careful application of mind dealt with the issue on facts and statutory provisions for dropping of part demand. Therefore, we do not find any infirmity in the finding of the impugned order, except the finding on receipt of cash. Accordingly, the same is upheld to the above extent. Consequently, the Revenue s appeal is liable to be dismissed. Jurisdiction - whether the DGGI has power to issue show cause notice? - HELD THAT - The entire case is decided on its fact and merit, we do not address the issue of jurisdiction and the said issue is left open. Penalties imposed on co-appellants - HELD THAT - The demand itself is not sustainable against the main Appellant, hence the question of penalties on co-appellants does not arise. Decided in favor of assessee.

Summary

Issues Involved:
1. Jurisdiction of DGGI Officers to issue Show Cause Notice (SCN).
2. Admissibility of evidence (Excel sheets and statements) obtained during Income Tax search.
3. Classification of services under 'Construction of Complex Service' or 'Work Contract Service'.
4. Demand of Service Tax based on uncorroborated evidence.
5. Demand of Service Tax on amounts not received.
6. Penalties imposed on co-appellants.

Issue-wise Detailed Analysis:

1. Jurisdiction of DGGI Officers to issue Show Cause Notice (SCN):
The appellant argued that only jurisdictional officers are empowered to issue SCNs under Section 73 of the Finance Act, 1994, and not DGGI officers. They relied on the Supreme Court judgment in M/s Canon India Vs. Commissioner of Customs. The tribunal did not address this issue directly since the case was decided on facts and merits, leaving the jurisdictional question open.

2. Admissibility of Evidence Obtained During Income Tax Search:
The tribunal found that the revenue's case was primarily based on Excel sheets retrieved by the Income Tax Authorities and the statement of Ms. Kalindi Shah. However, no independent investigation was conducted by the department to corroborate these documents. The tribunal emphasized that electronic records must comply with Section 65B of the Evidence Act to be admissible, which was not done in this case. The tribunal concluded that the demand based on these uncorroborated documents was not sustainable.

3. Classification of Services under 'Construction of Complex Service' or 'Work Contract Service':
The appellant contested the classification of their services under 'Construction of Complex Service,' arguing that their contracts were indivisible composite contracts involving materials, land, and services. The tribunal agreed with the appellant, noting that the demand under an erroneous category was not sustainable. It was also highlighted that the demand on amounts charged for the sale of flats was not sustainable as per the Delhi High Court decision in Suresh Kumar Bansal Vs Union of India.

4. Demand of Service Tax Based on Uncorroborated Evidence:
The tribunal observed that the department had not provided any independent facts or evidence to support the details mentioned in the Excel sheets. The tribunal cited several case laws emphasizing the need for corroborative evidence in evasion cases. The tribunal concluded that the demand based on uncorroborated evidence was not sustainable.

5. Demand of Service Tax on Amounts Not Received:
The tribunal noted that the revenue had demanded Service Tax on amounts shown as outstanding, which had not been received by the appellant. The tribunal agreed with the appellant's contention that Service Tax cannot be levied on amounts not received, as consideration is an integral part of a service. The tribunal also pointed out that the revenue's own investigation did not compute Service Tax on outstanding cheque payments, indicating an inconsistency in their approach.

6. Penalties Imposed on Co-appellants:
Given that the demand against the main appellant was not sustainable, the tribunal concluded that the penalties imposed on the co-appellants were also not warranted.

Conclusion:
The tribunal allowed the appeals filed by J.P. Iscon Pvt. Ltd. and others, and dismissed the revenue's appeal. The tribunal found that the entire demand of Service Tax was not sustainable due to the lack of corroborative evidence, improper classification of services, and the inadmissibility of electronic evidence. The penalties on co-appellants were also set aside.