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2022 (5) TMI 749 - AT - Service TaxVoluntary Compliance Encouragement Scheme - classification of services - works contract or construction of road under civil construction services? - factual errors in the computation of the demand or not - eligibility for cum-duty benefit - eligibility for exemption on the service rendered for construction of a road - Penalty. Whether there is a calculation error in the demand confirmed? - HELD THAT - The Commissioner arrived at the differential duty payable by way of a Chart and finds that I also hold that the differential amount of Rs.1,29,744/- is recoverable from the declarant under section 73 of the Finance Act, 1994 read with Section 111 of Finance Act, 2013. However, he has confirmed an amount of Rs.3,64,587/-. The appellant has given a calculation sheet to show the differential duty payable for different years from 2008-09 to 2011-12. The adjudicating authority has not considered these submissions. There is also an inherent contradiction in the calculation and findings by the adjudicating authority. Whether the adjudicating authority was correct in classifying the services rendered by the appellant under Works Contract Service ? - HELD THAT - The classification of taxable services has to be on the basis of nature of the work and terms of the contract. Though works contract has service and supply of goods as essential ingredients, vice-versa may not be true. The classification of services can be done only when the same falls under works contract as defined in the Statute. - There is force in the submissions of the appellant. The classification of the service should necessarily depend on the nature of the work and the contract and not on the basis of nomenclature - Whether the appellant is eligible for cum-duty benefit? - HELD THAT - The appellant has made out a prima facie case for the cum-duty benefit - reliance placed in the case of P. JANI CO. VERSUS COMMR. OF SERVICE TAX, AHMEDABAD 2010 (7) TMI 297 - CESTAT, AHMEDABAD where it was held that as regards the request for treatment of the amount received as inclusive of service tax, I agree with the contention of the learned advocate that the decision of the Tribunal in the case of COMMR OF C. EX CUS., PATNA VERSUS ADVANTAGE MEDIA CONSULTANT 2008 (3) TMI 59 - CESTAT KOLKATA applies and in view of the provisions of Section 67 of Finance Act, 1994, the amount received has to be treated as inclusive of tax. Whether the appellant is eligible for exemption on the service rendered for construction of a road? - Commissioner has denied exemption from the service tax on the ground that it was a private road; no free access was permissible to general public; the value of services in construction of a road was not separately worked out and that the services are not covered in exempted services - HELD THAT - The provision of section 65 (105) (zzzza) of the Finance Act shows that the said provision does not differentiate between a public road or a private road. Therefore, it appears that the observations of the Commissioner are not correct - the impugned order has not appreciated the legal position correctly and has not given findings backed by law and reason. The appellant did not place on record the necessary documents and submissions before the Commissioner. Therefore, in the interest of justice, the issue requires to be remanded to the adjudicating authority for proper appreciation of law and the facts of the case - appellant may submit the necessary documentary evidence and submissions before the adjudicating authority. Penalty - HELD THAT - Understandably, this is a case opened up after a declaration had been filed by the appellant under the VCES. Though, the authorities can verify the correctness of the claim of the appellant and arrive at the exact tax liability, imposition of any penalty would be detrimental to the Scheme itself. In fact, imposition of penalty would defeat the very purpose of bringing in such an amnesty Scheme to encourage voluntary tax compliance. Therefore, penalty cannot be imposed, in the facts and circumstances of the case. The appeal is partly allowed by way of remand to the adjudicating authority. Penalties imposed are, however, set aside.
Issues Involved:
1. Calculation error in the demand confirmed. 2. Classification of services under 'Works Contract Service'. 3. Eligibility for cum-duty benefit. 4. Eligibility for exemption on the service rendered for construction of a road. Detailed Analysis: 1. Calculation Error in the Demand Confirmed: The appellant argued that there were factual errors in the computation of the demand. Specifically, while the Commissioner mentioned a differential amount of Rs.1,29,744/- as recoverable, he confirmed a demand of Rs.3,64,587/-. This discrepancy was not addressed adequately by the adjudicating authority, indicating possible calculation errors or misinterpretations in the impugned order. 2. Classification of Services under 'Works Contract Service': The Commissioner classified the services rendered by the appellant under 'Works Contract Service' based on the fact that the appellant was registered for this service and had opted for the composition scheme. The appellant contended that registration does not bind them to a particular service classification and that they should not be compelled to pay service tax according to the provisions for those specified services if they provide other services. The Tribunal found contradictions in the Commissioner’s findings, noting that the classification should be based on the nature of the work and the terms of the contract, not merely on registration. 3. Eligibility for Cum-Duty Benefit: The appellant argued that the value shown in the Income Tax returns should be treated as cum-duty value under section 67(2) of the Finance Act, 1994. The Commissioner denied this benefit, stating that the work orders did not specify whether the value was inclusive of service tax. The Tribunal found merit in the appellant’s argument, supported by precedents such as the Advantage Media Consultant case, which established that amounts received should be treated as inclusive of tax under section 67 of the Finance Act. 4. Eligibility for Exemption on the Service Rendered for Construction of a Road: The Commissioner denied exemption from service tax for the construction of a private road, arguing that it was not accessible to the general public and the value of services was not separately worked out. The Tribunal noted that the relevant provisions of the Finance Act do not differentiate between public and private roads. Therefore, the denial of exemption based on the road being private was incorrect. Conclusion: The Tribunal found that the impugned order did not correctly appreciate the legal position and contained contradictions. The case was remanded to the adjudicating authority for a proper appreciation of the law and facts, allowing the appellant to submit necessary documentary evidence. The penalties imposed were set aside, as imposing penalties would undermine the purpose of the Voluntary Compliance Encouragement Scheme (VCES), which aims to encourage voluntary tax compliance. The appeal was partly allowed by way of remand, and penalties were set aside.
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