2023 (10) TMI 1090 - AT - Service Tax

Works which involve supply of material and service - composite contract - Denial of benefit of abatement on the gross value to the extent of 67% as provided in N/N. 01/2006-ST dated 01.03.2006 - time limitation - Penalties under Section 77 and 78 of FA - HELD THAT - The service recipient is also admittedly deducted 4% Works Contract Tax TDS under the Punjab VAT Act, 2005 on the payment made to the appellant and this 4% Works Contract Tax TDS is only deducted if the payment is made for a Works Contract in terms of Section 27 of the Punjab VAT Act, 2005. The CBEC has issued a Circular No. B1/16/2007-TRU dated 22.05.2007 and clarified Contracts treated as works contract for purposes of levy of VAT/Sales Tax shall be treated as works contract for purpose of levy of Service Tax. This is clear from the definition under Section 65(105)(zzzza) - The said Circular issued by the Board is binding on the Revenue Authorities as held by the Hon ble High Court of Punjab and Haryana in the case of AMBUJA CEMENTS LTD. VERSUS UNION OF INDIA 2009 (2) TMI 50 - PUNJAB HARYANA HIGH COURT . Time Limitation - HELD THAT - The substantial demand is barred by limitation because the department has not been able to establish that the appellant had intended to evade the payment of service tax which is essential ingredients to invoke the extended period of limitation. Penalties under Section 77 and 78 of FA - HELD THAT - Since the Audit raised the objection, the appellant paid the service tax after availing the abatement of 67% alongwith interest and therefore, it can safely be said that there was no intention to evade the payment of service tax, therefore, the penalties under Section 77 and 78 are not liable to be imposed on them. The impugned order is not sustainable in law and the same is set-aside - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the demand of service tax, abatement under Notification No. 1/2006-ST, penalty under Section 76 of the Finance Act, 1994, benefit of Section 80, penalties under Section 77 and 78 of the Act, and the time period for the demand of service tax.

Demand of Service Tax:
The appellant, engaged in providing commercial or industrial construction services, was found to have received payments for such services but had not paid the corresponding service tax. A show cause notice was issued demanding service tax, interest, and penalties. The appellant contended that they had already paid a portion of the service tax and should be entitled to abatement under Notification 1/2006. The Adjudicating authority confirmed the demand, leading to an appeal before the Commissioner (Appeals) who partially allowed the appellant's claim for abatement but did not extend the full benefit. The Tribunal examined the facts and submissions of both parties.

Abatement under Notification No. 1/2006-ST:
The appellant argued that they were entitled to abatement under Notification 1/2006 for works involving the supply of material along with services. They provided evidence, including invoices and a certificate from the service recipient, to support their claim that the works undertaken were composite in nature. The appellant also highlighted relevant legal provisions, circulars, and judicial precedents to establish their entitlement to abatement. The Tribunal considered these arguments and evidence in its decision.

Penalties and Benefit of Section 80:
The appellant contended that they should not be penalized as they were unaware of their service tax liability and promptly paid the tax upon realization. They sought the benefit of Section 80 to avoid penalties. The Tribunal evaluated whether penalties under Section 77 and 78 should be imposed considering the circumstances of the case, including the appellant's compliance post-audit objection. The appellant's arguments regarding the time period for the demand of service tax were also addressed.

Judgment:
After considering the submissions and evidence presented by both parties, the Tribunal found that the Commissioner (Appeals) had not correctly allowed the benefit of abatement to the appellant. The Tribunal noted that sufficient evidence had been provided to establish that the works undertaken were indeed composite contracts. Additionally, the Tribunal referenced relevant circulars and legal provisions supporting the appellant's claim for abatement. It was also observed that the demand for service tax was barred by limitation, as there was no evidence of intent to evade payment. Consequently, the Tribunal set aside the impugned order, allowing the appeal of the appellant with any consequential relief as per law.