2024 (3) TMI 282 - AT - Service Tax

False declaration under Service Tax Voluntary Compliance Encouragement Scheme of 2013 - appellant is involved in the construction activities and has declared their tax dues by wrongly availing the abatement on the value of construction work and on the advance money received for flat booking respectively - Non-inclusion of amount of liability under reverse charge mechanism for obtaining legal consultancy and with respect to the remunerations paid to their Director - failure to mention income with the service tax liability of Rs.2,28,08,414/- for the period from April, 2011 to December, 2012 - recovery alongwith interest and penalties. Demand of service tax for constructing educational institutes - HELD THAT - For any organisation or institutions to qualify as having been established solely for educational, religious, charitable, help, sanitation or philanthropic purposes, for non-commercial status, it is required that same fulfils the condition of being run without any profit making. None of the educational Institutes were observed to have a non-commercial status. There are no reason to differ from these findings because there is no denial apparent on record that the educational institutions for whom appellant constructed the complex, were charging fees from the students. None of these educational Institutes are Government owned institutes. Also there is no evidence to prove that despite collection of fee, there was no profit to these institutes and that these educational institutes were non-profit driven. Hence the demand of service tax pertaining to construction of educational institute activity confirmed. Demand with respect to construction of residential complexes - HELD THAT - There is nothing in agreement to suggest that these houses were the part and parcel of the same complex. Hence there is no evidence produced by the Department that these 18 agreements were 18 different residential units (more than 12 units) in a common area with several common facilities, as is the requirement in terms of section 65(91a) of Finance Act, 1994 which defines the residential complex. Once the construction does not qualify to be called as a residential complex, question of any services rendered for constructing the same to be taxable does not at all arises. Hence, the findings of the adjudicating authority below confirming the demand alleging the construction of individual house as a taxable service, service of construction of Residential Complex are liable to be set aside. Value of service tax which has been alleged to have been concealed in the VCES by the appellant that is with respect to remuneration paid to the Directors and with respect to the amounts spent for legal and professional consultancy - HELD THAT - Director remuneration refers to the compensation which a company gives to its Directors for the services rendered by him either in the form of fees, salary or by use of company s assets. But the mere fact of payment of remuneration is not sufficient to hold that there exists an employer employee relationship between the company and the Director in which situation only the remuneration paid could have been taxable. The Revenue has not produced any evidence that on the amount of remuneration TDS in terms of section 192 of Income Tax Act was ever deducted. Hence, there arises no Service Tax liability qua the amount of said remuneration. Order under challenge is liable to be set aside qua this demand - the value for legal and professional services the same is very much taxable, as it qualifies to be called as service for post negative list period it is not covered under the exclusion clause of section 66 D of Finance Act. Hence, there are no infirmity while the demand on this count, has been confirmed. Appeal allowed in part.

Summary

Issues involved:
The issues involved in the judgment are non-appearance of the appellant, incorrect declaration under the Service Tax Voluntary Compliance Encouragement Scheme, demand of service tax for construction activities, and the tax liability on remuneration paid to directors and legal consultancy expenses.

Non-Appearance of Appellant:
The appellant did not appear for the hearing despite multiple warnings and adjournments. The Department had served notice upon the appellant, and it was verified that the appellant did not benefit under the SVLDRS Scheme. Due to the continued absence of the appellant, the appeal was decided on merits in the absence of the appellant.

Incorrect Declaration under VCES:
The appellant filed a false declaration under the Service Tax Voluntary Compliance Encouragement Scheme, declaring tax dues incorrectly. The appellant failed to mention income with service tax liability for a specific period, leading to a proposed recovery of the amount along with interest and penalties.

Demand of Service Tax for Construction Activities:
The appellant was involved in construction activities and had wrongly availed abatement on the value of construction work. The appellant failed to include various amounts in their declaration, such as construction receipts, service tax on remuneration, and legal consultancy expenses. The demand for service tax was confirmed for construction of educational institutes but set aside for individual residential houses.

Tax Liability on Remuneration and Legal Consultancy:
Regarding the tax liability on remuneration paid to directors, it was held that the mere payment of remuneration does not establish a taxable relationship without evidence of TDS deduction. The demand for service tax on director remuneration was set aside. However, the demand for service tax on legal and professional consultancy services was confirmed as it qualified as a taxable service post the negative list period.

Conclusion:
The judgment confirmed the demand for service tax on construction of educational institutes and legal consultancy services, while setting aside the demands for construction of individual residential houses and remuneration paid to directors. As a result, the appeal was partly allowed.