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2024 (6) TMI 1185 - AT - Service TaxIssues Involved: 1. Entitlement to concessional rate of service tax under the Composition Scheme. 2. Inclusion of free materials supplied by service recipients in taxable value. 3. Validity of the show cause notice and subsequent demand. 4. Invocation of the extended period of limitation. 5. Penalties under Sections 77 and 78 of the Finance Act, 1994. 6. Taxability of construction services for non-commercial entities. Detailed Analysis: 1. Entitlement to Concessional Rate of Service Tax: The appellant contended that they were entitled to a concessional rate of service tax at 4% under the Composition Scheme. The Department argued that the appellant had not included the value of free materials supplied by the service recipients in the taxable value, thus making them ineligible for the concessional rate and liable to pay service tax at the standard rates of 12.36% and 10.36% for different periods. The Tribunal referred to the Supreme Court's decision in CST vs. Bhayana Builders (P) Ltd., which clarified that the value of free materials supplied by the service recipient should not be included in the taxable value. Consequently, the appellant's entitlement to the concessional rate was upheld. 2. Inclusion of Free Materials Supplied by Service Recipients: The Department's main allegation was that the appellant did not add the value of free materials supplied by the service recipients to the taxable value. The Tribunal found that this issue was settled by the Supreme Court in CST vs. Bhayana Builders (P) Ltd., which held that the value of free materials should not be included in the taxable value. Therefore, the demand based on this ground was not sustainable. 3. Validity of the Show Cause Notice and Subsequent Demand: The Tribunal noted several infirmities in the show cause notice, such as incorrect allegations about the registration date and filing of returns. The show cause notice was issued without proper investigation and was based merely on the highest figures from Form 26AS, Balance Sheet, and ST-3 Returns, which is not permitted under law. The Tribunal cited various decisions, including Kush Constructions vs. CGST, which held that demands based solely on such comparisons without proper examination are unsustainable. 4. Invocation of the Extended Period of Limitation: The Tribunal found that the extended period of limitation could not be invoked as the appellant was registered, paying service tax, and filing returns. The show cause notice was based on an audit, and it is settled law that the extended period cannot be invoked in such cases. The Tribunal referred to several decisions, including Sunshine Steel Industries vs. CGST, which emphasized that mere non-payment or omission does not amount to suppression unless it is deliberate with the intent to evade tax. 5. Penalties under Sections 77 and 78 of the Finance Act, 1994: Since the extended period of limitation was not invokable, the penalty under Section 78, which requires the same ingredients as the extended period, was also not leviable. The Tribunal noted that the appellant was entitled to the benefit of waiver of penalty under Section 80 of the Act, as it was prevalent at the relevant time. 6. Taxability of Construction Services for Non-Commercial Entities: The Tribunal held that construction services for schools or foundations, which are non-commercial entities, are not taxable. The Adjudicating Authority's finding that such constructions were commercial was based on surmise and conjecture, without proper consideration of the documents furnished by the appellant. The Tribunal emphasized that no tax should be levied on presumption and conjecture. Conclusion: The Tribunal set aside the impugned order, finding it unsustainable in law. The appeal was allowed with consequential reliefs as per law, emphasizing the need for proper investigation and adherence to legal principles in issuing show cause notices and confirming demands.
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