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2024 (11) TMI 1136 - AT - Service TaxShort paid the Service Tax - appellant had suppressed the taxable value in their ST-3 returns filed - Demand of service tax along with interest, and penalty - Separate penalty has been imposed on the Directors as well - gross taxable value declared is far less than the income receipt mentioned in 26AS as well as Profit Loss Account - Appellant are engaged in providing taxable services under the category of commercial or industrial construction service as defined under Section 65(25b) of the Finance Act, 1994. Eligibility for the abatement of 33% from the taxable value, as provided under Notification 01/2006 dated 01.03.2006 - services of construction and fabrication to their clients along with supply of materials - HELD THAT - We observe that the Appellant has supplied consumables, gas, etc., for the purpose of fabrication and construction service rendered by them. As per Notification No. 01/2006 dated 01.03.2006, if the construction service is undertaken along with supply of materials, the Appellant would be eligible for the benefit of 33% abatement in the taxable value. We observe that this exemption is available in the notification itself. Since the evidence submitted by the appellant clearly indicate rendering of the construction service along with consumables and materials such as Gas, grinding wheels, Welding Electrodes etc., we hold that the Appellant is eligible for abatement of 33% as provided under Notification No. 01/2006-S.T. dated 01.03.2006. Confirmation of the demand of service tax by invoking the extended period of limitation - We observe that the Appellant had been filing their Returns and paying Service Tax regularly. They have registered with Service Tax Department since 2006, but till the date of audit conducted in 2011, the Department had not raised any objection regarding any short payment of Service Tax by the Appellant. We observe that the if the demand has been confirmed on the basis of the data submitted by the appellant, i.e., from their balance sheet, Profit Loss Account and Form 26AS, then extended period of limitation is not invokable. Thus, we hold that the demand cannot be raised in this case by invoking the extended period of limitation. Thus, we hold that the demand confirmed in the impugned order by invoking the extended period of limitation is not sustainable. As the total tax payable for the normal period (excluding the extended period of limitation), after allowing the 33% abatement as provided under notification 01/2006 dated 01.03.2016, comes to Rs. 22,82,336/-. From the ST-3 returns filed for the half yearly period October 2011 to March 2012, we observe that the Appellant has paid service tax amounting to Rs. 33,92,433/- , for this period. As the appellant has paid more service tax than the service tax payable by them for normal period of limitation, i.e., the half yearly period October 2011 to March 2012, after allowing the abatement, we hold that no additional service tax is payable by the appellant for the normal period of limitation, i.e., for the period October 2011 to March 2012. Accordingly, we hold that the demand confirmed in the impugned order for the normal period of limitation is also not sustainable and hence we set aside the same. Since the demand itself is not sustainable, the question of demanding interest and imposing penalties on the Appellant as well the Directors does not arise.
Issues Involved:
1. Appropriateness of the demand for Service Tax and penalties imposed. 2. Applicability of the extended period of limitation for the demand. 3. Eligibility for 33% abatement under Notification No. 01/2006-S.T. 4. Validity of demand based on discrepancies between declared and actual taxable values. 5. Consideration of interest and penalties on the directors. Issue-wise Detailed Analysis: 1. Appropriateness of the Demand for Service Tax and Penalties Imposed: The Appellant was engaged in providing taxable services under 'commercial or industrial construction service' as defined under Section 65(25b) of the Finance Act, 1994. An audit revealed discrepancies in the Service Tax paid for the period 2006-07 to 2011-12. The Commissioner confirmed a Service Tax demand of Rs. 2,60,03,775/- along with interest and equal penalty. The Appellant contested the demand, arguing that they had already paid Service Tax on a taxable value of Rs. 17,72,81,266/-, which was more than required after allowing for abatement. 2. Applicability of the Extended Period of Limitation for the Demand: The Appellant argued that the Show Cause Notice issued on 04.07.2013 for the period 2006-07 to 2011-12 was beyond the five-year extended period of limitation, making the demand for 2006-07 to 2007-08 unsustainable. However, the Tribunal noted that the Appellant filed their first Service Tax Return on 12.10.2009, making the demand within the extended period of limitation as per Section 73 of the Finance Act, 1994. 3. Eligibility for 33% Abatement under Notification No. 01/2006-S.T.: The Appellant claimed eligibility for a 33% abatement on taxable value, as they provided construction services along with materials. The Tribunal reviewed work orders and confirmed that the Appellant supplied consumables and materials, qualifying them for the abatement. This was supported by precedent decisions, including P&H Associates Vs. Commissioner of Central Excise and Service Tax, Vadodara, which allowed similar abatements. 4. Validity of Demand Based on Discrepancies Between Declared and Actual Taxable Values: The demand was based on differences between the taxable values declared in ST-3 Returns and those in the balance sheet/Profit & Loss Account. The Tribunal found that the demand could not be sustained as the Appellant had disclosed all relevant information in their returns and the discrepancies arose from differences in accounting methods (cash vs. accrual basis). The Tribunal cited various judicial pronouncements supporting this view, including Arya Logistics v CCE & ST Rajkot and Balajee Machinery v Commissioner of CGST & Excise, Patna-II. 5. Consideration of Interest and Penalties on the Directors: Since the demand itself was found unsustainable, the Tribunal held that the imposition of interest and penalties on both the Appellant and the Directors was unwarranted. The appeal was allowed, and the impugned order was set aside, granting the Appellant consequential relief as per law. Conclusion: The Tribunal concluded that the demand for Service Tax and penalties was not sustainable due to the Appellant's eligibility for abatement, the non-invocation of the extended period of limitation, and the absence of suppression or fraud. Consequently, the appeal was allowed, and the order was set aside.
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