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TMI Blog2014 (3) TMI 777X X X X Extracts X X X X X X X X Extracts X X X X ..... - during the period 2005-06 to 2009-2010. It appeared that the activity undertaken by the appellant fell under the category of "Commercial or Industrial Construction Service" and they were liable to discharge service tax liability of Rs. 4,89,36,312/- on the consideration received for the services rendered. However, since the appellant did not obtain any service tax registration nor discharge any service tax liability, a show-cause notice dated 14/10/2010 was issued demanding service tax of Rs. 4,89,36,212/- on the activities undertaken by them during April 2005 to March 2010 along with interest thereon by classifying the service rendered as "commercial or Industrial Construction Service" and also proposing to impose penalties under the provisions of Finance Act, 1994. The appellant contested the levy on the following grounds: 2.1 The customers of the appellant floated tender work for interior works and most of the customers are banks. These customers appoint there own architect and planning consultants who prepare drawings, sketches, plans, etc. for the interior works to be undertaken by the appellant. Based on such planning, drawings, etc. the appellant undertook the work. The w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imilar services in relation to, building or civil structure, pipeline or conduit, which is ............... Clauses (a) & (b) of the said Section does not have any application to the present case and the service tax demand has been confirmed under clauses (c) & (d). Clause (c) covers completion and finishing services and the said services are in the nature of completing and finishing the building which is under construction. In the present case the activities have been undertaken in an already constructed building and the said build is not new and therefore, close (c) of Section 65 (25b) is not attracted to the facts of the present case. Clause (d) of the said section provides for repairs, alterations, renovation, restoration or similar services in relation to a building of civil structure. The activity undertaken by the appellant does not come under repair activity and the activity undertaken by the appellant is in the nature of interior decoration work. Therefore, the appellant has not undertaken nay activity of renovation or restoration. It is further argued that Section 65 (25b) envisages that the activities listed or specified therein should be in relation to the building or c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions would not be taxable. However, if such constructions are for commercial purposes like local government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to service tax 13.3 In case of multi-purpose buildings such as residential cum commercial construction, tax would be leviable in case such immovable property is treated as a commercial property under the local/ municipal laws. 14.1 Construction of new buildings or civil structures used for commercial or industrial purposes and repair, alteration or restoration activities of such buildings and civil structures was already liable to service tax since 2004. In this year's budget, such construction service has been renamed as 'commercial and industrial construction service' under section 65(25b) of the Finance Act 1994 and renovation of a commercial or industrial building or civil structure has now been specifically included within the purview of service tax. 14.2 Post construction completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall paperin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was held by the Tribunal that a machinery part is different from the machinery itself and therefore, cannot be extended the same treatment as that of machinery. In the light of the above, it is argued that the activity of renovation, repairs, etc. would attract service tax liability only if the same is undertaken with respect to the whole building and not with respect to the part of the building. 3.2 The Ld. Counsel for the appellant also argues that the demand is time barred inasmuch as the demand has been raised invoking the extended period of time. Earlier on similar activities undertaken by the appellant, the department had issued show-cause notices in 2002 demanding excise duty on the goods manufactured by the appellant and therefore, the activities of the appellants were known to the department. Therefore, extended period of time could not have been invoked in the instant case. 4. The Ld. Commissioner (AR) appearing for the Revenue made the following submissions: 4.1 Even if the activities undertaken by the appellant does not get specifically covered under repair, alteration, renovation or restoration, it would get covered under the expression "similar services" as speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly, the Ld. Commissioner (AR) pleads for upholding the impugned order. 4.2 It is also argued that since the present case, the appellant has defaulted in payment of service tax by resorting to suppression, penalties are imposable both under Section 76 as well as under Section 78 during the period 16/06/2005 to 09/05/2008. However, for the period from 10/05/2008 onwards, the benefits of amended Section78 is applicable and penalties under both the sections are not warranted. Accordingly, he prays that the impugned order can be sustained. 5. We have carefully considered the submissions made by both the sides. Section 65 (25b) reads as follows: "Commercial or industrial construction" means - (a) construction of a new building or a civil structure or a part thereof; or (b) construction of pipeline or conduit; or (c) completion and finishing services such as glazing, plastering, painting, floor and wall tiling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay it has been worded by the legislature and no words can be added to or excluded from the statutory provisions. Therefore, completion and finishing services, repair, alteration or renovation and restoration or similar services provided, whether in respect of a new building or an old building would attract service tax liability under Section 65 (25b) and we hold accordingly. 5.2 A more or less identical issue arose before this Tribunal in the case of Spandrel (cited supra) and this Tribunal held as follows:- "7. On perusal of the Orders-in-Original in two cases (M/s. Spandrel and M/s. Premier Agencies) and the Revision Order in one case (M/s. Delta Projects), we find that the lower authorities had recorded clearly the activities undertaken by the appellants. The summarize the activities undertaken by the appellants, it seems that the appellants are engaged in works such as false ceiling, partitions, flooring modular systems, painting, carpeting, electrical connections; works like wall paneling, false ceiling, interior furnishing, partitioning of Banks, Financial Institutions and other firms and supply & fixing of various furniture, etc. This portion of the findings o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; (c) competition and finishing services such as glazing, plastering, painting, floor and wall filling, wall covering and wall papering, wood and metal joinery and carpentry, fencing and railing, construction of swimming pools, acoustic applications or fittings and other similar services, in relation to building or civil structure; or (d) repair, alternation, renovation or restoration of, or similar services in relation to, building or civil structure, pipeline or conduit, which is - (i) used, or to be used, primarily for; or (ii) occupied, or to be occupied, primarily with; or (iii) engaged, or to be engaged, primarily in, commerce or industry, or work intended for commerce or industry, but does not include such services provided in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams." It can be seen from the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il, composed of brick, marble, wood or other proper substance, connected together, and designed for use in the position in which it is so fixed." Therefore, any structure or edifice enclosing a space within its walls would come within the scope of building and therefore even a particular floor or unit of a building which encloses a space within its walls and covered with roof would come within the scope of term "building". In Kalpakam Amma vs. Muthuram Iyer Muthurkrishna - AIR 1995 Ker 99, a question arose before the Hon'ble Kerala High Court whether the site on which a structure is built is a part of the building or not and the Hon'ble High Court held that if it forms an integral part of the structure and the same forms a composite unit, which is named "a building", the site naturally becomes a part of the building. A question arose before the Hon'ble Apex Court in the case of DG Gouse & Co. Vs. State of Kerala (AIR) 1980 SC 271 in the context of interpreting the Kerala Building Tax Act, 1975 and the Hon'ble apex court held that the word 'building' must receive its natural and ordinary meaning as "including the fabric or which it is composed, the ground upo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise tariff, machinery and parts have separate entries for classification. Therefore, in these decisions, it has been held that parts of machinery has an independent and separate identity. In the Monghibhai Hariram case, the Bombay High Court did not have any occasion to examine whether part of the building also would be a building or not. Therefore, the ratio of these decisions would not have application to the facts of the present case. 5.6 The next issue for consideration is whether the demand is time barred or not? One of the grounds urged in the appeal is that the activities undertaken were known to the department and the department had issued show-cause notice for demand of excise duty earlier. However, on perusal of the record it is seen that the show cause notice issued to the appellant pertain to an earlier period, that is prior to 2004, when there was no service tax levy on "Commercial or Industrial Construction Service". The appellant was directed to furnish copies of the show-cause notices, if any, issued wherein there is an overlapping demand, that is, for both excise duty and service tax. The appellant was not able to produce any evidence showing that for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be imposable. Thus for the period prior to 10-5-1008, the appellant would be liable to penalty both under section 78 would apply. As regards the late fee imposed under Section 7C of the Service Tax Rules, 1994, the same is clearly attached inasmuch as the appellant had not filed/furnished any returns during the impugned period. 5.9 As regards the plea of revenue neutrality claimed by the appellant, we do not find any merit in this argument. The principles of revenue neutrality, if at all, would apply only if the payment of tax and availment of credit is by the same entity as held by this Tribunal in the case of Jay Yuhshin Ltd. (cited supra). In the said case it was held that in the context of Cenvat scheme, it has to be shown that the revenue neutral situation would come about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee's manufactured goods. Therefore, the principle of revenue neutrality does not apply to the facts of the present case. 5.10 A claim has also been made by the appellant that the appellant had supplied furniture which is chargeable to excise duty and not liable to service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 21.3.2002 for the period 1997-98 alleging that the appellant is engaged in the manufacture of furniture etc. and failed to pay excise duty on the excisable goods. After detailed scrutiny including recording of several statement and examination of the records, the show-cause notice was adjudicated vide order dated 25.2.2008 confirming excise duty payable by the appellant for the period 1997-98 along with penalty under Section 11AC for same set of activity. It is brought to notice that another show-cause notice has been issued on 4.7.2007 for levy of excise duty for the period 2005-06, which has been adjudicated vide order-in-Original dated 25.2.2008 confirming Central Excise duty of Rs. 9,00,011/- along with penalty and interest. It is noteworthy that levy of excise duty and/or Service Tax are mutually exclusive. 7.2 That, it is further observed that the Revenue had issued summons as back as on 27.2.2006 and initiated detailed enquiry for levy of Service Tax. In the course of enquiry and recording of the statement on 11.8.2010, the proprietor of the appellant Mr. Bhosle had denied the liability of Service Tax in respect of its activity, which is after going through the show-caus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r levy of charge of construction or new residential complex or a part thereof and nowhere mentions in clause (c) of Section 65 (30a) for repair, alteration or renovation shall be chargeable in respect of part or unit thereof. 7.7 That from the aforementioned observations, it is seen that the issue involved in the present case is one of interpretation of statutory provisions wherein the department has also tried to classify the same activity under 'Interior Decorator Services', which was turned down by this Tribunal. Thus, it can be said that the proprietor of the appellant firm bonafidely had the belief that he was not chargeable to tax under the provisions of Finance Act, 1994. Further, it is observed that the Revenue inspite of starting detailed inquiry since October, 2006, in the present proceedings, have issued show-cause notice after lapse of nearly three years on23.3.2009, which evidently reflects that the Revenue also took pretty long time in resolving the taxability of Service Tax as regards the activity of the appellant. 7.8 It is further noticed that the appellant has discharged VAT/Sales Tax on its activities and the activity in the nature of works contract hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er (Judicial) (Pronounced in court on 20/08/2013) Per: P K Jain: 11. I have gone through the orders recorded by learned Member (Technical) as also learned Member (Judicial). The case was heard on 5.12.2013. I am not repeating the facts of the case as these are already elaborated in the order recorded by learned Member (Technical) and some of other facts recorded in the order of learned Member (Judicial). 12. The main contention of the learned Advocate for the appellant was that for invoking the extended period of limitation, the burden is on the department to prove suppression and mala fide intention of the appellant. He quoted the Hon'ble Supreme Court judgment in the case of Uniworth Textiles Ltd. vs. CCE reported in 2013 (288) ELT 161 (SC). The learned Advocate contended that in the present case, no such averment in the show cause notice has been made nor the department has provided any evidence during the course of litigation proceedings at any stage that the appellant has suppressed the information or misstated the facts with the intention to evade payment of tax. The second contention of the learned Advocate was that the appellant had bona fide belief that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant and, therefore, the extended period of limitation cannot be invoked. He further stated that the second show cause notice covers the period 2005-06 which is also covered in the present show cause notice. Since the department was aware of the ongoing litigation, the extended period of limitation cannot be invoked. He further quoted this Tribunal's judgment in the case of PSL Corrosion Control Services Ltd. vs. CCE reported in 2008 (12) STR 504 (T-Ahmd.). The next contention of the learned Advocate was that the whole exercise is revenue neutral inasmuch as if the duty was collected from his customer and paid to the department, his customer would have been entitled to take credit and under the circumstances, the extended period of limitation cannot be invokable. The learned Advocate further argued that penalties under Sections 76 and 78 are mutually exclusive as held by the Hon'ble Karnataka High Court in the case of CST vs. Motor World reported in 2012 (27) STR 225 (Kar.). The learned Advocate further contended that in any case under Section 80 of the Finance Act, no penalty shall be imposable on the assessee for any failure referred to in the said provisions if the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot co-operate and did not respond. It was only during 2010 by persistence that the department could get the required information and issue the show cause notice. The learned AR further argued that the very fact that the appellant was contesting the leviability of excise duty on their activity would have led them to believe that their activities would be liable to service tax. In fact, this conduct of appellant indicates willful intention to evade payment of duty. The learned AR agreed that there is only a period of 2005-06 which is overlapping in the demand show cause notice3s issued by two different departments relating to excise as also service tax. For the other period the demands are not overlapping. The learned AR further argued that there cannot be any bona fide belief by the appellant as the very fact that he was contesting the excisability of the goods should have led them to believe that their activity would be liable to service tax. The learned AR also argued that the fact that the appellant was paying VAT under works contract should have at least led them to start paying service tax from 2007 under the 'works contract service'. Works contract is a service which is li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sides as also the orders recorded by my two learned brothers. Extended period of limitation is invoked under the proviso to Section 73(1) of the Finance Act. The said proviso reads as under:- "PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of - (a) fraud; or (b) collusion; or (c) willful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "one year", the words "five years" had been substituted. There can be no doubt that for invoking the proviso to Section 73(1), one or more of the five situations enumerated in the said proviso is required to be satisfied in the case. In the present case, the un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n determining the five situations enumerated in proviso to Section 73. Even for sake of argument, if it is assumed that these are relevant, even then the appellant's arguments have no merits. The first reason quoted for bona fide belief is that Section 65(25b) is applicable to construction of new building. The word "new" or "old" is not mentioned in the said definition. In fact a plain reading of clause (c) and (d) would clearly indicate that the said clauses are applicable to the activities being carried out by the appellant. In fact there can be no doubt for this to a layman or persons engaged in the field of such services. Repair or renovation are not carried out in new building. Similarly, repair and renovation are always carried out in part of building. In fact, interpretation suggested will make entries redundant. The other reason quoted is that the appellant was paying VAT on the same amount. It is noted that the appellant was paying VAT as works contract. Works contract by very nature consists of two parts i.e. supply of goods and material and services. While providing the services, the material also gets consumed and both the services and material are handed over to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd hence not liable to excise duty should lead them to believe that the said activity also involves services and would get covered under Service Tax. In view of this position, I do not find any substance in the contention of the learned Advocate that the issue involved is interpretation of statute. From 2005 onwards, after the introduction of 'commercial or industrial construction service', the activities of the appellant are very specifically covered under the said provision and there can be no two opinions about the coverage of the same after 2005 whatever the difference of opinion or anything can be is for the period prior to 2005. As far as knowledge of the department is concerned, I agree with the learned AR that the Service Tax Law and Excise Law are two different laws and are implemented by two different set of officers having their own jurisdictions and enforcing the respective laws. The appellant has not shown any evidence whatsoever that the jurisdictional Service Tax officials were informed about the activities of the appellant and, therefore, they were fully aware about them. The jurisdictional Central Excise officials may be aware of the ongoing litigation but ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with the intent to evade payment of service tax, the person, liable to pay such service tax or erroneous refund, as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, which shall be equal to the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded" It will be seen that the ingredients for imposing penalty under the said Section are same as for invoking extended period, which have already been discussed in the earlier paragraphs. In view of the facts that there has been suppression of facts as also contravention of the provisions of the Finance Act, 1994 and the Rules made thereunder with intent to evade payment of service tax, penalty under Section 78 is imposable. Penalty under Section 76 is imposable for failure to pay service tax and Section 76 reads as under:- &n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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