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TMI Blog2015 (7) TMI 819X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant themselves were vivisecting the lump sum turnkey contracts and were to collect service tax under the category of consulting engineering service. There was no reason whatsoever not to charge, collect and pay the service tax in similar manner in respect of installation and commissioning service when separate consideration for that service was already available in each of these contracts, and installation and commissioning was the dominant service in these contracts. - this is a clear cut case of wilful statement as also suppression of facts. Submissions of some letters/contracts in the facts of this case will not make any difference. - Decided against Assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... L&T/03/3795-09.10.2003 Addressed to Jt. Commissioner, services tax, Mumbai-II, informing legal stand of service tax not payable on turnkey lumpsum contracts and also informing an appeal relating CRL contract filed before CESTAT, Delhi as covered by unconditional stay. 4 20.11.2003 16.12.2003 12.01.2004 L&T letter addressed to dept. Submitting contract copies and also invoices of sub-contractors 5 20.01.2004 CPCL letter No. 1027:4814:LSTK-II:237 - 20.01.2004 Addressed to L&T, opining non-levy of service tax for turnkey contract. 6 31.12.2004 11.01.2005 20.01.2005 PH statement as recorded on different Mr. P.A. Pawar forwarded to L&T by office of the Commissioner vide letter no. F.no.V.ST(HQ)/Adj/L&T-709/08/6210-18.11.2008 PH record 7 10.02.2005 L&T letter dated 10.02.2005 Addressed to dept., furnishing copy of contracts. 8 07.03.2005 L&T letter mo. OGSP/9/WELL/LO/0625-07/03/2005 Addressed to ONGC on imposition & payment of service tax for 9WELL platform project turnkey contract 9 16.03.2005 ONGC fax message Addressed to L&T informing of service tax not payable since project located in non-designed area. 10 07.08.2007 08.08.2007 L&T letter dated 07/08. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove finding is erroneous for various reasons. It was further submitted that the appellant had their genuine and bona fide belief that the listed contracts were not exigible to levy of service tax and thus no mala fide intention or mens rea can be attributed from a perusal of index of date and events. It was further submitted that the relevance of knowledge while invoking the extended period is very much relevant in view of the various judgments. In support of his contention, the learned senior counsel quoted the following judgments. (i) Modipon Fibre Company vs. CCE, Meerut reported in 2007 (218) ELT 8 (SC)- para 18 (ii) Jaiprakash Industries ltd. vs. CCE, Chandigarh reported in 2002 (146) ELT 481 (SC) - para 6 & 8; (iii) Padmini Products vs. CCE reported in 1989 (43) ELT 195 (SC) - para 8; (iv) CCE vs. Gujarat Narmada Fertilizers co. Ltd. reported in 2009 (240) ELT 661 (SC) - para 13; (v) CCE, Chandigarh vs. Punjab Laminates Pvt. Ltd. reported in 2006 (202) ELT 578 (SC) - para 14 to 18; (vi) CCE, Bangalore vs. Karnataka Agro Chemicals reported in 2008 (227) ELT 12 (SC) - para 27; (vii) Gopal Zarda Udyog vs. CCE, New delhi reported in 2005 (188) ELT 251 (SC)- para 12, 15 an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel on behalf of the Revenue submitted that the show cause notice dated 7.10.2008 sought to recover service tax from the appellant for the period 1.7.2003 to 12.9.2007 by invoking the extended period of limitation. The learned special counsel submitted that it is important to see first whether the appellant had any bona fide belief that indivisible works contract could not be split up and part of it could not be subjected to any tax. It was submitted that the appellant has claimed bona fide belief on account of the Tribunal's decisions in the case of Daelim Industrial Co. Ltd. vs. CCE, Vadodara reported in 2006 (3) STR 124 (T). It is to be noted that this decision of the Tribunal was rendered solely on the basis of solitary judgment of the Hon'ble Supreme Court in State of Punjab vs. Associated Hotels of India Ltd. reported in 1972 AIR 1131 holding that indivisible works contract could not be split up into two parts - one of service and other of sale of food stuffs. It was submitted that 10 years later in 1982. Article 366 of the Constitution of India was amended by inserting clause (29A) mandating that the indivisible works contracts could be split up and part of it coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in such contract. It was further submitted by the learned special counsel that the Hon'ble Supreme Court in the case of Bharat Sanchar Nigam Ltd. vs. UOI reported in 2006 (2) STR 161 (SC), in para 47 of its judgment, has observed that after the 46 th amendment, the sale element of those contracts which are covered by the six sub-clauses of Clause (29A) of Article 366 are separable and may be subjected to sales tax by the States under Entry 54 of List II and there is no question of the dominant nature test applying. It was further submitted that following the Constitution Bench decision in Builders' Association of India (supra), the Larger Bench of this Tribunal in the case of Asian Techs Ltd. vs. CCE, Pune II reported in 2005 (189) ELT 420 (Tri-LB), also held that after the 46 th amendment to the Constitution, indivisible contracts could be divided and excise duty could be levied on PSC girders involved in execution of works contracts for construction of bridges. 4.1 The learned special counsel submitted that ironically, the appellant has seen all the decisions from Daelim Industrial Co. onwards where the Tribunal has held that indivisible works contracts could not be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yable on installation and commissioning service. Despite that it chose not to pay service tax on taxable service of installation and commissioning on the specious plea that turnkey contracts could not be vivisected and part of them could not be subjected to tax, although each of the contracts showed separately lump sum value of materials and lump sum value of services. It was further submitted that the contracts also made provision for service tax which formed part of the total value of the contracts. This proves that the appellant did not deliberately pay service tax. It was further submitted that if the service tax was not payable on erection, installation and commissioning service, it ought to have been shown in the periodical ST-3 returns filed by them from time to time. It was submitted that service tax administration is based upon the self-assessment procedure and it is only from the ST-3 returns that the department comes to know the activities of the appellant. Since the appellant has not furnished the requisite information in the return, it would certainly amount to suppression of facts and wilful misstatement attracting extended period of limitation. The learned special co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Chennai Petroleum Corporation Ltd., extended period of limitation has been rightly invoked in respect of the remaining five contracts as held by Member (Technical). 5. The main issue to be decided is whether the extended period of limitation is invokable in the facts and circumstances of the case. The relevant Section 73(1) of the Finance Act, 1994 reads as under:- (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within 'eighteen months' from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : 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) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant. In fact, it is seen that in various lump sum turnkey contracts, they were showing the split up value of the above mentioned three components. As per the contract entered with customers, the appellant was expected to charge service tax on the first component under the category of consulting engineering service. This is evident from the details furnished in respect of the five contracts. Thus there is no dispute that the appellant is liable to pay service tax under the category of consulting engineering service as far as the first component is concerned, even though the first component is also part of lump sum turnkey contract. 6. There are in all five contracts which are matter of dispute in the present case. The first contract is the contract between the appellant and IOCL, Mathura. It is seen that the revised schedule of prices, which was approved in April 2003 is as under:- It would be seen from the above table at Sr.No.1 that service tax has been specifically included as far as the first component of the lump sum turnkey contract is concerned, i.e. service tax relating to consulting engineering services. Since this contract has been entered into before the introductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 9 Well Platforms Project. In this document also, the appellant has detailed changes in laws and regulations. The relevant item 6 is reproduced as under:- From the above, it is very clear that the appellant was aware that design and engineering service would attract 8% service tax w.e.f. 14.5.2003. It is also seen that the appellant has also made provisions of 8% service tax on hook-up and pre-commissioning / commissioning service w.e.f. 1.7.2003. 6.4 The fifth contract is relating to Mangalore Refinery. In respect of the said contract, it is seen from the addendum No. 7 reproduced below that the appellant has charged service tax:- 6.5 From the above five contracts, it is clear that each of LSTK contract had three parts and consideration for each of these parts is available. Appellant was fully aware and clear that first part is chargeable to service tax under consulting engineering service w.e.f. 1998 and third part is chargeable to service tax w.e.f. 1.7.2003. 7. In the case of Daelim Industrial Co. Ltd. (supra), the Revenue wanted to tax the whole of the contract (and not the component relating to design and engineering) under the category of 'consulting engineering se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the same lump sum turnkey contract. In fact, from the layman's angle in projects, like the covered by the five contracts in dispute, the whole exercise is nothing but it is the erection, commissioning and installation of a new plant. Thus erection, commissioning and installation is the major or dominant service. In fact, said service passes the test of Dominant Nature in all the five contracts. The consulting engineering service is only a minor portion of such contract. Keeping in view the above factual matrix, in my considered view, there was no bona fide belief on the part of the appellant about the non-taxability of the erection, commissioning and installation part of the LSTK. 7.2 It is seen from the show cause notice dated 7.10.2008 that the appellant was having registration under the category of 'Consulting Engineering Service'. In the said registration certificate, it had incorporated 'Installation and Commissioning Service' w.e.f. March, 2004. The show cause notice alleges that it failed to obtain registration for this taxable service for the period from 01/07/2003 to 12/03/2004 as required under Section 69 of the Finance ACt, 1994 and also failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting the extended period of limitation. 8. A lot of emphasis have been given by the senior counsel that the department had knowledge about their activities. I have gone through the various letters that have been exchanged between the appellant and different authorities. Here I observe that every authority in the Government has certain jurisdiction (based upon geographical or other factors) and the authorities cannot go beyond their jurisdiction. Any information provided to the relevant jurisdictional authority alone is relevant for deciding an issue by the jurisdictional authority. Providing some information in other jurisdiction is of no consequence whatsoever for the relevant jurisdictional authority. Further, even when an information is provided to relevant jurisdictional authority, it is to be seen, in what context the information is provided. Jurisdictional tax authority examines the details provided by the assessee with reference to a purpose, issue or lis. Just because some details were provided at some point of time with reference to some other purpose is of no consequence. For example, in a court, an appellant may state certain details and the court may decide the lis wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar India Pvt. Ltd. vs. CCE, Thane-I reported in 2015(38) STR 884, in para 5.15 of its order, the Tribunal has held as follows:- 5.15 The next issue for consideration is the time bar aspect. The contention of the appellant since is that they were only required to declare the consideration received in the ST3 return and in the case of foreign advertisers the consideration was paid directly to Star Hong Kong, there can not be any mis-declaration on their part. This contention is obviously wrong. In the ST3 return, there was a column wherein the appellant was required to declare the amount charged to the service recipient, apart from the amount received. As per the agreement dated 1-4-1999, SIPL was appointed as non-exclusive independent Representative in the territory of India to solicit television advertising for the channels, namely, Channel V, Star World, Star Plus, Star News, Star Movies and such other channels as may be added in future and to collect and remit advertisement charges. The responsibility also included delivery of the invoices to the advertisers on a timely basis. Thus the appellant obviously knew the amount charged for the broadcasting services. Section 70 of the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, suppression of facts, etc., period of service of notice on the person chargeable with such duty would be five years instead of one year provided in normal circumstances. Nowhere does this provision refer to the period of service of notice after fraud, collusion, wilful misstatement or suppression, etc. comes to the knowledge of the Department. In simple terms, the Department could recover unpaid duty up to a period of five years anterior to the date of service of notice when the case falls under proviso to sub-section (1) and such omission is on account of fraud, collusion, wilful misstatement, etc." Thus in our considered view, the invocation of extended period of time for confirmation of demand is fully justified and we hold accordingly. 9.1 In the case of Dewas Metal Sections Ltd. vs CCE, Indore - 2015 (319) ELT 104 (T), this Tribunal has held that failure to disclose any fact in ER-1 Returns necessary to enable assessing officer to ascertain correctness of self assessed tax amounts to suppression of fact with intent to evade duty. In para 6 of its order, the Tribunal has held as follows: "6. As regards the question of limitation and applicability of Section 11A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 1994 was invoked for demanding service tax for said period. In the present appeal, it is the case of the appellant that they bona fide believed that they had no tax liability in respect of the activities in question and hence did not include the relevant particulars in their returns. The learned counsel has argued that the entire dispute resulted from divergent interpretations of the exclusion clause contained in the definitions of "maintenance or repair" and "management, maintenance or repair" under Section 65 (64) of the Finance Act, 1994. In such circumstances, according to the learned counsel, the allegation of suppression of facts with intent to evade payment of service tax is not sustainable as held by the apex court. These arguments have been contested. After considering the submissions, we are not impressed with the plea of bona fide belief insofar as the works done by the appellant on IC engines/parts received as such from various authorised service stations/workshops are concerned. It is a fact admitted by the appellant that the engines were dismounted and given to them for reconditioning and other works. There is neither any consistent p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Quantum Instruments & Electronics - 2014 (302) ELT 113 (T) by its majority order vide paras 21.1. to 21.2.1., the Tribunal has held as follows: 21.1 ……………………………….. The question arises as to whether in the circumstances of the case, the extended period cannot be invoked or not. In this regard, the factual position is that:- (a) availability of SSI exemption in respect of the goods manufactured by a manufacturer depends upon whether or not the goods are affixed with brand name or trade name, whether registered or not of another person and, therefore, when a manufacturer manufacturing the goods on which he affixes the brand name or logo of another person and in respect of such goods, he avails SSI exemption, in the ER-1 Return filed by him or by direct communication, he is expected to disclose to the Jurisdictional Central Excise Authorities the use of brand name/logo of another person on the goods, as this is a most important information input for the Assessing Officers who are required to scrutinize the Returns filed by him; and (b) in this case, the fact of use of logo of "SEL, Baroda&quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the appellants and the raw material suppliers also give no indication of the weight or description of the intermediate billets / rods which come into existence. It is pertinent to note that certain manufacturing products mentioned in Sr. No.xxiv of annexure to notification no.8/2003-CE, dt. 01.03.2003 and Sr. No.(xxxii) to (xxxiv) of annexure to notification no.8/2006-CE, dt. 01.03.2006) give specifications of certain manufacturing goods which are not to be considered as specified goods for availment of SSI exemption. In the absence of any such details given / available in the declarations / challans by the raw material suppliers and in the absence of any such specifications mentioned in the periodical returns filed by the appellants it cannot be said that there is no suppression / misstatement. Being in the manufacturing and job work of goods of Chapter 74 of the Central Excise Tariff Act, 1985 it has to be held that appellant was aware that brass billets / rods come into existence and that brass billets weighing upto 5 Kgs. and certain other goods of copper are not specified goods. In view of the above, the extended period under Section 11A of the Central Excise Act, 1944 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-I/Pt.-II, RG-1) etc. which were to accompany the return. However, after the introduction of self-assessment procedure, it is the responsibility of the assessee to correctly assess his liability. Jurisdictional officer receives only return which contains overall details without supporting documents. It is only if in a case department decides to scrutinize that documents are called for. The position in the case of service tax is still different as the office may be located in a particular place and services may be provided at various sites all throughout the countries. Thus in case of service tax, assessee has to ensure correct payment of tax. Whole system is based upon the faith reposed in the assessee. As mentioned earlier, the appellants were including the service tax component specifically in respect of consulting engineering service for designing etc. in respect of various contracts. Thus, there was no question of their believing that service tax on the erection, commissioning and installation service will not be applicable in case of lump sum turnkey projects. The dominant nature of such contract is nothing but commissioning and installation. Non-leviability of service tax ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of dispute, the Hon'ble Supreme Court had taken the view that the extended period of limitation cannot be invoked. In the case of Padmini Products (supra), the dispute was relating to agarbattis and dhoop sticks and there were trade notices relating to such items and keeping in view the fact and circumstances of the said case, it was held that extended period of limitation cannot be invoked. In the case of Gujarat Narmada Fertilizers (supra), the Hon'ble Supreme Court has observed that the Cenvat Credit Rules have not been properly drafter which had led to litigation on interpretation of Cenvat Credit Rules, which has resulted in the conflicting decisions and it is under these circumstances, the Hon'ble Supreme Court has taken the view that no penalty is imposable. It may be noted that the Hon'ble Suprme Court has not set aside the demand of extended period in the said case. I also note that the number of judgments quoted is extremely large, I do not consider it necessary to discuss these judgments even though I have gone through these judgments and as mentioned earlier, the invocation of extended period of limitation is a mixed question of facts and law. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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