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TMI Blog2017 (11) TMI 1777X X X X Extracts X X X X X X X X Extracts X X X X ..... een addressed by the applicant during the personal hearing, it was not felt necessary to provide the copy of Commissioner’s report dated 17-10-2017 since no new point has been put forth by the Commissioner. Further, as regards eligibility to Cenvat credit for adjustment towards the demanded amount, the Commissioner had conceded to the point of the applicant and consequently, the interest liability is lessened, which is discussed separately in this order. Therefore, the total Service Tax liability is settled at ₹ 4,78,34,474/-, as demanded in the show cause notice. The applicant having paid this amount, no further payment of Service Tax is required. Liability of Interest - Held that:- The department, having accepted the contention of the applicant after verification, that the applicant is entitled to set off his liability of ₹ 3,39,16,856/- from out of his Cenvat Credit Account, the consequent interest liability of ₹ 52,89,585/- on this score is extinguished - Further, the applicant, in his submission on 12-9-2017, had also contended that there was an error in computation of interest liability in the department’s working with reference to the number of days for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 and corrigendum dated 21-4-2016 issued by the Principal Additional Director General, Directorate General of Central Excise Intelligence, Bangalore Zonal Unit, answerable to the Commissioner of Service Tax, Bangalore-V Commissionerate, demanding Service Tax of ₹ 4,78,34,474/- (Rs. 4,16,69,933/- + ₹ 61,64,541/-) for the period from April, 2013 to March, 2015, along with interest thereon, under the proviso to Section 73(1) of the Finance Act, 1994, with proposals for imposition of penalties under Sections 76, 77 and 78 of the Finance Act, 1994, besides proposing appropriation of ₹ 4,16,69,933/- and ₹ 10,64,578/-, being the amounts paid by the applicant towards the demand and interest respectively. Brief facts : 1.1 The applicant is registered with the department for providing Real Estate Agent Service , Business Auxiliary Service , Construction services other than Residential Complex, including Commercial/Industrial buildings or civil structures , Survey and Map making Service , Mining of mineral, Oil or Gas Service and Works Contract Service . The registered address is No. 2, Opposite to Devappa Garden, 1st Main Nagashettyhalli, RMV II St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... APL. The applicant, in his statement dated 28-7-2015, stated, inter alia, that M/s. TBAPL was not prompt and regular in making payment for the invoices; he had not paid applicable Service Tax during the period from April, 2013 to March, 2015 within the stipulated time as he was not aware of the provisions of Rule 3 of the Point of Taxation Rules, 2011; he stopped working in the mines of TBAPL from 16-6-2014; M/s. TBAPL did not allow him to enter the mines in spite of Court order and presence of his machineries inside the machines and therefore, he issued Idle Charge invoices for the machineries; M/s. TBAPL, however, did not entertain any bills, debit notes and as the invoices for Idle Charges were rejected by M/s. TBAPL, the same were not accounted in books of account. 1.3 From the verification, it appeared that the activities undertaken by the applicant by using his machinery and equipments were taxable services in terms of the provisions of Section 65B(44) and (51) of the Finance Act, 1994. The applicant had also undertaken civil construction work at the mines of M/s. TBAPL and had charged VAT on 60% of the value of civil work charges and Service Tax on 40% of the value an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7-3-2017, admitted a liability of ₹ 4,16,69,933/-, but paid the entire demanded amount of ₹ 4,78,34,474/- (Rs. 4,16,69,933/- + ₹ 61,64,541/-). The applicant explaining the facts of the case, submitted, inter alia, that - After dispute arose as to the payments, equipments supplied and remaining at the premises of TBAPL were not allowed to be taken out by M/s. TBAPL. He claimed for damages/losses, nomenclated as Idle Charges . As the matter went for litigation, he raised invoice for the same, though not accepted or agreed by M/s. TBAPL. There was doubt about the applicability of Service Tax on damages/loss since the matter went for litigation and it was thought appropriate to mention Service Tax in the invoice and accordingly mentioned in the invoices. Mutual settlement was made on 16-4-2016 when M/s. TBAPL agreed to pay the amounts due to him. However, no payments were received and the said settlement was a mere document without any action. Regarding delay in payment of Service Tax on the impugned activities during the period when services were rendered, the delay was merely due to financial crisis and not with intention to evade payment of Service Tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ₹ 10,64,577/- towards interest, though the actual interest payable worked out to only ₹ 9,17,691/-. The applicant also paid unaccepted Service Tax of ₹ 61,64,540/-. He had fully cooperated with the Investigating Agency by submitting all the information in his possession and had no mala fide intention to evade payment of Service Tax. 2.2 Based on the reply dated 7-4-2017 furnished by the applicant for the first notice dated 3-4-2017, the application of the applicant was allowed to be proceeded with by the Bench vide Order dated 17-4-2017. Jurisdictional Commissioner s Report : 3.1 The Commissioner of Central Tax, Bengaluru North Commissionerate, in his report dated 17-8-2017, submitted, inter alia that - The applicant had admitted the Service Tax liability of ₹ 4,16,69,933/- on hiring of machinery, excavation of iron ore, loading crusting, screening, dumping, etc. and the dispute is only with regard to Service Tax on Idle Charges amounting to ₹ 61,64,541/-. The applicant had paid the Service Tax liability of ₹ 4,16,69,933/- before the issuance of show cause notice and had also paid Service Tax of ₹ 61,64,541/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Residential Complex, including Commercial/Industrial buildings or civil structures , Survey and Map making Service , Mining of mineral, oil or gas Service and Works Contract Service . It has been alleged that the applicant had set up another firm in the name and style of M/s. P D Enterprises (hereinafter referred to as M/s. PDE ) for exclusively providing of Mining and Civil Construction Services for the mines of M/s. Tiffin s Barytes Asbestos Paints Ltd., Bellary (hereinafter referred to as M/s. TBAPL) and had not discharged Service Tax liability and not filed ST-3 returns. 4.3 However, the applicant admitted Service Tax liability of ₹ 4,16,69,933/- and paid the same before issuance of show cause notice and ₹ 61,64,551/- which was under dispute was paid after the show cause notice was issued. He paid a total Service Tax of ₹ 4,78,34,474/- as demanded in the show cause notice and filed Service Tax 3 returns for the subsequent period. 4.4 It was submitted by the Learned Chartered Accountant that there are two issues involved in the matter, (a) the methodology of calculation of interest and consequently, the quantum of interest on account of delayed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest liability will accrue from the date of signing of the Mutual Agreement i.e., [dated] 16-4-2016, as the service receiver, despite his raising invoice, refused to accept and honour his invoices. Applicant had not received any amount from M/s. TBAPL till the filing of application. No consideration had been received and there could not be tax on the same. 4.6 With regard to the second issue, the interest on Service Tax liability of ₹ 4,16,69,933/- it was submitted by the Chartered Accountant as under : The Service Tax payable was clearly shown in the audited financial statements and the applicant did not have intent to evade tax. The service receiver cancelled the contract with effect from 16-6-2014 and all the machineries and equipments were kept idle. No contract was live for generation of funds. He had to make payments to sub-contractors, fuel charges, day to day maintenance charges, salaries and wages to employees. All these factors made them deficient in cash flow to pay Service Tax in time. He had substantial CENVAT credit in his account to the extent of ₹ 3.39 crores and he had to pay only ₹ 77.53 lakhs in cash towards the disch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from February, 2015, the applicant has charged only Idle Charges and not charged Service Tax, and nowhere it is mentioned that the said charges pertain to damages or losses. Hence, the Idle Charges are leviable to Service Tax, which the applicant has already paid. The applicant was - providing taxable services and charging Service Tax regularly to M/s. TBAPL and was in receipt of consideration. He did not pay Service Tax and also not filed ST-3 returns from April, 2013 onwards. This showed that the applicant was aware of the provisions of the Act and deliberately did not pay Service Tax or filed returns with intent to suppress the facts from the department. The applicant had paid ₹ 4,16,69,933/- towards Service Tax on hiring charges and Works Contract Service and ₹ 10,64,577/- towards interest, though the actual interest payable worked out to only ₹ 9,17,691/-. The applicant also paid unaccepted Service Tax of ₹ 61,64,540/-. 4.10 With regard to the methodology of calculation of interest on Service Tax liability of ₹ 4,16,69,933/-, he reiterated the Commissioner s report, and invited the Bench s attention to Annexure to the said report on the calcula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest on utilization of input Service Tax credit was not justifiable. Findings and decision of the Bench : 6.1 The Bench had gone through the submissions, both written and oral, made by the applicant and the department. Service Tax and interest : 6.2 This is a case of non-payment of Service Tax on Mining and Civil Construction Services. Investigation conducted by the DGCEI, Bangalore Zonal Unit, revealed that the applicant carried on mining and other related services for M/s. TBAPL, Chennai, at Bellary and did not pay appropriate Service Tax. Show cause notice was issued demanding Service Tax of ₹ 4,78,34,474/- (Rs. 4,16,69,933/- + ₹ 61,64,541/-) for the period from April, 2013 to March, 2015. The notice proposed appropriation of ₹ 4,16,69,933/- and ₹ 10,64,578/-, being the amounts paid by the applicant towards the demand and interest respectively. 6.3 The demand raised were on two grounds, viz, non-payment of Service Tax (Rs. 4,16,69,933/-) on mining operations done in the premises of M/s. TBAPL and Service Tax on Idle Charges (Rs. 61,64,541/-) for which the applicant billed the service recipient with Service Tax for some period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Point of Taxation Rules, 2011. Hence, the applicant is liable to pay Service Tax of ₹ 61,64,541/- on Idle Charges with appropriate interest. The Bench also observes that the applicant had submitted during the personal hearing that he would abide by the decision of the Bench in this regard. Subsequent to the personal hearing, the applicant, vide his letter dated 20-10-2017, requested for providing of a copy of report of jurisdictional Commissioner submitted to the Bench consequent to the direction given during the hearing on 12-9-2017. However, as the jurisdictional Commissioner, in his report dated 17-10-2017, had reiterated his earlier stand with regard to taxability of Idle Charges , which had already been addressed by the applicant during the personal hearing, it was not felt necessary to provide the copy of Commissioner s report dated 17-10-2017 since no new point has been put forth by the Commissioner. Further, as regards eligibility to Cenvat credit for adjustment towards the demanded amount, the Commissioner had conceded to the point of the applicant and consequently, the interest liability is lessened, which is discussed separately in this order. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce to the number of days for 30% slab rate. Therefore, the applicant is required to work out the interest liability afresh in line with the above findings and to the satisfaction of the jurisdictional Commissioner. The sum of ₹ 10,64,578/- already paid by the applicant towards interest shall be adjusted against the total interest liability. Penalty : 6.7 As discussed supra, this is a case of non-payment of Service Tax on Mining and Civil Construction Services. The applicant contested the demand of Service Tax on Idle Charges alone and accepted the remaining liability. However, the applicant had paid the entire demanded amount of ₹ 4,78,34,474/- including Service Tax on Idle Charges . He had pleaded only financial constraints for non-payment of Service Tax. He had also not filed the statutory returns in time and filed belatedly. Financial constraints could not be accepted as a reason for non-payment of fiscal liabilities and non-filing of returns within the prescribed time. Hence, the applicant is liable to penalties as proposed in the show cause notice. Nevertheless, the Bench observes that the applicant had fully cooperated with the Bench and the departme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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