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TMI Blog2022 (3) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... cts or evidence as who is the service receiver, whether the cash receipts shown in the xls. Files pertaining to the service component only or otherwise and no corroborative evidence produced in support of details mentioned in the said xls. Files. In the present matter collection of a huge amount of cash in respect of provisions of services involved. However not a single rupee of unaccounted cash was found during the search conducted by the income tax. Reliability on the statements - Admissible evidence or not - HELD THAT:- In the whole matter revenue rely upon the statement of Ms. Kalindi Shah and Shri Venkataramana Ganesna both are the employees of the Assessee s company. No statement of Directors of the Appellant company recorded by the revenue to find out the truth of employee s statements. It was on records that Assessee company have raised the dispute on both the statements of employees recorded during the course of investigation by Income tax Authority and revenue. Therefore the said statement cannot be relied upon as admissible evidence in terms of the provisions of Section 9D of the Act. In the present case the Revenue has raised the Service tax demand merely on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of penalties on co-appellants does not arise. Decided in favor of assessee. - Service Tax Appeal No. 10599 of 2021-DB, 10711of 2021, 10735 of 2021, 10736 of 2021, 10737 of 2021, 10744 of 2021 - A/10270-10275 / 2022 - Dated:- 17-3-2022 - RAMESH NAIR, MEMBER (JUDICIAL) AND RAJU, MEMBER (TECHNICAL) Present For the Appellant : Shri Amish Khandhar, CA, Shri Jigar Shah, Advocate, Ms. Rashmin Vajes, CA Present For the Respondent : Shri Ghanshyam Soni, Joint Commissioner (Authorised Representative) ORDER The present appeals have been filed by M/s J.P. Iscon Pvt. Ltd., Shri Pravin T Kotak, Shri Jayesh T Kotak, Shri Jatin M. Gupta, Shri Amit M Gupta and also by Revenue against the common Order-in-Original No. AHMEXCUS- 001-COM-002-21-22 dtd. 27.04.2021. Both sides are in appeal against the impugned order. Issues in these appeals since emanating out of the same impugned order, they are taken up together for common disposal. 2. Briefly stated the facts of the case are that M/s J.P. Iscon Pvt. Ltd. are engaged in providing Construction of Residential Complex and Construction of Commercial Complex Service. Information was shared by Central Economic Intell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The entire case of Department of unaccounted cash receipt by the Appellant, which has been based on excel sheet recovered by the IT Department in their investigation is wholly arbitrary and bad in law. He placed reliance on following decisions: (i) Common Cause Others Vs Union of India Others passed in IA No.3 and 4 of 2017 in W.P. (Civil) No. 505 of 2015. (ii) Samta Khinda Vs. Asst. Commr. of IT 2016(11)TMI 1366 ITAT Delhi (iii) CCE Vs. Magnum Steels Ltd. 2017(357)ELT 226 (Tri-Del) (iv) Ruby Chlorate (P) Ltd. Vs. CCE 2006 (204)ELT 607 (Tri- Chennai) (v) Charminar Bottling Co. (P) Ltd. Vs CCE 2005 (192) ELT 1057 (vi) Nagubai Ammal Others Vs. B. Sharma Rao, AIR 1956 SC 593 5. He further submits that it is settled principle of law that in absence of corroborative evidence when the only relied upon documents by the officers is disputed by the assessee, the assessee cannot be penalized for the same. The following case laws also lays down the strength of corroborative evidence in the matter of evasion cases needs to produced by the department before levelling allegation against the assessee: (i) CCE Vs. Ravishnkar Industries Ltd. 2002 (150)ELT 1317 (Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TL 392 (Tri.-Del) (vii) Kipps Education Centre, Bathinda Vs CCE Chandigarh -2009(13)STR 422 (Tri.-Del) (viii) CCE, Ludhiana Vs. Ramesh Studio Colour Lab, 2010 (20) STR 817 (Tri. Del) (ix) CCE, Chandigarh Vs. Bindra Tent Service 2010 (17) STR 470 (Tri. Del.) (x) Ravi Foods Pvt. Ltd. Vs. CCE Hyderabad 2011 (266) ELT 399 (Tri. Bang.) 9. He submits that the onus of proof lies on the department to prove that the Appellants have received alleged cash from buyers during the disputed period. This onus has not been discharged by the department in the present case. The calculation of service tax is erroneous as the present show cause notice presumes the entire receipt as consideration of services which is against the principle of law settled by the Hon ble Supreme Court in the case of Larsen and Tourbo reported at 2014 (303) ELT 3 (SC). The present show cause notice itself suffer from an incurable deficiency with respect to the classification of service and computation of tax liability. The impugned Order-In-Original is therefore liable to be set aside. 10. He also contended that Section 132(4) of the Income Tax Act, 1961 is restricted and limited to the provisions of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard the appeal filed by the department, he submits that the demand of Service tax amounting to ₹ 3,75,35,481/- on alleged cash amount shown as outstanding did not receive by the assessee. Since the department has failed to prove the such amount pertains to flats where sale deeds have already been executed by the assessee. The Ld. Adjudicating authority rightly dropped the demand of ₹ 3,75,35,481/- in this matter. He also submits that demand of Service tax of ₹ 2,98,55,000/- rightly dropped by the Ld. Adjudicating authority on the ground that activity under consideration is neither covered under the category of work contract service nor the definition of declared Service as defined under Section 66E (h) of the Finance Act, 1994. 15. The demand of Service tax amounting to ₹ 11,17,67,955/- has been dropped since such demand was being raised on the basis of uncorroborated evidence by the department. The Ld Principal Commissioner correctly dropped the said demand and discussed his finding in para 29.5 of the impugned order. 16. On other hand Shri Ghanshyam Soni, the learned Joint Commissioner (Authorised Representative), reiterating the grounds of Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax. The Hon ble Gujrat Hight Court in the matter of STATE OF GUJARAT Versus NOVELTY ELECTRONICS 2018 (16) G.S.T.L. 87 (Guj.) held that- 14 . In the opinion of this Court, the findings recorded by the Income Tax authorities during the course of search, could have been made a starting point for inquiry as regards the discrepancy in the physical stock and that shown in the stock register. However, the statement made by the dealer, ipso facto, could not have been the basis of an addition. Acting upon the findings recorded by the Income Tax authorities, the authorities under the Value Added Tax Act were required to make an independent examination into the facts before making the assessment. As noted hereinabove, the Commercial Tax Department had also searched the premises of the dealer and no discrepancies could be found in stock and the investigation report of the department had given a clean chit to the appellant. In these circumstances, the Tribunal was wholly justified in setting aside the order of the first appellate authority to the extent it had confirmed the demand which had no legal basis, and confirming the order to the extent it had reduced the tax liability imposed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as relevant for the purposes of proving the truth of the contents thereof. . Reliance is placed on the ruling of the Hon ble Punjab Haryana High Court in the case of Jindal Drugs (Infra),2016 (340) E.L.T. 67 (P H) wherein the Hon ble High Court laid down the detailed procedure, inter alia, providing for cross examination of the witness of the Revenue by the Adjudicating Authority and thereafter, if the Adjudicating Authority is satisfied that the statement of the witness is admissible in evidence than the Adjudicating Authority is obligated to offer such witnesses for cross examination by the other side/assessee. Such view has also been affirmed by the Hon ble Supreme Court in the case of Andaman Timber (Infra) 2015 (324) E.L.T. 641 (S.C.). 20. We further find that Hon ble Punjab Haryana High Court in the case of Sukhwant Singh(1995) 3 SCC 367 it has been observed as under :- 8. It will be pertinent at this stage to refer to Section 138 of the Evidence Act which provides : 138. Order of examinations . - Witnesses shall be first examined-in-chief then (if the adverse party so desires) cross-examined, then (if the party calling him so desires) re-examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by the Income tax authorities with Revenue. The Revenue heavily relied upon these .xls printout documents. In this context we find that the Hon ble Apex Court in case of M/s. Anwar P.V. v. P.K. Basheer - reported at 2017 (352) E.L.T. 416 (S.C.) has prescribed certain guidelines before accepting electronic documents as an admissible piece of evidence. The Hon ble Supreme Court held that - 13 . Any documentary evidence by way of an electronic record under the Evidence Act, in view of Sections 59 and 65A, can be proved only in accordance with the procedure prescribed under Section 65B. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer. It may be noted that the Section starts with a non obstante clause. Thus, notwithstanding anything contained in the Evidence Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer shall be deemed to be a document only if the conditions mentioned under sub-section (2) are satisfied, without further proof or produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. 16 . Only if the electronic record is duly produced in terms of Section 65B of the Evidence Act, the question would arise as to the genuineness thereof and in that situation, resort can be made to Section 45A - opinion of examiner of electronic evidence. 17 . The Evidence Act does not contemplate or permit the proof of an electronic record by oral evidence if requirements under Section 65B of the Evidence Act are not complied with, as the law now stands in India. 18 . It is relevant to note that Section 69 of the Police and Criminal Evidence Act, 1984 (PACE) dealing with evidence on computer records in the United Kingdom was repealed by Section 60 of the Youth Justice and Criminal Evidence Act, 1999. Computer evidence hence must follow the common law rule, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by assessee to Income Tax department as regards undisclosed/suppressed sales turnover cannot be held to be on account of clandestine removal of their final products, in the absence of any other corroborative evidence. Similarly, in the case of C.C.E., Ludhiana v. Mayfair Resorts - 2011 (22) S.T.R. 263 (P H), it was held so. We also find that the CESTAT in the case of Kipps Education Centre, Bathinda v. C.C.E., Chandigarh - 2009 (13) S.T.R. 422 (Tri.-Del.), has held that the income voluntarily disclosed before the income tax authorities could not be added to the taxable value unless there is evidence to prove the same. 28. In view of above, we are of the considered view that in the present matter entire demand of service tax as proposed in the show cause notice is not sustainable. 29. Without prejudice to our above finding, we also find that in the present matter the Ld. Adjudicating Authority confirmed the Service tax demand of ₹ 5,60,28,373 in respect of taxable Service viz. Construction of Residential Complex Service/ Construction of Commercial Complex Service by assuming that the said service was provided by the assessee during the period from 01.04.2014 to 30.06.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the assessee and the customers has to be examined in terms of the tone and tenor of the said document. As already discussed above, the sale deed reveals that the same is for the sole purpose of sale of vacant plot and is definitely not for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of immovable property. Therefore, in this case it cannot be said that the assessee have entered into a contract with their customers for the purpose as specified under the definition of the term Work Contract . 25.5. In the light of above discussion, it is clearly seen that none of the limbs of the definition of Works Contract as defined under Sec. 65B(54) of the Finance Act, 1994 have been satisfied in the instant case in as much as : There is no contract entered into between the assessee and the customers for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of immovable property; AND There is no transfer of property in goods involved in the transaction between the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances the judgment is in harmony with the definition of Work Contract . However, in the instant case the agreement is for the sale of vacant plot on which no construction work has been undertaken and as such the element of transfer of Property in good is missing in the transaction under consideration. Thus, I find considerable force in the contention of the assessee to the effect that the analogy of the case of M/s K Raheja supra cannot be made applicable to the effect of the case at hand. 27. The show cause notice also make a reference to the judgment in the case of M/s Narne Construction P. Ltd. reported at 2019 (29) STR 3 (SC) wherein Hon ble Supreme Court had held that the activity involving offer of plots for sale to its customers/ members with an assurance of development of infrastructure/amenities, lay -out approval etc. was a Service within the meaning of Clause (o) of Section 2(1) of the Consumer Protection Act. The assessee have argued that the said Judgment would not be applicable to their case since the definition of the term service under the Consumer Protection Act was different from the definition under Sec. 65B(44) of the Finance Act, 1944. Further it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies such as electric supply, drainage, water supply, Club house etc, should not be construed to as work contract service under the provisions of Rule 65B(44) read with Rule 66E(h) of the Finance Act, 1994 (iii) The amount of service tax evaded to the tune of ₹ 2,98,55,000/- in respect of taxable service viz., works contract service supplied by then during the period from 01.04.2014 to 30.06.2017 as detailed in said Summary appended to this notice should not be demanded recovered from them under proviso to sub-section (1) of Section 73 of the finance Act 1944 read with section 174 of the GST act 2017. bye way of making the above charges, the revenue has narrowed down the compass of adjudicating authority to mere examination of the fact whether the activity of sale of plots with undeniable condition of development of amenities and common facilities such as electricity supply, drainage, water supply, club house etc. can be construed as Work Contract or otherwise. 27.1 In the light of specific charges, I cannot examine the issue under a different category of service or any other aspect. This is so because the well settled judicial principles do not permit t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he findings, whether the proposals made in the Show Cause Notices for different classification should sustain or not. Since the Adjudicating Order had entirely changed the classification of the product, as proposed in the Show Cause Notice from 6914 90 90 to 6909 90 90, without issuing any notice to the appellant, we are of the view that differential duty confirmed under the changed classification should also not stand for judicial scrutiny. Accordingly, it is held that the impugned order confirming the differential duty is not proper and justified. In the light of above judicial pronouncement, I find that the examination of the matter has to be confined merely to the aspect of whether the activity of sale of plots with undeniable conditions of development of amenities and common facilities such as electricity supply, drainage, water supply, club house etc. can be construed as work contract or otherwise. In light of the elaborate discussion hereinabove, I find that such activity cannot be construed as Work Contract in as much as the activity is not covered within the four corners of definition of Work Contract in terms of the provisions of Sec. 65B(54) of the Finance Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of Immovable Property Service . Clearly the demand was confirmed by going beyond the scope of show cause notice. c) M/s Vaatika Construction Pvt. Ltd. reported at 2020 (43) GSTL 533 (T), it has been held by the Delhi Tribunal as under: 12 . Thus, it was not permissible for the Revenue to issue a notice demanding service tax under construction of complex services as defined under Section 65(105)(zzzh) of the Finance Act, 1994 [the Finance Act] when the nature of activity was of works contract . In this connection, it would also be pertinent to refer the following decisions of the Tribunal as follows :- (i) M/s. Jambeshwar Construction Co v. Commissioner of Central Excise and Service Tax, Jaipur-II [2019 (3) TMI 39 - CESTAT, New Delhi]. (ii) M/s. Choudhary Stone Crushing Co. v. Commissioner of Central Excise and Service Tax, Jaipur-II [2019 (3) TMI 38 - CESTAT, New Delhi] (iii) CGST - Delhi-III v. Lattice Interiors (Vice-Versa) [2019 (2) TMI 1308 - CESTAT, New Delhi]. (iv) M/s. Srishti Constructions v. Commissioner of Central Excise and Service Tax, Ludhiana [2018-TIOL- 337-CESTAT-CHD] 13 . In M/s. Choudhary Stone Crushing Company, the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant date in such cases has been specified under Section 73(6)(1) of the Finance Act, 1994 as the date of filing of ST-3 return. In the instant case it is observed that the ST-3 return for the period October 13 to March 14 has been filed on 26.04.2014 and the show cause notice has been received by them on 22.10.2019. Thus, the demand in respect of the amount received of on or before 31.03.2014 is beyond five years from the relevant date and as such no demand for such a period prior to five years would survive. The relevant text of Section 73 of the Finance Act, 1994 is reproduced under for ease of reference: Where any service tax has not been levied or paid or has been shortlevied or short-paid or erroneously refunded, Central Excise Officer may, within thirty 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that no invoice has been issued in respect of such unaccounted cash amount as such the Point of Taxation would be the date of completion of service. This is evident from the narration at para 9.6 of the show cause notice which reads as under : Thus, Rule 6 of the Service tax Rules, 1994, provides for payment of tax on the prescribed date immediately following the calendar month in which the service is deemed to be provided as per the rules framed in this regard Further, the relevant rules framed on the issue are the Point of Taxation Rules, 2011. Rule 3 of the Point of Taxation Rules, 2011 provides that in case where invoices are not issued within the specified time period prescribed under Rule 4A of the Service Tax Rules, 1994, then point of taxation shall be the date of completion of provision of service. Thus it is obvious that the event of taxation and point of taxation do not depend on realization of consideration against the provision of service but the relevant factor for taxability is provision of service and the point of taxation shall be as per Rule 3 of Point of Taxation Rule, 2011. In the instant case it is undisputed that the noticee has not issued any invoic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leviable on the part of the consideration which has not been received or otherwise. 29.4.3. It is contention of the assessee that consideration is an integral part for the activity to be termed as a service and for the purpose of examining the same, the term service as defined under Section 65B(44) of the Finance Act, 1944 is of vital importance and the same read as under: Service means any activity carried out by the a person for another for consideration and includes a declared service. In light of the above definition, there is considerable force in the contention of the assessee. The direct implication of the language used in the above statute is that in absence of consideration, the activity cannot be termed as a service . This theory has also been taken cognizance of at para 2.2.2. of the Service Tax Education Guide which read as under: 2.2.2 What are the implications of the condition that activity should be carried out for a consideration ? To be taxable an activity should be carried out by a person for a consideration Activity carried out without any consideration like donations, gifts or free charities are therefore outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of receipts of payment OR iii) Date of completion of service However, corresponding amendments were carried out in Rule 6(3) of the Service Tax Rules, 1994 with effect from 01.04.2011 by virtue of Notification No. 26/2011 -ST wherein the following amendments were carried out: (a) in sub-rule (3) (i) after the words partially for any reason , the words or where the amount of invoice is renegotiated due to deficient provision of service, or any terms contained in a contract, shall be inserted; 29.4.4 An in-depth analysis of the amendment to Rule 6(3) of the Service Tax Rules, 1994 is required for the purpose of understanding the purpose and effect of such amendment. The text of the said rule pre-amendment as well as post-amendment is reproduced for ease of reference. Prior to amendment Where an assessee has issued an invoice, or received any payment, against the service to be provided which is not so produced by him either wholly or partially for any reason, the assessee may take the credit of such excess service tax paid by him, if the assessee- (a) has refunded the payment or part thereof, so received alongwith the service tax payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but was to be taken as credit by the service provider. The crux of both the above reference is that no service tax is to be paid on that part of the consideration which has not been received by the service provider. Thus, it can be derived that even after the shift in the point of taxation from receipt of payment to invoice, no service tax was intended to be charged on the value which had not been received by the service provider. With a view to safeguard the interests of the service provider, the mechanism for adjustment of underlying principle of receipt based levy of service tax has continued even after the change in the point of taxation. In other words, service tax is chargeable only on the amount that is received by the service provider even after the amendments w.e.f 01.04.2011. 29.4.5 The investigation has also adhered to the above principle in as much as the service tax has only been calculated on the outstanding cash payment and not on the outstanding cheque payment. This is evident from Annexure A-1 and B-1 to the SCN where Column M is the sum total of Cash Received Column H and Outstanding Cash- Column L . The applicable abatement has been calculated on s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id allegation, the assessee have contended that the demand of service tax to the tune of ₹ 93,28,750/- is not sustainable since the document on the basis of which the said demand has been raised was not made by any of their person but was created by broker. Further, it has been contended that the said document contained 30 entries where Annexure C-1 to SCN is found to be containing 52 entries. 29.5.2 The credibility of the said document has been with vehemently challenged by the assessee on the count that the name appearing in the said documents are not the person to whom such units have been sold. The assessee have produced copies of Sale Deeds in respect of the entries under contention and scrutiny of the said sale deeds indicate that the flat at at Annexure C-1 to the SCN in respect of which the allegation have been made have been sold to the following person (as detailed mentioned in OIO) The above indicates that except for Sr. No. 1 the name of the buyer as shown in the chit is not matching with the name of the buyers as per sales deed. 29.5.3. Further, as pointed out by the assessee in their written submission, entries at Sr.Nos. 1 to 30 are pertaining to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.34 I peruse the image reproduced at page No. 28 of the notice dated 05/09/2019 issued by Asst. Commissioner of Income Tax, Central Circle -2 (4), Ahmedabad under Section 142 of the IT Act to M/s J.P. Iscon Pvt. Ltd. and as a token of having perused the same I put my dated signature on the page 28 of the said notice. Since it was seized from the residence of Mrs. Kalindi S. Shah, I have taken feedback from her and accordingly I submit that this sheet was given to her by a broker with a brokerage proposal to sell the flats listed in the above sheet at attractive rates in return for a brokerage amount. Since we were having direct inquires for these flats, she did not entertain this brokerage proposal and the paper remained in her house. Q 35. The above sheet contains details of flat No. of Iscon Platinium (Phase -2) and it is also found that name mentioned against are tour buyers. For all Illustration, at Sr. No. 1 of the said sheet flat No. M-1102 of Iscon Platinium -Phase -2 the buyer name is showing Mr. Dua and the same also cross verified from you flat ledgers that the same flat with saleable area mentioned in the sheets is sold to Mr. Dua. Please offer your comments. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estine manner without the payment of duty. The surmises and conjectures cannot take place of legal proof. The excise department was required to prove by cogent, convincing and tangible evidence the allegation of clandestine receipt of polyester yarn from the company, M/s. HPL and thereafter manufacture of texturised yarn out of the same and clearance thereof without payment of duty, by the appellants. But the department, in our view, has failed to establish the same The effect of lack of evidence has been discussed by the Hon ble Patna High Court in the case of M/s Brims Products reported at 2011(271) ELT 0184 (Pat) which is reproduced under Presumptions and assumptions cannot take place of positive legal evidence, which are required for proving the charge. Even if, it is assumed that some raw materials were received at the factory of the respondent during the said period, the same cannot become conclusive proof of production and clandestine sale to different parties. Due to lack of positive evidence, benefit of doubt will always go in favour of the assessee. In view of the above, I find that the balance of convenience lies in favour of the assessee since the very b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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