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TMI Blog2022 (10) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... the Noticee; 5.2 I order recovery of statutory interest at appropriate rate on the amount of Service Tax demand confirmed at Para 5.1 above from the Noticee, under the provisions of Section 75 of the Finance Act, 1994; 5.3 I do not impose any penalty under Section 76 of Finance Act, 1994 on the noticee in view of my findings at Para 4.21 above; 5.4 I impose a penalty of Rs. 10,000/- (Rupees Ten Thousand only) under Section 77 of the Finance Act, 1994, on the Noticee; 5.5 I impose a penalty of Rs. 16,84,61,4481- (Rupees Sixteen Crore eighty four lakh sixty one thousand four hundred forty eight only on the Noticee under the provisions of Section 78 of the Finance Act. 1994. II Show Cause Notice F.NO.STIDn. IV/Gr.V/SCN/Afcons Infra/2013-14/4520 dated 09- 05-2014 for Rs.1,67,27,398/- for the period April, 2012 to March, 2013. 5.6 I Confirm, in terms of Section 73(2) of the Finance Act, 1994 read with Section 68 ibid & Rule 6 of Service Tax Rules, 1994, the demand of Service Tax amounting to Rs. 1,67,27,398/- (Rupees One Crore sixty seven lakh twenty seven thousand three hundred ninety eight only) and order its recovery from the Noticee; 5.7 I order recovery of statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fire fighting, etc. for service corridor in middle circle of Connaught Place (hereinafter referred to as the project). 2.2 On completion of tendering process, the composite contract for Rs.236,70,48,257/- was awarded to the Consortium for execution of the said project. As per the Detailed Letter of Acceptance dated 06/01/10 by Ell the scope of work allotted to the Consortium is Civil works which included RCC structure for the Service corridor including structural works i.e. Sheet piling, RCC works (Concrete, formwork, HYD bars), waterproofing, Structural steel and finishing works such as granite in staircase and tiling/glazing works in exits/entries. -Civil works shall also include the piping works for Drainage, Sewerage, Water Supply & irrigation works etc, Rain Water Harvesting shall also form part of the civil works. Electrical works which include Installation, Testing and commissioning of 23 nos (1600 KVA each), Compact substations and HT/LT cabling works, Other Works which includes fire fighting, CCTV & PA System for overall Connaught place area and fire fighting & detection, CCTV Access control, Public address system & Ventilation system for the service corridor. 2.3 Of to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 A Show Cause Notice dated 28-09-2012 was thus issued to the appellant asking them to show cause as to why: i. service tax amounting to Rs.16,84,61,448/- (Rs. Sixteen Crores Eighty Four Lakhs Sixty One Thousand Four Hundred Forty Eight Only) inclusive of education cess and secondary & higher education cess on the taxable value of RS. 180,40,09,490/- should not be demanded and recovered from them in terms of proviso to section 73(1) of the Finance Act, 1994 as amended for the taxable service provided by them to EIL classifiable under Commercial or Industrial Construction since March, 2010, as defined under Section 65(105)(zzg) read under Section 65(25b) of the Finance Act, 1994. ii. appropriate interest should not be demanded and recovered from them under section 75 of the Finance Act, 1994. iii. penalty should not be imposed on them under section 77 of the Finance Act, 1994 as amended for their failure to furnish information, failure to produce documents, failure to pay appropriate Service tax, failure to furnish the prescribed ST- 3 return as required under section 70 Finance Act, 1994 as amended, read with rule 7 of the Service Tax Rules, 1994; iv. penalty should not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, local authority or Government authority by way of construction of a civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession are exempt vide Notification 25/2012-ST. * Since the construction of civil structure for NDMC is covered within the Jawaharlal Nehru National Urban Renewal Mission Scheme, the same is exempted from service tax levy vide entry no. 13 of the Mega Exemption No. 25/2012-ST for activities performed after 01.07.2012 As per the Board Circular No 80/10/2004-ST, dated 17-09- 2004 where government buildings or civil constructions are used for providing civic amenities, such services would not be taxable. * Circular No 116/10/2009-ST, dated 15.09.2009 has clarified that the "commercial or industrial construction service" is chargeable to service tax if it is used, occupied or engaged either wholly or primarily for the furtherance of commerce or industry. * Appellants has for NDMC, constructed the service corridor in order to provide the facilities of drainage, sewerage, water supply and irrigation. The service corridor so constructed could by no means have said to be u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings recorded in the impugned order submits that: * at the first the time of issue of SCN, all the facts were not known by the Department and hence the demand was made under CICS. But after the fact that it was a composite contract came to the knowledge of the department, they have confirmed the demand under Works Contract Service. In this case, we cannot say that the Appellant has been denied any the due process of natural justice. * for the entire period of the demand both CICS and Works Contract Service were fully taxable. Since both the service of CICS and Works Contract Service is similar and hence it cannot be said to have gone beyond the scope of the SCN per se. We have had several cases where the Tribunal and High Courts have confirmed the demand even when wrong sections were quoted in the SCN. These cases are : * Pradyumna Steel Ltd - 1996 (82) ELT 441 (SC) * Deccan Cements Ltd - 2002 (147) ELT 428 (Tri. Chennai) * Deccan Cements Ltd -2006 (199) ELT A44 (SC) * The Elphinstone Spinning & Weaving Mills Co Ltd - 1978 (2) ELT J399 (SC) * Supercom India Ltd - 2003 (160) ELT 69( Del) * Hytaisun Magnetic Ltd-2008 (229) ELT 634 (Tri. Ahd) * Lanjekar Sales Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. In case the Bidder is a Consortium, Bidder is to submit copy of Consortium agreement * Total contract value is mentioned. EIL will act 3 Turn Key consultant. * Entire work is per scope of work covered under this contract shall be treated as Composite contract (refer para 2.6.1 of special conditions of contract.) Contractor shall pay Sales Tax on Works Contract and this should be included in the price quoted. If there is no any variation due to any statutory amendment, the variation in Sales Tax will be reimbursed / refunded. Service Tax at the prevailing rates on the works shall be included in the rates quoted by the contractor. However, if at later date, due to any statutory amendment for any increase / decrease resulting into variation in the Service Tax rate, actual Service Tax paid by the contractor will be reimbursed / refunded. (Refer para 5.6 of special conditions of contract.) 4.3 EIL issued detailed letter of acceptance dated 06.01.2010 to M/s Afcons- Sterling and Wilson Consortium which states that the scope of work under the contract shall be as detailed in the bidding document. 4.4 Salient features of the Consortium agreement entered on 31.07.2009 betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and occupied primarily for commerce or industry. These are not considered as places for public purposes or for providing civic amenities. The shops are constructed for renting them out for commercial and business purposes. Therefore, the argument of the Noticee that the activities undertaken does not fall within the scope of services provided in relation to commercial or industrial construction is contrary to facts and totally untenable. 4.9 The Noticee also argued that the construction services provided includes activities relating to making of tunnel and construction or making of tunnel are excluded from the scope of the said taxable service. It is not the case of the Noticee that these activities undertaken relates to construction of tunnel. The construction services were performed by the Noticee as per the letter of acceptance dated 06-01-2010 between the Noticee. And EIL in terms of Bidding Document No. 1038/T-01/09-10/RKK/04. The letter of acceptance dated 06.01.2010 was issued by EIL only to the consortium. Said letter in its Para 1.0 mentioned the scope of the work as under: "Civil work: RCC structure for the service corridor including structural works i.e. Sheet pil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y evidence. The bid document clearly envisages that the activity undertaken under this contract are leviable to Service Tax. The contract also makes it obligatory on the part of the contractor to include Service Tax at the prevailing rate while quoting the rate. The contract envisages and specifically provides for payment of Service Tax on actual basis. In case of any increase, the contractor will be suitably compensated. In case of any decrease in Service Tax rate, the contractor is not entitled to claim Service Tax quoted but only on the basis of actual Service Tax payable or paid. 4.13 The contract has been awarded on the terms and conditions specified. The Noticee being a member of the Consortium is party to the contract. The view taken by the Notices that the works undertaken by them under the contract is not leviable to Service Tax is completely contrary to the explicit terms of the contract. The Noticee in the running account mentions the entire contract value. It is therefore evident that the Noticee is fully aware of his contractual obligation that the activity undertaken under the contract is leviable to Service Tax, The Noticee for the reason best known has decided not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of Commercial Complex" as defined by the Section 65 (25b) of the Finance Act, 1994, but would merit classification under the category of "Work Contract Service" as defined by Section 65 (105) (zzzza) of the Finance Act, 1994. Admittedly the contract in the present case involves transfer of property involved in execution of work contract, and the contract is not an service contract simplicitor. 4.2.3 Hon'ble Supreme Court has in case of Larsen and Tubro [2015 (39) STR 913 (SC)] held as follows: "24. A close look at the Finance Act, 1994 would show that the five taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is clear from the very language of Section 65(105) which defines "taxable service" as "any service provided". All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Finance Minister in moving the Bill to tax Composite Indivisible Works Contracts specifically stated :- "State Governments levy a tax on the transfer of property in goods involved in the execution of a works contract. The value of services in a works contract should attract service tax. Hence, I propose to levy service tax on services involved in the execution of a works contract. However, I also propose an optional composition scheme under which service tax will be levied at only 2 per cent of the total value of the works contract." 28. Pursuant to the aforesaid speech, not only was the statute amended and rules framed, but a Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 was also notified in which service providers could opt to pay service tax at percentages ranging from 2 to 4 of the gross value of the works contract. 29. It is interesting to note that while introducing the concept of service tax on indivisible works contracts various exclusions are also made such as works contracts in respect of roads, airports, airways transport, bridges, tunnels, and dams. These infrastructure projects have been excluded and continue to be excluded pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007, since the demand was raised under "commercial or industrial construction service, whereas admittedly the service is correctly classifiable under works contract service, the demand raised under wrong head of service cannot sustain. 7. As per above discussion, the demand raised under 'commercial or industrial construction service shall not sustain. Hence, the same is set aside.' 20. In M/s. Choudhary Stone Crushing Company versus Commissioner of Central Excise and Service Tax - Jaipur-II [2019 (3) TMI 38 -CESTAT, New Delhi], the Tribunal observed as under:- "8. For period commencing on 1/06/2007, the composite services would be liable for classification under Works Contract Service only. But we note that Show Cause Notice has proposed the demand for service tax under the category of Commercial and Industrial Construction Service as well as Repair and Maintenance Service. Hence we are of the view that the confirmation of demand under the category of WCS will not be proper particularly in view of the decision of the Tribunal in case of Ashish Ramesh Dasarwar (supra) wherein Tribunal has taken the view that demand for Service Tax is to be set aside if the Show Cause Notice p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire case of the Revenue will not sustain. Therefore, we are not addressing the issue that whether the appellant's classification was correct or otherwise. The appellant also made an alternate submission that even if the classification declared by them under CTH 8306 2110 is incorrect the goods are otherwise classifiable under CTH 9703 in such tariff entry also the IGST Rate is 12% and therefore, there will be no revenue implication. Though alternate classification suggested by the appellant appears to be prima facie correct but since we have already taken a view that Revenue's claim of classification under CTH 8311 is absolutely incorrect and it is nobody's case in the Show Cause Notice that the goods are classified under CTH 9703 we are not addressing this issue. However, since the Revenue's claim of classification is held to be incorrect the entire proceeding of the Revenue is quashed. The impugned order is set aside. The appeal is allowed with consequential relief, if any arise, in accordance with law. 4.2.5 For the period from 01.07.2012, the issue of classification of service under the taxable category had be done away with and the demand was to be made in respect of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in Sun Export case (supra) stands overruled." 4.2.7 Since appellant have failed to substantiate their claim to the benefit of exemption under this notification in our view the benefit of this exemption would not be available to them. 4.2.8 Appellant have claimed abatement for determination of the taxable value as per Rule 2A of Service Tax (Determination of Value) Rules, 2006. The claim has been denied by the Commissioner as per para 4.15 of the impugned order. The only reason for denial stated is that the appellant have failed to substantiate their claim to abatement. Rule 2A as substituted by Notification No 24/2012-ST dated 6th June 2012 reads as follows: 2A. Determination of value of service portion in the execution of a works contract.- Subject to the provisions of section67, the value of service portion in the execution of a works contract , referred to in clause (h) of section 66E of the Act, shall be determined in the following manner, namely:- (i) Value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per cent. of the total amount charged for the works contract; Explanation 1.- For the purposes of this rule,- (a) "original works" means- (i) all new constructions; (ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; (iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether prefabricated or otherwise; (b) "total amount" means the sum total of the gross amount charged for the works contract and the fair market value of all goods and services supplied in or in relation to the execution of the works contract, whether or not supplied under the same contract or any other contract, after deducting- (i) the amount charged for such goods or services, if any; and (ii) the value added tax or sales tax, if any, levied thereon: Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles. Explanation 2. --For the removal of doubts, it is clarified that the provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the extended period. 4.18 The recovery mechanism provided in proviso clause to Section 73(1) of the Finance Act, 1994, as it existed at the material time, provides for demanding Service Tax short paid or not paid during the period up to five years, "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 there under with intent to evade payment of Service Tax". 4.19 Thus, each of the sub-clauses getting covered by (a) to (e) of Section 73(1) are independent of each other and existence of any / each one of the individual situation is good enough to attract demand Service Tax for extended period under the proviso clause to Section 73(1). In the present case, the notice chose not to pay service tax in spite of the fact that noticee was fully aware that the construction activity carried out by them falls under the category of "Works Contract Service" as stipulated in Para 2.6.1 of the contract between them and EIL and as per Para 5.6 of special conditions of contract, the burden to pay service tax for the impugned works contract was on the Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he scheme of Service Tax levy, the self-assessment system casts a responsibility on the noticee to declare truthfully and comply with all requirements of law. The noticee has all along suppressed the facts as discussed in the preceding paras. Thus, it being a clear case of suppression of facts and contravention of provisions of law leading to evasion of Service Tax. I, therefore, hold that the noticee is liable for penalty under Section 78 of the Finance Act, 1994. 4.23 Penalty has also been proposed under Section 77 in the instant Show Cause Notice. This penalty is attracted where, among other things, any person liable to Service Tax contravened any of the provisions of Chapter V of Finance Act, 1994 or the rules made there under for which no penalty is separately provided therein. In the instant case, it is observed that though the noticee had filed their ST-3 Returns, the same has been filed without making correct disclosures. Requirement of Section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules, 1994 to file proper ST-3 returns with full disclosure is not a mere procedural formality but a statutory requirement. The noticee was under legal obligation to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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