9911796707
TMI Blog2023 (8) TMI 475X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of investigation, it was found that during the period 2004-05 to 2008-09, the appellant had failed to pay the service tax for the services of "Commercial and Industrial Construction" provided to various customers and accordingly the demand of Rs. 2,12,91,371/- was made vide show cause notice dated 23.10.2009 which has been confirmed vide the impugned order. The details of the demand confirmed are mentioned in the table below:- Service Tax payable Name of Clients to whom construction services provided by M/S Vrutika Enterprises, Rajkot 2004-05 (from 10.09.0 4) 2005- 06 2006-07 2007-08 2008-09 (upto 31.12.08) Total M/s Suzlon Infrastructure Ltd, Pune 5647991 1743826 351291 7743108 M/s Suzlon In Fastructure Services Ltd, Pune 6464017 2396236 8860253 M/s Rajkot Nagrik Sahkari Bank Ltd, Rajkot. 40761 354665 395426 M/s Vyavsayi Vidya Pratisthan (VVP), 439174 308644 532824 1077133 1161439 3519214 M/s Seva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classification under all the aforesaid three categories. However, they agreed with the classification under the category of "Commercial or Industrial Construction" for services provided by them to M/s. Suzlon Infrastructure Limited, Pune during the period2006-07 to 2008-09 and services provided by them to M/s. Suzlon Infrastructure Service Limited during the years 2007-08 and 2008-09 (upto25.8.2009) but they do not agree to classify the services provided by them to the said firm during 2008-09 (with effect from 25.08.2008 but incorrectly mentioned in reply as 25.08.2009) under the category of "Commercial or Industrial Construction" service. They wish to classify the service under the category of "Works Contract" as per the invoices raised by them during the period and charge/collect the Service tax @ 4.12%. The appellant has submitted that the services provided to both the above named companies were under different contracts executed from time to time; that the levy of tax is service specific and not person specific; that each service have to be classified under appropriate category suitable to the service provider on contract to contract basis; that therefore, if the service provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment, particularly, when they 'were already registered under one of the categories and had also submitted copy of the contract to the Department at a later stage. (ii) With regard to their taxability towards services provided to other parties, they have submitted that they have re-calculated Service tax on receipt basis by taking the receipts in respect of service rendered after10.9.2004 and by applying abatement as provided under Notification Nos. 15/2004-S.T., dated 10.9.2004 and 1/2006-S.T., dated 1.3.2006 for the years 2004-05 and 2005-06 after adding the value of raw material supplied by the recipient and also by applying the cum-duty principle. On this basis, they have submitted that their Service tax liability comes to Rs. 18,223/- and Rs. 1,25,357/- for service provided by them to M/s. Rajkot Nagarik Sahkari Bank Limited during the years 2004-05 and 2005-06 respectively. They have also submitted that they were not liable to pay Service tax on the amount of Rs. 3,000/- (Entry No. I of Annexure-"E" to the show cause notice) as the same related to service provided for the period prior to 10.9.2004. They have further submitted that service provided by them to Vyavsayi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterials supplied or provided or used by the provider or the construction service for providing such service, was inserted; that as this explanation was 3 absent during the period prior to 01.03.2005, there was no legal requirement for inclusion of the value of goods and materials supplied or provided or used by the provider of services during the said period. They have further submitted that value of raw material supplied by the recipients of service is not includible in the value of taxable services. In support of this plea, they have relied upon the (iii) They have further submitted that as per show cause notice, they have not collected and paid Service tax on the service provided to M/s. VVP, Rajkot, M/s. Rajkot Nagrik Sahakari Bank Limited, Rajkot, M/s. Tanna Cranktech Pvt. Limited, Rajkot, M/s. Precision Industrial Component, Rajkot and M/s. Sevabharti, Ahmedabad. Therefore, demand of Service tax is required to be re-computed by applying the cum-tax principle. They have also submitted that simultaneous invocation of Section 73 and 73A of the Finance Act, 1994, by invoking extended period of limitation is not tenable in the eyes of law. They have also submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 both dated 15.03.2007 under the category of "Commercial or Industrial Construction" service in spite of the fact that both the invoices were raised for use of JCB and tractors on rental basis, it has been mentioned in the impugned order that the copies of invoices produced are dated 8.6.2007 & 10.06.2007 and not 15.03.2007, therefore they do not support the claim of the appellant. The deduction on account of TDS has not been allowed as those were considered to part of the assessable value. The claim of abatement with regard to construction service provided to M/S Rajkot NagrikSahkari Bank Limited has been denied on the ground that the appellant did not provide any documentary evidence to establish the correctness of their claim with regard to the value of raw material claimed as received by them from the recipient of service. The claim of the appellant with respect to the service provided to Vyavasayi Vidhya Pratisthan (VVP), Rajkot and Sewa Bharti, Ahmedabad for construction of VVP Engineering college and Saraswati Shishu Mandir has been denied on the ground that both the recipients could not be considered as non-commercial undertakings as they were charging fees from the studen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant and mere act of taking registration and filing isolated returns cannot act as any mitigating factor and provide a shield against invocation of extended period in accordance with the proviso to Section 73(1) of the Finance Act, 1994. That decision in the case of M/s. Avenue Regent, 2010 (17) STR 284 (Tri. Bang.) was not applicable as this decision was rendered on a completely different footing inasmuch as it involved reclassification of the service provided by the applicant as convention services where they had taken the registration under Mandap Keeper and filed returns annually. In stark contrast, in spite of having taken the registration under construction service, M/s. Vrutika neither filed returns nor paid Ser-vice tax for over five years, except for one year, i.e. 2006-07 for which they filed false returns and paid Service tax of Rs. 4,18,679/- against their liability of Rs. 60,61,386/- for the said year and against the total liability of Rs. 2,12,91,371/- for the period from 10.09.2004 to 31.12.2008 covered by the show cause notice. Thus, no parallel can be drawn between the decision relied upon. That, the facts of the case clearly establish that M/s. Vrutika ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. 25. In fact, by way of contrast, Section 67 post amendment (by the Finance Act, 2006) for the first time prescribes, in cases like the present, where the provision of service is for a consideration which is not ascertainable, to be the amount as may be determined in the prescribed manner. 26. We have already seen that Rule 2(A) framed pursuant to this power has followed the second Gannon Dunkerley case in segregating the 'service' component of a works contract from the 'goods' component. It begins by working downwards from the gross amount charged for the entire works contract and minusing from it the value of the property in goods transferred in the execution of such works contract. This is done by adopting the value that is adopted for the purpose of payment of VAT. The rule goes on to say that the service component of the works contract is to include the eight elements laid down in the second Gannon Dunkerley case including apporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y fall within Section 65(105)(zzd) as a contract which relates to erection, commissioning or installation. It is clear that such contracts were never intended to be the subject matter of service tax. Yet, if learned counsel for the revenue is right, such contracts, not being exempt under the Finance Act, 1994, would fall within its tentacles, which was never the intention of Parliament. 30. It now remains to consider the judgment of the Delhi High Court in G.D. Builders. 31. In the aforesaid judgment, it was held that the levy of service tax in Section 65(105)(g), (zzd), (zzh), (zzq) and (zzzh) is good enough to tax indivisible composite works contracts. Various judgments were referred to which have no direct bearing on the point at issue. In paragraph 23 of this judgment, the second Gannon Dunkerley judgment is referred to in passing without noticing any of the key paragraphs set out hereinabove in our judgment. Also, we find that the judgment in G.D. Builders (supra) went on to quote from the judgment in Mahim Patram Private Limited v. Union of India, 2007 (3) SCC 668 = 2007 (7) S.T.R. 110 (S.C.), to arrive at the proposition that even when rules are not framed for computatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Central Sales Tax Act says :- "The State Government may make rules, not inconsistent with the provisions of this Act and the rules made under sub-section (1), to carry out the purposes of this Act." 34. In the aforesaid judgment it was found that Section 9(2) of the Central Sales Tax Act conferred powers on officers of the various States to utilize the machinery provisions of the States' sales tax statutes for purposes of levy and assessment of central sales tax under the Central Act. It was also noticed that the State Government itself had been given power to make rules to carry out the purposes of the Central Act so long as the said rules were not inconsistent with the provisions of the Central Act. It was found that, in fact, the State of Uttar Pradesh had framed such rules in exercise of powers under Section 13(3) of the Central Act as a result of which the necessary machinery for the assessment of central sales tax was found to be there. The Delhi High Court judgment unfortunately misread the aforesaid judgment of this Court to arrive at the conclusion that it was an authority for the proposition that a tax is leviable even if no rules are framed for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Sinha, C.J. said: (K.T. Moopil case [AIR 1961 SC 552], AIR p. 559, para 9) "9. ... Ordinarily, a taxing statute lays down a regular machinery for making assessment of the tax proposed to be imposed by the statute. It lays down detailed procedure as to notice to the proposed assessee to make a return in respect of property proposed to be taxed, prescribes the authority and the procedure for hearing any objections to the liability for taxation or as to the extent of the tax proposed to be levied, and finally, as to the right to challenge the regularity of assessment made, by recourse to proceedings in a higher civil court. The Act merely declares the competence of the Government to make a provisional assessment, and by virtue of Section 3 of the Madras Revenue Recovery Act, 1864, the landholders may be liable to pay the tax. The Act being silent as to the machinery and procedure to be followed in making the assessment leaves it to the Executive to evolve the requisite machinery and procedure. The whole thing, from beginning to end, is treated as of a purely administrative character, completely ignoring the legal position that the assessment of a tax on person or property is at le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as amended by the Amendment Act (23 of 1962). Noticing the absence of machinery provisions in the impugned enactments this Court observed: (AIR p. 1468, para 22) "22. ... if Section 6 is put aside, there is absolutely no provision in the Act prescribing the mode of assessment. Sections 3 and 4 are charging sections and they say in effect that a person will have to pay an additional assessment per acre in respect of both dry and wet lands. They do not lay down how the assessment should be levied. No notice has been prescribed, no opportunity is given to the person to question the assessment on his land. There is no procedure for him to agitate the correctness of the classification made by placing his land in a particular class with reference to ayacut, acreage or even taram. The Act does not even nominate the appropriate officer to make the assessment to deal with questions arising in respect of assessments and does not prescribe the procedure for assessment. The whole thing is left in a nebulous form. Briefly stated under the Act there is no procedure for assessment and however grievous the blunder made there is no way for the aggrieved party to get it corrected. This is a typica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Income Tax Act would apply to assessment of such dissolved firm. Interestingly enough, this provision is referred to only in the minority judgment in M/s. Murarilal's case (supra). The impugned judgment in the present case has referred to Ellis C. Reid's case but has not extracted the real ratio contained therein. It then goes on to say that this is a case of short levy which has been noticed during the lifetime of the deceased and then goes on to state that equally therefore legal representatives of a manufacturer who had paid excess duty would not by the self-same reasoning be able to claim such excess amount paid by the deceased. Neither of these reasons are reasons which refer to any provision of law. Apart from this, the High Court went into morality and said that the moral principle of unlawful enrichment would also apply and since the law will not permit this, the Act needs to be interpreted accordingly. We wholly disapprove of the approach of the High Court. It flies in the face of first principle when it comes to taxing statutes. It is therefore necessary to reiterate the law as it stands. In Partington v. A.G., (1869) LR 4 HL 100 at 122, Lord Cairns s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A unfortunately does not take into consideration that under the Rules the deduction in relation to any other charges in the manner and to the extent were also to be prescribed. Rule 13-A cannot be said to be an absolute follow-up legislation to subclause (i) of clause (a) of Section 21(1). When the law provides that something is to be prescribed in the Rules then that thing must be prescribed in the Rules to make the provisions workable and constitutionally valid. In Gannon Dunkerley & Co. [(1993) 1 SCC 364 : (1993) 88 STC 204] the Supreme Court observed that as subsection (3) of Section 5 and sub-rule (2) of Rule 29 of the Rajasthan Sales Tax Act and the Rules were not providing for particular deductions, the same were invalid. In the present matter the constitutional provision of law says that particular deductions would be provided but unfortunately nothing is provided in relation to the other charges either in Section 21 itself or in the Rules framed in exercise of the powers conferred by Section 58 of the Bihar Finance Act. *** In our considered opinion sub-clause (i) of clause (a) of Section 21(1) read with Rule 13-A of the Rules did not make sub-clause (1) fully workable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to provide the procedure and principles for effectively determining the taxable turnover, after excluding the items of turnover relating to such works contract which could not be subjected to levy of tax by the State in exercise of its power of legislation under entry 64 of the State List. Rule 6 by its own operation had no application in the matter of determination of liability under section 3-B since it has been made applicable only in respect of determining the taxable turnover of a dealer under section 3, 3-A, 4 or 5. Consequently, with our decision above striking down rules 6-A and 6-B of the Rules, there is no proper machinery provisions to determine the taxable turnover for purposes of section 3B. The provisions of section 3-B, therefore, in the absence of the necessary rules for enforcing the same and determining the taxable turnover for the purposes of section 3-B is rendered dormant, ineffective and unenforceable. Such would be the position till sufficient provisions are made either in the Act itself or in the rules by virtue of the rule-making power to ignite, activate and give life and force to section 3-B of the Act." (at paras 32, 33) 39. And the Orissa High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that Section 67 of the Finance Act, which speaks of "gross amount charged", only speaks of the "gross amount charged" for service provided and not the gross amount of the works contract as a whole from which various deductions have to be made to arrive at the service element in the said contract. We find therefore that this judgment is wholly incorrect in its conclusion that the Finance Act, 1994 contains both the charge and machinery for levy and assessment of service tax on indivisible works contracts. 42. It remains to consider the argument of Shri Radhakrishnan that post 1994 all indivisible works contracts would be contrary to public policy, being hit by Section 23 of the Indian Contract Act, and hit by Mcdowell's case. 43. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services. 44. We have been informed by counsel for the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of raw materials will not be added for determination of taxable value. The appellant shall be allowed cenvat credit on "input services" and capital goods" where they have charged tax at full value in the invoices on proportionate basis vis-à-vis the services where the appellant has already availed abatement of 33% under the respective notifications subject to submission of supporting documentary evidence. No cenvat shall be admissible for use of raw materials. (iii) Where there is a divisible work contract clearly defining value for the service portion and the value of raw materials, the taxability will be determined under "works contract" service after 01.06.2007. The appellant may be given an option subject to production of supporting documents to pay duty on a value determined under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 or Works Contract (Composition Scheme for payment of Service Tax), 2007. (iv) Where there is a contract simplicitor for "Commercial and Industrial Construction" service without supply of any raw material by the appellant, the taxability will be determined under this service only without adding the value of raw materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be part of the "gross amount charged" as given in explanation (c) to Section 67 of the Act. 12. The appellant has further disputed the taxability of the two invoices which they claimed that the same were for raised for use of JCB and tractors on rental basis and were covered under the service of ""supply of tangible goods for use" which was not covered under the Act at the relevant time. The Ld. Commissioner has rejected the claim on the ground that invoices produced are dated 8.6.2007 & 10.06.2007 and not 15.03.2007 as claimed by the appellant. We are of the considered view that the appellant should be given a chance to clarify to the adjudicating, the above discrepancy. 13. Appellant has further claimed that an invoice Rs. 3000/- and invoice Rs. 4,00,000/- which has been computed twice pertain the service was provided prior to 10.09.2004 when the impugned service of "construction" was brought into the service tax net. The claim has been rejected by the Ld. Commissioner on the ground that the appellant could not produce documents that the service was provided prior to 10.09.2004. We are of the considered view that the appellant should be given a chance to submit necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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