Custom, Excise & Service Tax Tribunal
R S Constructions vs Cst Ch on 27 February, 2023
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 688 of 2012
(Arising out of Order-in-Original No. 30/2012 dated 17.09.2012 passed by the
Commissioner of Central Excise, Chennai-III Commissionerate, 26/1, Mahatma Gandhi
Road, Nungambakkam, Chennai - 600 034)
M/s. R.S. Constructions : Appellant
No. 567, 17th Street,
4th Sector, 20th Street,
K.K. Nagar, Chennai - 600 078
VERSUS
The Commissioner of Service Tax : Respondent
Newry Towers, No. 2054-I, 2nd Avenue,
Anna Nagar, Chennai - 600 040
APPEARANCE:
Shri S. Durairaj, Learned Advocate for the Appellant
Shri M. Ambe, Learned Deputy Commissioner for the Respondent
CORAM:
HON'BLE MR. P. DINESHA, MEMBER (JUDICIAL)
HON'BLE MR. M. AJIT KUMAR, MEMBER (TECHNICAL)
FINAL ORDER NO. 40088 / 2023
DATE OF HEARING: 21.02.2023
DATE OF DECISION: 27.02.2023
Order : [Per Hon'ble Mr. P. Dinesha]
This appeal is filed by the appellant-taxpayer against
the Order-in-Original No. 30/2012 dated 17.09.2012
passed by the Commissioner of Central Excise, Chennai.
2. The appellant is engaged in civil construction work
and had obtained Service Tax registration under the
following categories, namely: -
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Appeal No.: ST/688/2012-DB
(i) Cargo Handling Service
(ii) Commercial or Industrial Construction Service
(iii) Site Preparation & Clearance Service
(iv) Mining Service
3. It appears that there was an audit of accounts of the
appellant by the Internal Audit Group of the Service Tax
Commissionerate, Chennai wherein it was noticed that the
appellant had not paid the Service Tax of Rs.32,14,641/-
on the value of taxable services realized by them for the
period from July 2008 to December 2008. Upon being
pointed out, it appears that the appellant had paid
Rs.2,78,779/- on 18.12.2008 for the half year ending
September 2008. Further, it is also borne on record that
the Internal Audit Party had noticed that the appellant had
not paid the Service Tax on Site Formation Service, Cargo
Handling Service and Commercial or Industrial
Construction Service provided to various clients.
4. Accordingly, a Show Cause Notice dated 07.04.2010
was issued alleging, inter alia, various violations and
consequently proposing to demand: -
(i) Service Tax of Rs.1,79,07,643/- under Section 73(1)
of the Finance Act, 1994;
(ii) Rs.9,83,960/-, being the CENVAT Credit wrongly
taken and utilized by the appellant, to be recovered
under Rule 14 of the CENVAT Credit Rules, 2004;
(iii) Rs.2,78,779/- paid by the appellant, to be
appropriated;
(iv) Interest under Section 75 of the Finance Act, 1994;
and
(v) Penalty under Sections 76 and 78 of the Finance Act,
1994 read with Rule 15(2) of the CENVAT Credit
Rules, 2004.
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5. The appellant filed a detailed reply dated 24.11.2011
thereby rebutting the proposal made on each count and
thereby contending that there was no liability to Service
Tax for the various reasons given by them therein. They
had also filed a rejoinder to their reply by enclosing
additional documents as well in support of their claim that
they were not liable to pay Service Tax.
6. During adjudication, the Commissioner-Adjudicating
Authority having considered the replies filed by the
appellant, however, has vide impugned order confirmed
the demands proposed in the Show Cause Notice along
with interest under Section 75 ibid. and penalty under
Section 78 ibid. It is against this demand in the impugned
order that the appellant has preferred the present appeal
before this forum.
7. Heard Shri S. Durairaj, Learned Advocate for the
appellant and Shri M. Ambe, Learned Deputy
Commissioner for the Revenue.
8.0 The Learned Advocate for the appellant submitted at
the outset that the Show Cause Notice is ex facie illegal
since the issuing authority has not relied upon any
evidence to propose the various demands against the
appellant and that the Show Cause Notice is contrary to
the C.B.E.C. Master Circular No. 1053/2/2017-CX. dated
10.03.2017. He also seriously contended that the authority
has also not mentioned in the Show Cause Notice the relied
upon documents, whereby the appellant was deprived of
proper defence. He further contended that though the
appellant had filed documents / additional documents vide
its replies to the Show Cause Notice, during adjudication
proceedings, the Commissioner has only considered those
very documents filed by it, called for a verification report
and proceeded to conclude the adjudication proceedings
based on such report obtained, without furnishing the
above report to the appellant, which, according to the
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Learned Advocate, is in serious violation of the principles
of natural justice.
8.1 He would further contend, without prejudice to the
above legal grounds, that the (1) first issue is that the
appellant had made a belated payment of Service Tax
along with interest even prior to the issuance of Show
Cause Notice, but the same was not at all considered by
the authority below in the adjudication proceedings; that
the demand pertaining to the belated payment, therefore,
could not stand for the above reason and consequently, no
penalty could also be exigible on this.
8.2 On the second issue of Site Formation Work, it is the
case of the appellant that it had entered into an agreement
with M/s. Nuclear Power Corporation of India Ltd.,
Kudankulam, which involved even construction of roads
and that the above contract was an infrastructural project
for the generation of electricity. He thus pleaded that the
above contract was a Works Contract prior to 01.06.2007
and hence, the benefit of the decision of the Hon'ble Apex
Court in the case of Commissioner of C.Ex. & Cus., Kerala
v. M/s. Larsen & Toubro Ltd. [2015 (39) S.T.R. 913 (S.C.)]
was available. He would further place reliance on the
exemption Notification No. 17/2005-S.T. dated 07.06.2005
whereby even the construction of roads has been held to
be exempted insofar as the same related to Site Formation
Services and relied on the order of the co-ordinate
Chandigarh Bench of the CESTAT in the case of M/s.
Ludhiana Builders v. Commissioner of C.Ex. and S.T.,
Ludhiana [2020 (37) G.S.T.L. 231 (Tri. - Chandigarh)]
8.3 The next issue is relating to the demand on
Cargo Handling Services, against which it was contended
that the work orders were issued by M/s. India Cements
Ltd. and M/s. Hindustan Construction Co. Ltd. wherein the
service involved was transportation per se, which was duly
taken note of even in the Show Cause Notice, as mentioned
in Annexure-II therein. The above transportation,
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according to the Learned Advocate, was ancillary and
incidental, which did not attract Service Tax. In this
connection, he would place reliance on the cases of M/s.
Jain Carrying Corporation v. Commissioner of C.Ex., Jaipur
[2019 (24) G.S.T.L. 376 (Tri. - Delhi)] and M/s. M.L. Agro
Products Ltd. v. Commissioner of Cus., C.Ex. & S.T.,
Guntur [2017 (6) G.S.T.L. 94 (Tri. - Hyderabad)] which
was affirmed by the Hon'ble Supreme Court in 2018 (18)
G.S.T.L. J38 (S.C.)
8.4 The next issue is relating to the demand on
construction services rendered to M/s. Petron Civil
Engineering (P) Ltd., against which the Learned Advocate
for the appellant contended that the nature of the service
was construction or earth work evacuation and that the
principal contractor itself had paid the Service Tax during
2006-07. This, however, was not accepted by the
Adjudicating Authority who, by placing reliance on the
Board Circular No. 96/7/2007-S.T. dated 23.08.2007, had
denied the same. The Learned Advocate thus contended
that the said Circular was not applicable retrospectively in
the light of the decision of the Hon'ble Apex Court in the
case of M/s. Suchitra Components Ltd. v. Commissioner of
C.Ex., Guntur [2008 (11) S.T.R. 430 (S.C.)]
8.5 The next issue pertains to the alleged wrong
availment of CENVAT Credit on capital goods which,
according to the appellant, were used for providing taxable
services on which appropriate taxes were paid. Thus it is
the case of the appellant that when the taxes were paid,
the payer had every right to avail the CENVAT Credit.
8.6 The Learned Advocate for the appellant would
conclude his arguments by stressing upon the invocation
of extended period by contending that the Show Cause
Notice did not bring out any suppressed documents and
that the allegations were made upon verification / audit of
the appellant's accounts by the Internal Audit Group.
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9. Per contra, the Learned Deputy Commissioner for
the Revenue relied on the findings in the impugned Order-
in-Original.
10.1 Hence, first, we take up the issue of Show Cause
Notice vis-à-vis the non-reliance of documents in support
to propose tax liability. There is no dispute that a Show
Cause Notice is the foundation on which the Revenue would
build its case and hence, it is quintessential that a Show
Cause Notice should reflect all such supporting evidences
in support of each proposal for demand of respective duty
/ tax. We have seen a copy of the Show Cause Notice and
there is no dispute even by the representative of the
Revenue that nowhere in the Show Cause Notice is it
mentioned as to the relied upon documents nor is there
any averment about supplying such relied upon documents
to the noticee.
10.2 Further, it is also clear from a perusal of the Show
Cause Notice that it has been alleged that the appellant
provided the services mentioned thereunder, that they did
not pay the Service Tax on those services and that the
verification carried out by the audit party warranted the
invocation of extended period for demanding the tax due.
Thus, it is very clear from the Show Cause Notice that there
is not even a single assertion proposing to levy and collect
Service Tax on the basis of any specific document /
evidence.
10.3 We have gone through the impugned Order-in-
Original wherein the Adjudicating Authority has referred to
copy of challans produced as evidence by the appellant,
purchase orders (1) No. NPCIL/KKNPP/TS/2007/S/3113
dated 28.02.2007 issued by NPCL in favour of the noticee
and (2) No. NPCIL/KKNPP/TS/2006/S/2184 dated
29.05.2006 issued by NPCL in favour of the noticee,
invoices raised by M/s. India Cements Ltd. and M/s. ACC
Ltd. and invoices raised for the purchase of capital goods
from M/s. Schwing Stetter (India) Pvt. Ltd. The
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Appeal No.: ST/688/2012-DB
Commissioner has also placed reliance on the verification
report of the jurisdictional Service Tax authority, which
report admittedly was not provided to the appellant for
rebuttal.
10.4 From the discussions in the impugned Order-in-
Original, we find that it was the appellant who furnished
most of the documents voluntarily, though no mention
about any of the documents finds place in the Show Cause
Notice. It is these very documents that were sent for
verification to the jurisdictional Service Tax authority and
hence, it would be incumbent upon the lower authority to
have provided such report obtained from the jurisdictional
Service Tax authority before fastening the appellant with
tax liability.
11. From the above discussions, we are satisfied that the
liability was fastened on the appellant without following the
principles of audi alteram partem and clearly, the
consequential demands raised cannot sustain.
12. We also deem it necessary to examine the merits of
the demand in respect of each issue.
13.1.1 The demand at Sl. No. 1 relates to belated payment
of Service Tax. At paragraph 12.4 of the impugned order,
the lower authority has noted as under: -
"12.4 .....
.
.
......The Assistant Commissioner of Service Tax Chennai II division had reported vide C.No.IV/11/16/211.2009 - IA-SFO 205 dated 28.08.2012 that the noticee had paid a sum of Rs.27,26,650/- towards the service tax by challans and paid Rs.4,99,540/- in the Cenvat credit account and enclosed copy of the credit documents..."
8Appeal No.: ST/688/2012-DB 14.1.2 Against the above, the Adjudicating Authority has proceeded to appropriate only the sum of Rs.27,26,650/- paid by the appellant by ignoring the payment of tax in the CENVAT Credit account to the extent of Rs.4,99,540/-.
13.2.1 The demand at Sl. No. 2 pertains to the Site Formation Services for which the appellant has relied on exemption Notification No. 17/2005-S.T. dated 07.06.2005, a copy of which is placed in the paper book filed by the appellant. From the above Notification, we find that exemption has been granted for site formation and clearance, excavation and earth moving and demolition and such other similar activities referred to in sub-clause (zzza) of clause (105) of Section 65 of the Finance Act, provided to any person by any other person in the course of construction of roads, airports, railways, etc., which Notification was interpreted by the co-ordinate Chandigarh Bench of the CESTAT in the case of M/s. Ludhiana Builders (supra) wherein the Learned Bench has held as under:-
"7. .....
.....
.......We find that Notification No. 17/2005-S.T., dated 7-6-2005 does not say that if it is not a public road then it is liable to be taxed. Therefore, we hold that the appellant is engaged in the construction of road and the same is exempt as per the Notification No. 17/2005-S.T., dated 7-6- 2005, therefore, no service tax is payable by the appellant."
13.2.2 Thus, the appellant is well within its right to claim bona fides as to the non-payment of Service Tax on the above.
13.3.1 In respect of the demand pertaining to Cargo Handling Services, Learned Advocate for the appellant would draw our attention to Annexure-II to the Show 9 Appeal No.: ST/688/2012-DB Cause Notice wherein the issuing authority has extracted the description of work as per se transportation. If the Adjudicating Authority had any doubts that the appellant did undertake any other activity other than transportation inviting tax liability, then the same should have been put across to the appellant for rebuttal / explanation thereby providing an opportunity to the appellant to meet the allegations levelled against it. Contrary to this, the Adjudicating Authority refers the matter to the jurisdictional tax authority, obtains a report and proceeds to confirm the demand based solely on such report obtained behind the back of the appellant. Moreover, the name of the party as mentioned at Annexure-II to the Show Cause Notice refers to ICL and HCC whereas in the Order-in-Original, the lower authority has referred to ICL and ACC, which was perhaps based on the unrebutted report obtained by the lower authority.
13.3.2 In the above peculiar facts, we propose not to confirm the above demand as we find that there are serious inconsistencies, that the conclusion arrived at by the Adjudicating Authority appears to be in a haste and without proper application of mind and also that the principles of natural justice have not been followed.
13.4.1 The next demand pertains to the construction services rendered to M/s. Petron Civil Engineering (P) Ltd., against which it was claimed by the appellant that the principal contractor had paid the Service Tax, which fact has been brushed aside by the lower authority by relying upon the Master Circular No. Circular No. 96/7/2007-S.T. dated 23.08.2007.
13.4.2 We find substance in the contentions of the Learned Advocate for the appellant that the said Circular can operate only prospectively, as clarified by the Hon'ble Supreme Court in the case of M/s. Suchitra Components Ltd. (supra) wherein the Hon'ble Court has followed its earlier judgement and held as under: -
10Appeal No.: ST/688/2012-DB "2. We have heard Mr. A.R. Madhav Rao, learned counsel for the appellant and Mr. K. Radhakrishna, learned Senior Counsel for the respondent. We have perused the orders passed by the lower Authorities and also of the Tribunal. The point raised by the learned counsel for the appellant is covered by the recent judgment of this Court in Civil Appeal No. 4488 of 2005, Commissioner of Central Excise, Bangalore v. M/s. Mysore Electricals Industries Ltd., reported in 2006 (204) E.L.T. 517 (S.C.). In the said Judgment, this Court held that a beneficial circular has to be applied retrospectively while oppresive circular has to be applied prospectively. Thus, when the circular is against, the assessee, they have right to claim enforcement of the same prospectively."
13.5 The last demand at Sl. No. 5 pertains to the denial of CENVAT Credit on capital goods which has been denied on the ground that the noticee did not turn up with documents for verification by the jurisdictional Service Tax authority. It is the settled position of law that no CENVAT Credit shall be allowed on capital goods used exclusively in the manufacture of exempted goods or in providing exempted services; but from a perusal of the Show Cause Notice or the impugned Order-in-Original, nowhere do we see that the lower authority has placed reliance on any evidence to support that the appellant was indeed engaged in the manufacture of exempted goods or was providing exempted services.
14. From the above discussions, it is clear to us that even on merits, the demands proposed in the Show Cause Notice, which thereafter have been confirmed in the impugned Order-in-Original, are without any basis or without any documentary evidence and that there is serious violation to the principles of natural justice and hence, no part of the demand can be sustained.11
Appeal No.: ST/688/2012-DB 14.1 We are not going into the other technical grounds urged by the appellant as we are satisfied that the appellant has made out a case on merits.
15. Consequently, we set aside the impugned order and allow the appeal on both legal grounds as well as on merits, with consequential benefits, if any, as per law.
(Order pronounced in the open court on 27.02.2023) Sd/-
(P. DINESHA) MEMBER (JUDICIAL) Sd/-
(M. AJIT KUMAR) MEMBER (TECHNICAL) Sdd