Custom, Excise & Service Tax Tribunal
Ranjit Singh & Company Llp vs Meerut-I on 28 March, 2022
1 ST/70225/2018
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Allahabad
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REGIONAL BENCH - COURT NO.
Service Tax Appeal No.70225 Of 2018
[Arising out of OIO No. 54/Principal/Commissioner/Meerut/2017 dated 28.12.2017
passed by the Commissioner of Central Excise, Meerut]
M/s Ranjit Singh & Company Ltd. : Appellant (s)
Kothi No. 268, Phase-I, Sector - 55,
Mohali, Punjab
Vs
Principal Commissioner, Central Excise
And Service Tax Commissionerate : Respondent (s)
Meerut APPEARANCE:
Shri Vikrant Kansaria, Advocate for the Appellant Shri T. M. Siddiqui, Authorised Representative for the Respondent CORAM : HON'BLE MR. ASHOK JINDAL, MEMBER (JUDICIAL) HON'BLE MR. P. AJNANI KUMAR, MEMBER (TECHNICAL) ORDER No. 70086 / 2022 Date of Hearing:11.03.2022 Date of Decision:28.03.2022 Per : Mr. Ashok Jindal The appellant is in appeal against the impugned order wherein the demand of service tax to the tune of Rs.
15,78,25,616/- has been confirmed alongwith interest and equivalent amount of penalty was also imposed.
2. The brief facts of the case are that during the period April 2011 to March 2015, the appellant provided erection, installation and commissioning services to Power Grid Corporation of India Limited (Power Grid) which were exempt from payment of 2 ST/70225/2018 service tax. The appellant alongwith JV partner like Skipper Limited gave the bid for supply, erection, installation and commissioning of Transmission lines to Power Grid Corporation of India Limited (Power Grid) to qualify as bidder. The Power Grid awarded two separate contracts in the name of JV viz:-
(a) Contract 1-for supply of Towers, Hardware fitting and accessories; and
(b) Contract 2-for erection, installation and commissioning of transmission lines.
The JV partner raised invoices for supply of towers and payments were received by JV towers directly.
The appellant raised invoices for supply of Accessories. The invoices for erection, installation and commissioning of Transmission lines were raised by the appellant on Power Grid. The payments for services were directly made to the appellant based on the invoices issued by the appellant.
3. In addition to the above supplies, Power Grid supplied insulators and conductors, which were purchased by PGCIL from open market for erection of transmission lines. Vide the impugned order, the adjudicating authority has included the value of the towers, accessories and insulators and conductors for the purpose of working out total amount under the Composition Scheme and Valuation Rules and has demanded the differential service tax. The appellant discharged the service tax under the Works Contract (Composition Scheme for payment of 3 ST/70225/2018 service Tax) Rules, 2007upto 30.06.2012 and thereafter in terms of Rule 2A of the Service Tax (Determination of Value) Rules, 2006. As the appellant discharge service tax under Composition Scheme as the value of free supplies by the Power Grid sought to be included in gross services provided by the appellant, therefore, the impugned demand has been raised against the appellant by way of issuance of the show cause notice dated 18.10.2016 and adjudicated by including the value of free supplies by Power Grid for execution of the work. Against the said order, the appellant is before us.
4. The Ld. Counsel for the appellant submits that for the period prior to March 2015, the free supplies to material are not to be included in the assessable value has been held by the Hon'ble Apex Court in the case of Union of India vs. Intercontinental Consultants and Technocrats Pvt. Ltd. 2018 (10) GSTL 401 (S. C.), therefore, the impugned demand is not sustainable.
5. He further submitted that in the case of Commissioner of Vs. Bhayana Builders (P) 2018 (10) GSTL 118 (S.C.) again the Hon'ble Apex Court has held that free supplies are not to be included in the gross value of service provided by the appellant. 5.1. He also submitted that the appellant is providing services of erection commissioning for distribution of electricity, the same is exempt from levy of service tax under Section 66 of the Finance Act, 1994. To support of this contention, he relied on 4 ST/70225/2018 the decision of this Tribunal in the case of U. P. RajkiyaNirmam Nigam Ltd. vs. Commissioner of Central Excise, Meerut-I 2015 (05) LCX 0174.
6. On the other hand, the Ld. AR supported the impugned order.
7. Heard the parties and considered the submissions.
8. On hearing both the parties, following issue are emerges for consideration:-
(a) whether the value of material supplied by M/s Power Grid to the appellant free of cost for erection commissioning of transmission lines shall form the part of gross value of services provided by the appellant from payment of service tax or not?
(b) whether the services of erection commissioning and installation provided for distribution of electricity is exempt from payment of service tax under Section 66 of the Finance Act, 1994 or not?
(c) whether the show cause notice dated 18.10.2016 for the period April 2011 to March 2015 is barred by limitation or not?9. Issue No. 1
whether the value of material provided by M/s Power Grid to the appellant for erection commissioning of transmission lines shall form the part of gross of total value on services provided by the appellant from payment of service tax or not?
The issue has been examined by the Hon'ble Apex Court in the case of Union of India vs. Intercontinental Consultants 5 ST/70225/2018 and Technocrats Pvt. Ltd. 2018 (10) GSTL 401 (S. C.) (supra) wherein the Hon'ble Apex Court has observed as under:-
"24) In this hue, the expression 'such' occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing 'such' taxable services.As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such 'taxable service'.That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 01, 2006) or after its amendment, with effect from, May 01, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasized that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider 'for such service' and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service.
25) This position did not change even in the amended Section 67 which was inserted on May 01, 2006. Sub-section (4) of Section 67 empowers the rule making authority to lay down the manner in which value of taxable service is to be determined.
However, Section 67(4) is expressly made subject to the provisions of sub-section (1). Mandate of sub-section (1) of Section 67 is manifest, as noted above, viz., the service tax is to be paid only on the services actually provided by the service provider.
29) In the present case, the aforesaid view gets strengthened from the manner in which the Legislature itself acted. Realizing that Section 67, dealing with valuation of taxable services, does not include reimbursable expenses for providing such service, the Legislature amended by Finance Act, 2015 with effect from May 14, 2015, whereby Clause (a) which deals with 'consideration' is suitably amended to include reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service. Thus, only with effect from May 14, 2015, by virtue of provisions of Section 67 itself, such reimbursable expenditure or cost would also form part of valuation of taxable services for charging service tax. Though, it was not argued by the learned counsel for the Department that Section 67 is a declaratory provision, nor could it be argued so, as we find that this is a substantive change brought about with the amendment to Section 67 and, therefore, has to be prospective in nature. On this aspect of the matter, we may usefully refer to the Constitution Bench judgment in the case of Commissioner of Income Tax (Central)-I, New Delhi v. Vatika Township Private Limited8 wherein it was observed as under:
"27. A legislation, be it a statutory Act or a statutory rule or a statutory notification, may physically consists of words printed on papers. However, conceptually it is a great deal more than an ordinary prose. There is a special peculiarity in the mode of verbal communication by a legislation. A legislation is not just a series of statements, such as one
6 ST/70225/2018 finds in a work of fiction/non-fiction or even in a judgment of a court of law. There is a technique required to draft a legislation as well as to understand a legislation. Former technique is known as legislative drafting and latter one is to be found in the various principles of "interpretation of statutes". Vis-à-vis ordinary prose, a legislation differs in its provenance, layout and features as also in the implication as to its meaning that arise by presumptions as to the intent of the maker thereof.
28. Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. This principle of law is known as lexprospicit non respicit: law looks forward not backward. As was observed in Phillips v. Eyre [(1870) LR 6 QB 1] , a retrospective legislation is contrary to the general principle that legislation by which the conduct of mankind is to be regulated when introduced for the first time to deal with future acts ought not to change the character of past transactions carried on upon the faith of the then existing law.
29. The obvious basis of the principle against retrospectivity is the principle of "fairness", which must be the basis of every legal rule as was observed in L'OfficeCherifien des Phosphates v. Yamashita-Shinnihon Steamship Co. Ltd. Thus, legislations which modified accrued rights or which impose obligations or impose new duties or attach a new disability have to be treated as prospective unless the legislative intent is clearly to give the enactment a retrospective effect; unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. We need not note the cornucopia of case law available on the subject because aforesaid legal position clearly emerges from the various decisions and this legal position was conceded by the counsel for the parties. In any case, we shall refer to few judgments containing this dicta, a little later."
30) As a result, we do not find any merit in any of those appeals which are accordingly dismissed."
10. Further, the said issue has been examined by the Hon'ble Apex Court in the case of Commissioner of Vs. Bhayana Builders (P) (supra) wherein the Hon'ble Apex Court has observed as under:-
"A plain meaning of the expression 'the gross amount charged by the service provider for such service provided or to be provided by him' would lead to the 7 ST/70225/2018 obvious conclusion that the value of goods/material that is provided by the service recipient free of charge is not to be included while arriving at the 'gross amount' simply, because of the reason that no price is charged by the assessee/service provider from the service recipient in respect of such goods/materials. This further gets strengthened from the words 'for such service provided or to be provided' by the service provider/assessee. Again, obviously, in respect of the goods/materials supplied by the service recipient, no service is provided by the assessee/service provider. Explanation 3 to sub-section (1) of Section 67 removes any doubt by clarifying that the gross amount charged for the taxable service shall include the amount received towards the taxable service before, during or after provision of such service, implying thereby that where no amount is charged that has not to be included in respect of such materials/goods which are supplied by the service recipient, naturally, no amount is received by the service provider/assessee. Though, sub-section (4) of Section 67 states that the value shall be determined in such manner as may be prescribed, however, it is subject to the provisions of sub-sections (1), (2) and (3). Moreover, no such manner is prescribed which includes the value of free goods/material supplied by the service recipient for determination of the gross value. It was argued that payment received in 'any form' and 'any amount credited or debited, as the case may be...' is to be included for the purposes of arriving at gross amount charges and is leviable to pay Service Tax. On that basis, it was sought to argue that the value of goods/materials supplied free is a form of payment and, therefore, should be added. We fail to understand the logic behind the aforesaid argument. A plain reading of Explanation (c) which makes the 'gross amount charges' inclusive of certain other payments would make it clear that the purpose is to include other modes of payments, in whatever form received; be it through cheque, credit card, deduction from account, etc. It is in that hue, the provisions mentions that any form of payment by issue of credit notes or debit notes and book adjustment is also to be included. Therefore, the words 'in any form of payment' are by means of issue of credit notes or debit notes and book adjustment. With the supply of free goods/materials by the service recipient, no case is made out that any credit notes or debit notes were issued or any book adjustments were made.
Likewise, the words, 'any amount credited or debited, as the case may be', to any account whether called 'suspense account or by any other name, in the books of accounts of a person liable to pay Service Tax' would not include the value of the goods supplied free as no amount was credited or debited in any account. In fact, this last portion is related to the debit or credit of the account of an associate enterprise and, therefore, takes care of those amounts which are received by the associated enterprise for the services rendered by the service provider."
11. In view of the above discussion, we hold that the issue is no more res-Integra, therefore, we hold that for the period prior to May 2015 the free supplies of material by the service recipient is not includable in the gross amount of service provided by the service provider i.e. the appellant. Therefore, whole of demand is not sustainable.
12. Issue No. 2
8 ST/70225/2018 whether the services of erection commissioning and installation provided for distribution of electricity is exempt from payment of service tax under Section 66 of the Finance Act, 1994 or not?
Further, we also take a note of the fact that the said service has been provided by the appellant for distribution of electricity which is exempt from payment of service tax as held by this Tribunal in the case of U. P. RajkiyaNirmam Nigam Ltd. vs. Commissioner of Central Excise, Meerut-I (supra) wherein this Tribunal has observed as under:-
"4. We have considered the contentions of the appellant. Notification No. 45/2010- ST dated 20.07.2010 reads as under:-
Electricity-Exemption to all taxable services relating to transmission of electricity till 26.02.2010 Whereas, the Central Government is satisfied that a practice was generally prevalent regarding levy of service tax (including non-levy thereof), under Section 66 of the Finance Act 1994 (32 of 1994) (hereinafter referred to as 'as the finance Act)/on all taxable services relating to transmission and distribution of electricity provided by a person (hereinafter called the service provider) to any other person (hereinafter called The service receiver), and that all such services were liable to service tax under the said Finance Act, which were not being levied according to the said practice during the period upto 26th day of February, 2010 or all taxable services relating to transmission of electricity, and the period upto 21 st day of June, 2010 for all taxable services relating to distribution of electricity.
Now, therefore, in exercise of powers conferred by Section 11C of the Central Excise Act, 1944 (1 of 1944) read with Section 83 of the finance Act, the Central Government hereby directs that the service tax payable on the said taxable services relating to transmission and distribution of electricity provided by the service provider to the service receiver, which was not being levied in accordance with the said practice, shall not be required to be paid in respect of the said taxable services relating to transmission and distribution of electricity during the aforesaid period. [Notification No. 45/2010 I". Dated 20.07.2010]"
Thus, the service tax payable on all services relating to transmission and distribution of electricity provided by the service provider to the service recipient is not required to be paid."
Therefore, we hold that the services provided for distribution of power is exempt from payment of service tax.
9 ST/70225/2018 13. Issue No. 3 whether the show cause notice dated 18.10.2016 for the period April 2011 to March 2015 is barred by limitation or not?
We take a note of the fact that the appellant has informed to the respondent that they will discharge their service tax liability under Composite Scheme under Works Contract Services and the said activity was known to the respondent during the period of execution of work.
In these circumstances, the show cause notice issued by invoking extended period of limitation is not sustainable. Accordingly, the whole of demand is barred by limitation.
14. In view of the above analysis, we do not find any merit in the impugned order, the same is set-aside and the appeal is allowed with consequential relief, if any.
(Pronounced on 28.03.2022) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(P ANJANI KUMAR) MEMBER (TECHNICAL) G.Y.