Custom, Excise & Service Tax Tribunal
Dyp Constructions Pvt Ltd vs Cce Pune I on 17 January, 2019
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: ST/86300/2015
[Arising out of Order-in-Original No: PUN-SVTAX-000-COM-011-
14-15 dated 26th March 2015 passed by the Principal Commissioner of
Service Tax, Pune.]
For approval and signature:
Hon'ble Shri C J Mathew, Member (Technical)
Hon'ble Shri Ajay Sharma, Member (Judicial)
1. Whether Press Reporters may be allowed to see the
Order for publication as per Rule 27 of the : Yes
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of
CESTAT (Procedure) Rules, 1982 for publication : Yes
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy
: Seen
of the Order?
4. Whether Order is to be circulated to the
: Yes
Departmental authorities?
DYP Constructions Pvt Ltd ... Appellant
versus
Principal Commissioner of Service Tax
Pune ...Respondent
Appearance:
Shri Sachin Chitnis, Advocate for appellant Shri M Suresh, Deputy Commissioner (AR) for respondent ST/86300/2015 2 CORAM:
Hon'ble Shri C J Mathew, Member (Technical) Hon'ble Shri Ajay Sharma, Member (Judicial) Date of hearing: 10/09/2018 Date of decision: 17/01/2019 ORDER NO: A/85112 / 2019 Per: C J Mathew This appeal of M/s DYP Constructions Pvt Ltd challenges confirmation of demand for the period from 2005-06 to 2008-09 in fresh proceedings, consequent upon remand order of the Tribunal, against the challenge to the first adjudication order confirming liability to tax as provider of 'commercial or industrial construction service', that favoured the claim of the appellant that the tax should be restricted to actual receipts on services rendered after incorporation of section 65 (105) (zzq) of Finance Act, 1994 on 16th June 2005 and that the 'written off dues' be excluded, for non-compliance with the terms thereof.
2. According to Learned Counsel for appellant, the dispute in the second round of proceedings is limited to the recovery of ₹ 10,09,725 representing tax on amounts that were not received from customers and on bad debts. He contends that of the ₹ 1,08,31,274 sought to be ST/86300/2015 3 demanded in the show cause notice dated 23rd April 2010, the first order had dropped ₹ 35,778 pointed out as error in computation and that the impugned order-in-original no. PUN-SVTAX-000-COM-011- 14-15 dated 26th March 2015 of Principal Commissioner of Service Tax, Pune, while reducing demand of ₹ 15,29,533 pertaining to receipts on contracts executed before introduction of the new levy and acknowledging payment of tax of ₹ 78,98,139, discarded the claim for other deductions beyond ₹ 1,871 on bad debts to crystallise the tax liability at ₹ 92,64,092 besides confirming other detrimental consequence. With the plea that tax liability, along with interest, had been discharged in full, he seeks setting aside of penalties under section 76, 77 and 78 of Finance Act, 1994 by placing reliance on the decision of the Hon'ble High Court of Bombay in Commissioner of Service Tax, Mumbai v. SR Enterprises [2008 (9) STR 123 (Bom)] which was upheld by the Hon'ble Supreme Court and on the decision of the Hon'ble High Court of Gujarat in Commissioner v. Jivanbhai D Makwana [2010 (20) STR 605 (Guj)] and of the Hon'ble High Court of Andhra Pradesh in Commissioner of Customs & Central Excise v. Indian Institute of Chemical Technology [2012 (26) STR 97 (AP)] besides a host of decisions in similar vein rendered by the Tribunal. He further canvassed the non-includability of other expenses in the rendering of services by placing reliance on the decision of the Hon'ble Supreme Court in Union of India v. Intercontinental ST/86300/2015 4 Consultants and Technocrats Pvt Ltd [2018 (10) GSTL 401 (SC)].
3. Learned Authorised Representative points out that the decision of the Hon'ble High Court of Madras in Dhandayuthapani Canteen v. CESTAT, Chennai [2015 (39) STR 386 (Mad)] would not permit any dilution of the penalties even though, admittedly, the disputed tax liability had been discharged albeit under protest. He submits that the finding of the original authority, after scrutinising the debit notes claimed by the appellant to evidence short-payment on the part of customers, had correctly relied upon the provisions of section 67 of Finance Act, 1994 prescribing tax on gross value and which, in conjunction with rule 5(1) of Service Tax (Determination of Value) Rules, 2006, did not allow for any concession on that score.
4. It now devolves upon us to determine the legality and propriety of the maintenance of demand of ₹ 10,07,854 on receipts that, admittedly, had not been received by the appellant and the imposition of penalty in the circumstances pleaded by the appellant. That the dispute over billed amount of ₹ 36,936 and the reduction of consideration to the extent covered by debit notes continues has been affirmed by the adjudicating authority; on the latter, it is his finding that these represent the value of goods supplied by the customers and constitutes partial shift in fulfillment of contractual responsibility assumed by the appellant without altering the scope of the service ST/86300/2015 5 rendered. According to the adjudicating authority, the provisions for valuation of service in Finance Act, 1994, and the appurtenant Rules, require the gross value to be the assessable and inclusive of any non- monetary consideration.
5. It is surprising that the adjudicating authority has deemed these debit notes, relating to supply of materials by the customers, to be documents that substitution of monetary consideration by non- monetary consideration. Consideration, in common understanding, is the recompense for providing anything to a provider and is, consequently, subsumed within the property of the provider. Debit notes imply the intent to withhold the value therein from the monetary consideration and the issue of materials in lieu for subsuming in an asset that will vest with the issuer cannot, by any stretch, be deemed to be consideration. It is, therefore, not the 'non-monetary consideration' referred to in section 67 of Finance Act, 1994 and the relevant Rules. Moreover, it would appear that the ultra vires of rule 5(1) of Service Tax (Determination of Value) Rules, 2006 has been settled by the Hon'ble Supreme Court in re Intercontinental Consultants and Technocrats Pvt Ltd. On both these counts, the impugned order is flawed in confirming liability of ₹ 9,77,087. Furthermore, prior to the introduction of Point of Taxation Rules, 2011, the levy of tax, except in relation to transactions between associated entities, crystallized only on receipt. Therefore, the tax on ST/86300/2015 6 disputed amount of ₹ 30,767 was not leviable on the date of issue of show cause notice.
6. It is equally relevant to note that the decision of the Hon'ble Supreme Court in Commissioner of Central Excise & Customs, Kerala v. Larsen & Toubro Ltd [2015 (39) STR 913 (SC)] has squarely distinguished the scope of services, such as that in section 65(105)(zzq), from works contract for levy of tax under Finance Act, 1994. The appellant is a provider of services against contract that also involves supply of goods which would take the activity beyond the ambit of tax under the provisions that have been held to be service simplicitor. In these circumstances, and the due discharge of tax liability on the undisputed portion of the demand, imposition of penalties under section 78 of Finance Act, 1994 is not appropriate.
7. For the above reasons, we set aside the recovery of tax of ₹10,07,854 and penalty imposed under section 78 of Finance Act, 1994 in the impugned order.
(Pronounced in Court on 17/01/2019)
(Ajay Sharma) (C J Mathew)
Member (Judicial) Member (Technical)
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