Custom, Excise & Service Tax Tribunal
Gupta Enterprises vs Commissioner, Central Excise & ... on 14 July, 2023
Author: Dilip Gupta
Bench: Dilip Gupta
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. 1
Service Tax Appeal No. 52294 of 2021
(Arising out of Order-in-Original No. 31/Commr./Del East/AP/2021 dated
29.09.2021 passed by the Commissioner, CX & GST Commissionerate, Delhi
East, New Delhi)
M/s. Gupta Enterprises .....Appellant
252-G, First Floor, Lakshyadeep Plaza,
Sant Nagar, East of Kailash,
New Delhi-110065
VERSUS
Commissioner, CX & GST
Commissionerate, Delhi East .....Respondent
C.R. Building, I.P. Estate, New Delhi- 110002 APPEARANCE:
Mr. A.K. Batra with Ms. Sakshi Khanna, Chartered Accountant for the Appellant Ms. Jaya Kumari, Authorized Representative of the Department CORAM : HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MS. HEMAMBIKA R. PRIYA, MEMBER (TECHNICAL) Date of Hearing/Decision: 14.07.2023 FINAL ORDER NO. 50982/2023 JUSTICE DILIP GUPTA This appeal has been filed for setting aside the order dated September 28, 2021 passed by the Commissioner, CX & GST Commissionerate, Delhi East1 that adjudicates the show cause notice dated December 22, 2020. The Commissioner has confirmed the demand of service tax with interest by invoking the extended period of limitation contemplated under the proviso to section 73(1) of the Finance Act, 19942 and has also imposed penalty.
1. the Commissioner
2. the Finance Act 2
2. The appellant claims that it provided works contract service to Indian Institute of Technology Kanpur, Allahabad University, Guru Ghasidas Vishwavidyalaya Bilaspur, Indian Institute of Information Technology, Design and Manufacturing Jabalpur and West Central Railway, Jabalpur. The appellant also claims that it discharged service tax liability for the disputed period, which is from October 01, 2014 to June 30, 2017, by claiming exemption provided at entry no. 12/12A of notification no. 25/2012 dated June 20, 20123, in respect of works contract services rendered to the educational institution and exemption provided at entry no. 29(h) read with 14(a) in respect of construction services rendered to the Railways through RITES.
3. A show cause notice dated December 22, 2020 was, however, issued to the appellant proposing to levy service tax of Rs.3,15,12,586/-. The break up of the proposed demand is as follows:
Issue Demand (Rs.) I- Wrong availment of exemption at entry 12/12A of Notification 2,72,85,669
No. 25/2012-ST dated 20.06.2012 in respect of works contract services rendered to IIT Kanpur, Allahabad University, GGU Bilaspur, IITDM, Jabalpur II- Wrong availment of exemption vide entry 14(a) alleging that 40,81,159 works contract services rendered to RITES are not related to railways III- Service tax demand on unaccounted cash 1,17,878 Sub-total (A) 3,14,84,706 IV- Short payment of interest on late payment of service tax (B) 27,880 Total Demand (A)+(B) 3,15,12,586
4. The appellant filed a reply to the show cause notice and denied the allegations made therein but the Commissioner, by
3. the Notification 3 order dated September 28, 2021, confirmed the demand proposed in the show cause notice with interest and penalty.
5. This appeal seeks the quashing from the aforesaid order dated September 28, 2021 passed by the Commissioner.
6. Shri A.K.Batra, learned counsel for the appellant assisted by Ms. Sakshi Khanna submitted that:
(i) The appellant had rightly claimed exemption under entry no.12/12A of the Notification, but the Commissioner incorrectly interpreted the definition of "governmental authority" defined under clause 2(s) of the Notification. In this connection, learned counsel placed reliance upon a decision of the Patna High Court in Shapoorji Paloonji & Company Pvt Ltd vs. C.C., C.Ex & S.T., Patna4;
(ii) The appellant had rightly claimed exemption under entry no.29(h) read with entry 14(a) of the Notification with respect to works contract services provided by the appellant to the Railways through RITES, but the Commissioner denied the exemption solely for the reason that the services provided by the appellant to RITES are not in relation to Railways. In this connection, learned counsel placed reliance upon the decision of the Tribunal in Saritha Infra & Geo Structures vs. Pr. Commr. of C.T., Visakhapatnam5; and
(iii) The demand of service tax could not have been raised merely because the audit observed that the
4. 2016 (42) S.T.R. 681 (Pat.)
5. 2019 (27) G.S.T.L. 211 (Tri.-Hyd.) 4 appellant had received income of Rs.19,64,638/- on account of cash survey during the Financial Year 2016-17.
Learned counsel submitted that the show cause notice did not even allege that this amount was towards a consideration for provision of a taxable service. In support of this contention, learned counsel placed reliance on the following decisions:
(a) M/s. Sahil Study Circle Pvt. Ltd. vs. C.C.E. Delhi-II6;
(b) Deltax Enterprises vs. Commissioner of Central Excise, Delhi-I7; and
(c) M/s. M.P. Ladhu Udyog Nigam Limited vs. CCE & ST, Bhopal8.
7. Ms. Jaya Kumari, learned authorized representative appearing for the department, however, submitted that the Commissioner committed no illegality in confirming the demand and in this connection, learned authorized representative placed the provisions of the Notification.
8. The submissions advanced by the learned counsel for the appellant and the learned authorized representative have been considered.
9. The first issue that arises for consideration in this appeal is as to whether the appellant is a „governmental authority‟ in terms of the Notification. This is for the reason that it is only if the appellant is a „governmental authority‟ that exemption under the Notification would be available to the appellant.
6. 2017(3) TMI 1104-CESTAT New Delhi
7. 2018 (10) G.S.T.L. 392 (Tri.-Del.)
8. 2018 (2) TMI 1410-CESTAT New Delhi 5
10. To appreciate this contention of the appellant, it will be appropriate to reproduce the relevant portion of the Notification and the same is reproduced below:
" New Delhi, the 20th June, 2012 G.S.R. 467 (E).- In exercise of the powers conferred by sub- section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the said Act) and in supersession of notification number 12/2012-Service Tax, dated the 17th March, 2012, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 210 (E), dated the 17th March, 2012, the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the following taxable services from the whole of the service tax leviable thereon under section 66B of the said Act.
xxx xxx xxx
12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of-
(a) omitted
(b) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);
(c) omitted
(d) canal, dam or other irrigation works;
(e) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or
(f) omitted 12A. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -
(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
(b) a structure meant predominantly for use as (i) an educational,
(ii) a clinical, or (iii) an art or cultural establishment; or
(c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause (44) of section 65 B of the said Act;
under a contract which had been entered into prior to the 1st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date:
provided that nothing contained in this entry shall apply on or after the 1st April, 2020;
xxx xxx xxx 6
14. Services by way of construction, erection, commissioning, or installation of original works pertaining to,-
(a) railways, excluding monorail and metro; "
11. A perusal of the aforesaid Notification would show that certain taxable services were exempted. Serial no. 12 of the Notification deals with services provided to the government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation or alteration of certain goods is provided in (a) to (f). This Notification also shows that clause (a), (c) and (f) were omitted by Notification dated March 01, 2015 with effect from April 01, 2015 and these three, as they stood before omission, read as follows:
"(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession;
(c) a structure meant predominantly for use as (i) an educational,
(ii) a clinical, or (iii) an art or cultural establishment;
(f) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause 44 of section 65B of the said Act;"
12. Thus, prior to April 01, 2015 services provided to a governmental authority by way of construction of a structure meant predominantly for use as an educational institution was exempted.
13. It is with effect from March 01, 2016 that clause 12A was inserted to the aforesaid Notification. A perusal of this clause indicates that services provided to a governmental authority by way of construction of an educational institution was exempted. 7
14. What, therefore, transpires is that it is only for the period from April 01, 2015 to February 28, 2016 that there was no exemption under the aforesaid Notification from service tax for services provided to governmental authority by way of construction of a structure meant predominantly for use as an educational institution.
15. It is stated by the learned counsel for the appellant that the appellant had duly discharged the service tax liability for this interregnum period. The dispute in the present appeal relates to the period during which exemption was provided under the Notification.
16. „Governmental authority‟ has been defined in clause 2(s) of the Notification. The said clause as it stood after January 30, 2014 is as follows:
"2(s) "governmental authority" means an authority or a board or any other body;
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by Government, With 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution."
17. A bare perusal of the definition of „governmental authority‟ indicates that it would mean an authority or a board or any other body set up by an Act of Parliament or State Legislature; or established by a Government with 90% or more participation by way of equity or control to carry out any function entrusted in a municipality under article 243W of the Constitution.
18. The show cause notice admits that the four educational institutions were established by the Acts of the Parliament. What 8 it alleges is that they do not fulfill the requirement provided under
(ii) of the definition of „governmental authority‟ in clause 2(s).
19. The appellant contends that once the four institutions were established by an Act by Parliament, it would not necessary to examine whether the requirement of (ii) in clause 2(s) has to be satisfied. The Commissioner has repelled this contention holding that the appellant was required to satisfy (ii) of clause 2(s) also even if (i) of 2(s) was satisfied.
20. This finding recorded by the Commissioner cannot be sustained. It is more than apparent that (i) and (ii) of clause 2(s) are two separate and distinct requirements separated by „or‟. Under (i) the authority or a board or any other body should be set up by an Act of Parliament or a State Legislature. Under (ii) they should be established by Government with 90% or more participation by way of equity to carry out any function entrusted. It is, therefore, not necessary that both (i) and (ii) of clause 2(s) should be satisfied. Once it is established that an authority or a board or any other body has been set up by Act of Parliament, that authority or board would be entitled to exemption from payment of service tax under the aforesaid Notification.
21. In this connection, reference can be made to the decision of the Patna High Court in Shapoorji Paloonji. The Patna High Court, after referring to the said Notification observed as follows:
"We have heard learned counsel for the parties and found the arguments raised by Mrs. Nivedita Nirvikar are not sustainable in law. The Governmental authority as defined in the Notification dated 30th January, 2014, means an authority or a board or any other body set up by an Act of Parliament or State Legislature. The provisions contained in sub-clause
(i) and sub-clause (i) of Clause 2(s) are independent dis-
conjunctive provisions and the expression "90% or more 9 participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution"
is related to sub-clause (i) of Clause 2(s) alone. The clause (i) is followed by "" and the word "or". Therefore, each of the sub- Clauses is independent provision. The condition of 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution is relatable to only sub-clause (ii) of Clause 2(s). It means that an authority established by Government should have 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243 of the Constitution to be eligible for exemption. The Authority set up by an Act of Parliament or State Legislature is not and cannot be made subject to the condition of 90% or more participation by way of equity or control to carry out any function entrusted to a municipality under Article 243W of the Constitution. Thus, the construction activity undertaken by the petitioner in respect of the academic block of the Institute-Respondent No. 4, is exempt from payment of service tax in terms of Notification, dated 20th June, 2012 as amended."
(emphasis supplied)
22. The aforesaid decision of the Patna High Court holds that the provisions contained in sub-clause (i) and sub-clause (ii) of clause 2(s) of the Notification are independent dis-conjunctive provisions and the requirement of 90% or more participation by way of equity or control to carry out any function entrusted to a municipality is relatable only to (ii) of clause 2(s) of the Notification.
23. The second issue that arises for consideration is whether the appellant had rightly claimed exemption with regard to the works contract services provided by the appellant to Railways.
24. The Commissioner has denied the benefit of the exemption merely for the reason that the services were provided by the appellant to RITES and not to the Railways.
25. A perusal of the agreement dated October 14, 2016 shows that it had been executed between RITES (a Government of India 10 enterprise acting for and on behalf of and as an agent of power of attorney of Western Central Railway, Jabalpur) on the one part and the M/s. Gupta Enterprises (the appellant) on the other part. The agreement was signed by the partner of the appellant and by one Mr. Pankaj Kumar, as a representative for and on behalf of the Western Central Railway, Jabalpur.
26. The letter of acceptance has been issued to the appellant by the General Manager of RITES acting for and on behalf of Western Central Railways and refers to the same tender number which has been referred to in the agreement dated October 14, 2016.
27. It is, therefore, clear that the appellant provided services to the Indian Railways through RITES for construction of an alternative factory including buildings, roads, boundary walls and other allied works. This service is clearly exempted from levy of service tax under entry no. 14(a) of the Notification. This entry is reproduced below:
"14. Services by way of construction, erection, commissioning, or installation of original works pertaining to,-
(a) railways, excluding monorail and metro."
28. Prior to March 01, 2016, entry at (a) read as „railways, including monorail or metro‟. It is therefore, clear that services by way of construction, erection, or installation, of original works pertaining to railways is exempted from levy of service tax under the Notification.
29. The finding recorded by the Commissioner, that the appellant had not performed work for the Railways, therefore, cannot be sustained.
11
30. The third issue that arises for consideration is regarding levy of service tax on the cash recovery during audit.
31. The relevant portion of the show cause notice regarding this allegation is reproduced below:
"7. During course of audit, it is observed that the assessee had received income of Rs. 19,64,638/- on account of Cash-Survey during FY 2016-17. The assessee had not paid service tax on the said income.
7.1 Therefore, service tax (including cess) for an amount of Rs.1,17,878/- (Rupees One Lakh, Seventeen Thousand, Eight Hundred and Seventy Eight only) along with appropriate interest and penalty is liable to be recovered from the assessee."
32. The show cause notice does not mention the service against which this income was proposed to be taxed. The demand has been confirmed merely for the reason that cash survey during the financial year 2016-17 revealed that the appellant had received income. In view of the decisions of the Tribunal in Sahil Study Circle, Deltax Enterprises and M.P. Ladhu Udyog Nigam, this demand cannot be sustained.
33. The fourth issue relates to short-payment of interest. The allegation made in the show cause notice is as follow:
"8. During the course of audit it is observed that the assessee had made late payments of service tax. Assessee had paid less interest on late payment of service tax. The assessee is liable to pay the balance amount of interest on late payment of service tax. 8.1 Therefore, interest for an amount of Rs.27,880/- (Twenty Seven Thousand, Eight Hundred and Eighty only) (Annexure-C) is liable to be recovered from the assessee."
34. In this connection, Annexure-C is reproduced below:
FINANCIAL YEAR TOTAL INTEREST DUE PAID BALANCE DUE 2015-16 6065 4571 1494 2016-17 34209 12533 21676 2017-18 30050 25339 4711 Total 27880 12
35. The contention of the learned counsel for the appellant is that Annexure-C records that the appellant had paid interest amounting to Rs.42,443/- whereas the appellant actually paid Rs. 76,422/- towards interest. The fact that the appellant had paid interest of Rs.76,422/- is evident from the Certificate issued by the Chartered Accountant. It states that the appellant, for the Financial Years 2016-17 to 2017-18, had deposited on amount of Rs.76,422/- towards interest. Such being the position, interest amount of Rs.27,880/-had also been deposited by the appellant. The Commissioner was, therefore, not justified in holding that there was short payment of interest.
37. The aforesaid four issues having been decided in favour of the appellant, the order dated September 28, 2021 passed by the Commissioner cannot be sustained and is set aside. The appeal is, accordingly, allowed.
(JUSTICE DILIP GUPTA) PRESIDENT (HEMAMBIKA R. PRIYA) MEMBER (TECHNICAL) Archana