Custom, Excise & Service Tax Tribunal
Madhumita Construction Pvt Ltd vs Service Tax - Kolkata on 26 August, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH: KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 76113 of 2014
(Arising out of Order-in-Original No. 16/Comm/ST/Kol/2014-15 dated 30.05.2014
passed by the Commissioner of Service Tax Commissionerate, Kendriya Utpad Shulk
Bhawan (3rd Floor) 180, Shantipally, Rajdanga Main Road Kolkata-700107)
M/s. Madhumita Constructions Pvt. Ltd. : Appellant
P-572, C.I.T. Scheme-47,
Lake Terrace Extension Kolkata-700029,
VERSUS
Commissioner of Service Tax, : Respondent
Kolkata Commissionerate, Kendriya Utpad Shulk Bhawan (3rd Floor) 180, Shantipally, Rajdanga Main Road Kolkata-700107 APPEARANCE:
Shri Subhamay Mitra, Advocate Shri K. S. Chakravarty, Consultant for the Appellant Shri D. Sue, Authorized Representative for the Respondent CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL) HON'BLE SHRI SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.77346/2025 DATE OF HEARING / DECISION: 26.08.2025 Order: [PER SHRI SANJIV SRIVASTAVA] This appeal is directed against Order-in- Original No. 16/Comm/ST/Kol/2014-15 date 30/05/2014.
1.2. By the impugned order, the following has been held: -
6.1 I confirm the demand of Service Tax to the extent of Rs. 5,94,09,078 (Rupees Five crore Ninety Four lakh Nine thousand Seventy Eight) only including Educational Cess and Secondary & Higher Educational Cess, in Page 2 of 36 Appeal No.: ST/76113/2014-DB terms of provisions of the Section 73(2) of the Finance Act 1994. But since, the noticee has already deposited an amount of Rs.37,05,753/, I appropriate the same to the government exchequer and order the notice to pay the Service Tax to the tune of the balance amount of Rs.5,57,03,325/ 6.2 I order for payment of applicable interest on the actual amount as mentioned in Para (6.1) above in terms of Section 75 of the Finance Act 1994.
6.3 I impose a penalty of Rs. 10,000/-(Ten Thousand) only on the noticee under Section 77 of the Finance Act 1994.
6.4 I impose a penalty of equal amount i.e Rs.5,94,09,078)-(Rupees Five crore Ninety Four-lakh Nine thousand Seventy Eight) only on noticee in terms of provisions of Section 78 of the Finance Act 1994. However, if the noticee pays the service tax, within 30 (thirty) days from the date of communication of this order, the penalty will be reduced to 25% (Twenty five percent) of the said amount.
6.5 I refrain from imposing penalty under Section 76 of the Finance Act'1994.
1.3. Vide Corrigendum dated 10.07.2014, the following amendments have been made in the impugned order: -
This corrigendum is issued in respect of Order- in-original No. 16/Commr/ST/KOL/2014-15 dated 30.05.2014 in respect of the following:
1. In para 6.1, the amount confirmed. should be read as Rs 5,53,80,257/ instead of Page 3 of 36 Appeal No.: ST/76113/2014-DB Rs.5,94,09,078/- and Rs. 5,57,03,0325/- should be read as Rs 5,16,74,505/-
2. In para 6.4 amount to be read as Rs 5,53,80,257/- instead of Rs 5,94,09,078/-.
2.1. Appellant, having Service Tax Registration No. AABCM8418LST001 are engaged in construction of various commercial & residential complexes including the job of plumbing & sanitary system installation work, etc. for completion and furnishing of those buildings or civil Structures or complexes for their clients. They are also engaged in the job of drainage work, infrastructural work for car parking and road work within the complex or township. The services provided by the appellant appear to be classifiable under the category of 'commercial or Industrial Construction Services' as defined in clause (256) and 'Construction of Complex Services' as defined in clause (30a) of Section 65 of Chapter V of the Finance Act, 1994 and are taxable services in terms of Section 65(105)(zzq) & Section 65(105) (zzzh) of the said Act. Further, they are also engaged in site preparation for the purpose of such construction for their clients and such services fall under the category of 'site formation and clearance, excavation and earth moving and demolition Services' within the meaning of Section 65(97a) and are taxable services in terms of Section 65(105) (zzza) of the Act ibid.
2.2. An information was received to the effect that appellant was not paying appropriate Service Tax on the service charges collected from their clients inasmuch as they had irregularly determined the taxable value of the services for by availing the benefit of Notification No. 1/2006- ST dated 01.03.2006 thereby determining the taxable value of Page 4 of 36 Appeal No.: ST/76113/2014-DB the services provided without including the value of the goods and materials supplied or provided by the service receiver under the category of Commercial or Industrial Construction Services' and 'Construction of Complex Services'.
2.3. After completion of investigation, it was observed in respect of 'construction of complex services' appellant was required to pay Service Tax as detailed in the table below: -
Amount in Rs Year Service Service Edu. S & HE Total Charges Tax Cess Cess 2007-08 70156148 8418738 168375 84187 8671300 Oct- Mar 2008-09 94380176 11325621 226512 113256 11665390 2009-10 152288572 15228857 304577 152289 15685723 2010-11 107219480 10721948 214439 107219 11043606 2011-12 24768356 2476836 49537 24768 2551141 2012-13 3932598 471912 9438 4719 486069 Apr-Jun Total 452745330 48643911 972878 486439 50103229 2.4. In respect of 'commercial or industrial construction services', appellant was required to pay Service Tax as detailed in the table below: -
Amount in Rs Year Service Service Edu. S & HE Total Charges Tax Cess Cess 2007-08 1255793 150695 3014 1507 155216 Oct- Mar 2008-09 1222293 146675 2934 1467 151075 2009-10 0 0 0 0 0 2010-11 3100000 310000 6200 3100 319300 2011-12 50969381 5096938 101939 50969 5249846 2012-13 7469227 896307 17926 8963 923196 Apr-Jun Page 5 of 36 Appeal No.: ST/76113/2014-DB Total 64016694 6600616 132012 66006 6798634 2.5. In respect of 'site formation and clearance, excavation and earthmoving and demolition and such other similar activities', appellant was required to pay Service Tax as detailed in the table below: -
Amount in Rs Year Service Service Edu. S & HE Total Charges Tax Cess Cess 2007-08 3095655 371479 7430 3715 382623 Oct- Mar 2008-09 1611975 193437 3869 1934 199240 2009-10 8428748 842875 16857 8429 868161 2010-11 9249867 924987 18500 9250 952736 2011-12 1014120 101412 2028 1014 104454 2012-13 0 0 0 0 0 Total 23400365 2434189 48684 24342 2507214 2.6. From the returns filed by the appellant during the period of dispute, it was found that the appellant had deposited Service Tax of Rs.39,11,476/-
(Rupees Thirty Nine Lakh Eleven Thousand Four Hundred Seventy Six only), Education Cess of Rs.78,231/- (Rupees Seventy Eight Thousand Two Hundred Thirty One only) and Secondary and Higher Education Cess of Rs.39,113/- (Rupees Thirty Nine Thousand One Hundred and Thirteen only).
2.7. Thus, it was observed that the appellant had short paid Service Tax as detailed in the table below:
Amount in Rs Service Service Edu. S&HE Total Tax Cess Cess Construction 48643911 972878 486439 50103228 of complex service Commercial 6600616 132012 66006 6798634 or industrial construction service Site 2434189 48684 24342 2507215 formation Page 6 of 36 Appeal No.: ST/76113/2014-DB and excavation services Total 57678716 1153574 576787 59409077 Service Tax 3911476 78231 39113 4028820 paid (ST-3 Returns) Service Tax 53767240 1075343 537674 55380258 demanded 2.8. A Show Cause Notice dated 07.04.2013 was issued to the appellant, asking them to show cause as to why: -
(i) Service Tax amounting to Rs.5,37,67,240/-
(Rupees Five Crore thirty seven Lakh sixty seven Thousand two Hundred forty only), Education Cess amounting to Rs.10,75,343/- (Rupees ten Lakh seventy five Thousand three Hundred forty three only) and Secondary & Higher Education Cess amounting to Rs.5,37,674/- [Rupees five Lakh thirty seven Thousand six Hundred seventy four only], as detailed in Annexure-C, should not be demanded and recovered from them, invoking the extended period of limitation as envisaged under the proviso to the Sub-Section (1) of Section 73 of the Finance Act, 1994;
(ii) Interest at the appropriate rate under Section 75 of the Finance Act, 1994 should not be charged/demanded and recovered from them for the delayed payment of Service Tax including Education Cess and Secondary & Higher Education Cess;
(iii) Penalty should not be imposed upon them in terms of Section 78 of the Finance Act, 1994 for their act of suppressing the fact of providing taxable services and failure to pay Service Tax including Education. Cess and Secondary & Higher Education Cess properly in contravention of the provisions of Section 68, 69 and 70 of Chapter V of Page 7 of 36 Appeal No.: ST/76113/2014-DB the Finance Act, 1994 read with Rule 4, 5, 6 & 7 of the Service Tax Rule 1994;
(iv) Penalty should not be imposed upon them in terms of Section 76 of Finance Act, 1994 as amended for failure to pay Service Tax including Education Cess and Secondary & Higher Education Cess properly in contravention of the provisions of Section 68, 69 and 70 of Chapter V of the Finance Act, 1994 read with Rule 4, 5, 6 & 7 of the Service Tax Rule 1994,
(v)Penalty should not be imposed upon them in terms of Section 77 of Chapter V of the Finance Act, 1994 for failure to take Certificate of Registration in respect of all the taxable services and to file return in the prescribed format to the department incorporating therein amount of service charges received, amount of Service Tax paid etc.; and
(vi) The amount of Rs.33,73,536/ [Rupees thirty three Lakh seventy three Thousand five Hundred thirty six only] paid by MCPL, and credited to the Government account, should not be appropriated against the liability of Service Tax including Education Cess and Secondary & Higher Education Cess as demanded under clause (i) of Para 8.1 above. The said payment of Rs.33,73,536/- is, however, subject to verification by the concerned Commissionerate.
2.9. The Show Cause Notice has been adjudicated as per the impugned order referred to in paragraph 1 above.
2.10. Aggrieved, the appellant has filed this appeal.
Page 8 of 36Appeal No.: ST/76113/2014-DB 3.1. We have heard Shri Subhamay Mitra and Shri K. S. Chakravarty for the appellant and Shri D. Sue, for the Revenue.
4.1. Arguing for the appellant, Ld. Counsel submits that: -
(i) The demand has been made by including the value of free supply materials and is contrary to the decision of the Hon'ble Supreme Court in the case of Bhayana Builders (P) Ltd. v Commissioner of Service Tax, Delhi 2013(32) S.T.R. 49 (Tri.-LB)
(ii) Further, that they have provided services of construction under Jawaharlal Nehru National Urban Renewal Mission (JNNURM), funded by Govt.
of India and State Govr., both, and implemented by Govt. of West Bengal with assistance of Urban Local Bodies(ULBs). The projects undertaken for construction were undertaken by the BSUP (Basic Services to the Urban Poor) scheme of the Govt. for social upliftment of the poor and their rehabilitation from slum areas to the projects.
(iii) The services provided to such projects have been exempted vide Notification No. 28/2010-S.T. dated 22.06.2010 w.e.f. 01.07.2010. As these services were provided for upliftment of the poor to the Government body / authority, these services have been exempted from 01.07.2010 as per the said Notification. However, it is unconceivable that the same spirit in respect of same project would not apply to the period prior to that. Reliance in this regard is placed on the decision in the case of Collector of C.Ex. v. Himalayan Co-op. Milk Product Union Ltd. 2000(122) E. L. T. 327 (S.C.).
(iv) The case involves only a valuation dispute, purely on interpretation on law, in respect of transactions duly reported in periodical returns. Thus, invocation of extended period of limitation would not be proper. Accordingly, the demand Page 9 of 36 Appeal No.: ST/76113/2014-DB issued solely on the basis of statutory records, beyond eighteen months from the relevant date, is barred by limitation.
(v) Also that there has been calculation error while computing the demand because they have deposited Service Tax which is much more than that has been appropriated vide the impugned order.
(vi) Details of Service Tax paid by the appellant for the period from 26.12.2012 to 20.03.2014 is as indicated in the table below: -
4.2. Authorized Representative reiterates the findings recorded in the impugned order.
5. We have considered the impugned order along with the submissions made in the appeal and during the course of arguments.Page 10 of 36
Appeal No.: ST/76113/2014-DB
6. The impugned order records the findings as follows: -
4. Services provided to M/s. Bengal Shristi Infrastructure Development Ltd. And M/s.
Shristi Infrastructure Development Corporation Ltd.
4.1 During the period from Oct 2007 to June 2013 the noticee provided taxable service i.e. as defined under the categories of Sec 65(105)(zzzh), Sec 65(105)zzq & Sec 65(105)(zza) respectively i.e. "Construction of complex services, Construction of Commercial & industrial complex services, Site formation to the service recipients M/s Bengal Shristi Infrastructure Development Ltd & Shristi Infrastructure Development Corporation Ltd. The noticee executed the work against specific work order and on completion of an event or part of event of an particular work order. The noticee never received any payment in advance from the service recipients. They constructed a number of Residential Bungalows at Shantiniketan, Taltor, Bolpur, and Shnatiniketan Road Area which comprises more than 12 numbers each. They also constructed Residential Buildings/ Bungalows at different sites/complexes having more than 12 residential units. They also conducted Drainage work, Infrastructural work for car parking, Plumbing and Sanitary system installation work and Road construction work within the township or complex at their project site i.e Shristinagar, Asansol. They were also engaged in Land Development work, Dismantling of car parking work etc. at different sites/townships Page 11 of 36 Appeal No.: ST/76113/2014-DB and such services fall under the 'Site formation, Clearance, Excavation and Earth moving & Demolition services' as defined under Section 65(97a) of chapter V of Finance Act 1994, at Shristinagar Area of Asansol. The noticee executed all the activities e.g. Construction of Residential Complex, Site Formation, Commercial & Industrial services & Construction of Road services and provided the same to the service recipients i.e. M/s Bengal Shristi Infrastructure Development Ltd & Shristi Infrastructure Development Corporation Ltd. The gross taxable value of the said services was determined at Rs. 22,39,93,203/- by the notice themselves and according to the figure given by them the service tax liability(without allowing abatement of 67% on the gross value) amounts to Rs.
2,45,43,146/-. It was alleged that the noticee did not include the value of certain items i.e. cement, steel etc which were includable in the bills they raised, along with the value of the taxable services they provided to the service recipients M/s Bengal Shristi Infrastructure Development Ltd & Shristi Infrastructure Development Corporation Ltd. but availed the benefit of the Notification No. 1/2006-ST dated 01.-03- 2006 where an abatement of 67% of the gross value of the taxable services was allowed on fulfillment of certain conditions contained in the said Notification at St No. 7 & 10(column 3 & 51 But on going through work orders issued by the service recipients in favour of the service provider for the purpose of Construction of Residential Complexes at different places, it has been noticed that the "description of item of civil Page 12 of 36 Appeal No.: ST/76113/2014-DB work was very specific and categorical, where it has been mentioned that the cement & steel would be issued free of cost. Description of item of Civil work also clearly indicated the value of the work stating respective quantity and rate, the bill of quantity, contractual terms and conditions and drawings thereof.
4.2 I find that the SCN has questioned the avalling of abatement under Notification No. 1/2006 ST dated 01.03.06. The SCN has clearly mentioned the rationale behind such chjection and the projects against which the abatement was availed by the noticee. The noticee against none of the projects has claimed to the contrary. The allegation that the noticee did not consider the value of the supplied materials in their tax liability calculation can only be countered with the documentary evidence showing the value of the supplied goods and the same was not included in the gross value of the sum total. I find that the noticee while defending the case has not addressed to this aspect instead, that they have put forward the issue like CENVAT Credit Rules, 2004 and Notification No. 12/2003-ST, which are hardly relevant to the extent.
4.3 I find that the noticee has referred to an interim order of Honorable High Court at Calcutta in the case of Simplex infrastructures Ltd. v. Commissioner of Service Tax, Kolkata [2010 (20) S.T.R. 607 (Cal.)] in this regard. I have considered their reliance. However, I find that the order is only interim in nature and yet to achieve finalist. The facts and circumstances of the Page 13 of 36 Appeal No.: ST/76113/2014-DB case are not identical with that of the present one and hence, its ratio is not applicable to decide the issue of improper availing of the abatement in terms of Notification No. 1/2006-ST dated 01.03.06 by the noticee.
4.4 I find that in the informed SCN, it has been alleged that during the period from 2007-08 to 2012-13(June) the noticee provided taxable service in the category of 'Construction of complex services, Commercial & industrial complex services' to various services recipients i.e. M/s Bengal Shristi Infrastructure Development Ltd, Shristi Infrastructure Development Corporation, Kolkata Municipal Development Ltd. & Balmer Lawrie etc and therefore was tiable to pay Service Tax to the tune of Rs 5,94,09,087/ But from the written reply of the noticee it has been ascertained that during the said period the noticee provided taxable services ie. Construction of complex services, Commercial & industrial services, Site formation, Construction of Road services etc to M/s Bengal Shristi Infrastructure Development Ltd & Shristi Infrastructure Development Corporation Ltd. of a gross value of Rs 22,39,93,203/- and confirmed a Service Tax liability of Rs.86,73,274/- based on 67% abatement on the gross value of the taxable service on that count as against the Service Tax liability of Rs. 2,45,43,146/- proposed in the SCN(calculated on the gross value of the taxable service without allowing any abatement) and in support of their such confirmation the notice stated that the gross taxable value of the services provided by them to M/s Bengal Shristi Infrastructure Page 14 of 36 Appeal No.: ST/76113/2014-DB Development Ltd, Shristi Infrastructure Development Corporation Ltd. was inclusive of the value of the services of Construction of road services which amounted to Rs. 2,18,38,128/- and according to them said service was not taxable as the services provided for construction of road were executed against different and separate work orders and not against a single contract and for that reason they did not pay service tax of an amount of Rs. 23,43,059/- (as proposed to be payable in the SCN) based on CBEC's circular no. B1/6/2005-TRU dated. 27-07-05 (Para 14.4 & 14.5) where Para 14.5 reads 'If the contract for construction of commercial complex is single contract and the construction of road is not recognized as a separate activity as per the contract, then the service tax would be leviable on the gross amount charged for construction including the value of construction of roads. In Para 3.2 of SCN it was alleged that the noticee conducted drainage work, infrastructural work for car parking, plumbing & sanitary system installation work and road work within the township or complex. In addition, the noticee constructed labour hutment to facilitate their labourers for executing the project township. And although all such works were conducted by the noticee against separate work orders placed by their clients, the same were in relation to the completion of entire project at site or complex or township and such activities on the part of noticee fall under the category of construction of complex services as defined Clause (30a) of Sec 65 of Chapter V of Finance Act 1994 and for that matter, the same are taxable services in terms of the Page 15 of 36 Appeal No.: ST/76113/2014-DB Sec 65(105)(zzzh) of the Act. Though the investigating agency did not mention any particular work order no. of the construction of the road services in the annexure to the SCN, it was the noticee who produced copies of certain work order nos. WO/BSIDL/ASN- PHIA-INFRAROAD/04-10/14-3a dated 07-04- 11, WO/ASNLINFRA/P 18/15 dated 14-01-11 and WO/BSIDL/ASN-PH1B-INFRAROAD/09-
10/43 dated 23-12-09 before the adjudicating authority alongwith the written reply to the SCN to substantiate the reason of non-payment of service tax. From a close study of the sald work orders, it has been noticed that those work orders were issued for construction of road within the complex area of integrated township of Shritinagar as these road work were integral part of the whole construction work and were inseparable from construction of complex service and in this context the issuance of separate work orders cannot ipso facto lead to the conclusion that those work orders in relation to construction of road were distinct from the construction of complex services and therefore the noticee's submission in this particular issue can't be acceded to and accordingly the demand of service tax on this count to the tune of Rs. 23,43,059/- stands justified. The work order are considered as a composite contract for the purpose of construction of residential complex.
4.5 It has also been alleged that the noticee did not pay service tax to the tune of Rs. 19,25,350/- on gross value of taxable service of an amount of Rs. 1,86,92,735/- in the category of site formation and clearance, Page 16 of 36 Appeal No.: ST/76113/2014-DB excavation and defined under Sub Clause zza of clause (105 of sec 65 of the Finance Act 1994) which they provided to the M/s Bengal Shristi Infrastructure Development Ltd & M/s Shristi Infrastructure Development Corporation Ltd. during the year 2007-08 to 2012-13(June). The noticee however did not rebut the allegation of evasion of service tax to the tune of Rs. 19,25,350/- and admitted. their liability for payment of service tax in their written reply to SCN.
4.6 Thus the demand for payment of service tax to the tune of Rs.2,45,43,146/- for the taxable services provided to M/s Bengal Shristi Infrastructure Development Ltd & M/s Shristi Infrastructure Development Corporation Ltd. during the year 2007-08 to 2012-13( June) is also justified as shown in the table below.
Amount in Rs.
Services Gross Bill Value Service Tax demanded Const. of complex services 18,26,28,285/- 2,01,87,092/-
Const. of comm. & indust. service 8,34,055/- 87,645/- Site formation 1,86,92,735/- 19,25,350/- Const. of road services 2,18,38,128/- 22,43,059/- Total 22,39,93,203/- 2,45,43,146/-
5 Services provided to the Kolkata Municipal Development Authority, Balmer Lawrie and Co. Ltd, Barrackpore Municipality & M/s. Westinghouse Saxby Farmer Ltd.
5.1 I find that during the period from Oct 2007 to June 2013 the noticee provided services in the category of Construction of Complex services, Commercial & Industrial services as defined under Sec 65(105)(zzzh), Sec 65(105)zzq & Sec 65(105)zza respectively to Page 17 of 36 Appeal No.: ST/76113/2014-DB the recipients Kolkata Municipal Development Authority, Balmer Lawrie and Co. Ltd. Barrackpore Municipality & M/s. Westinghouse Saxby Farmer Ltd.. The noticee constructed a number of residential complex at Nonadanga Barrackpore Housing Project for which various work orders were issued by Kolkata Municipal Development Authority. Similarly the noticee constructed a number of commercial complex at Kalyani for which work orders were issued by the M/s Westinghouse Saxby Farmer Ltd. The noticee also constructed residential complexes at Baisnabghata-Patuli Township for which work order were issued by M/s Balmer Lawrie and Co. Ltd. The Kolkata Municipal Development Authority also issued work orders in favour of the noticee to undertake certain finishing work at residential complex in Baisnabghata-Patuli Township area. A few copies of these work orders were annexed to the SCN. In their written reply to the SCN, the noticee submitted that they had also provided taxable services to their clients other than M/s Bengal Shristi Infrastructure Development Ltd & Shristi Infrastructure Development Corporation Ltd., the gross value of which was determined by the noticee to be Rs. 31,10,15,026/- and according to the figure given by them the service tax liability(without allowing abatement of 67% on the gross value) amounts to Rs.3,48,65,940/-. The notice categorically admitted that they did not discharge their service tax liability on this count at all and pleaded innocence that they were not aware about the taxability of services provided to Government or Semi Page 18 of 36 Appeal No.: ST/76113/2014-DB Government organization. However in their written reply to SCN they mentioned the same amount as payable. Regarding the non-payment of service tax on account of the taxable services provided to the Government organizations like Kolkata Municipal Development Authority, Barrackpore Municipality the noticee availed to the benefit of the notification no. 28/2010-ST dated 22-06-10, which came into force on 01-07-10, whereby taxable services on construction of complex referred to in Sub Clause(zzzh) of Clause 105 of Section 65 of the Finance Act 1994 became exempted from the whole of the service tax leviable thereon under Section 66 of the Finance Act 1994, when provided to Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awaas Yojana. But the demand of Service Tax pertaining to period from 01-07-10 onwards was not raised in the SCN only that pertaining to the period prior to 01-07-10 was raised in the SCN. So the particular Issue needs no further discussion. As discussed supra, the benefit of the Notification No. 1/2006 St Dated 01-03- 06 is also inadmissible since the value of the goods and materials provided, supplied or used is includible in the gross value of service, which they provided to various service recipients. Accordingly the demand of Service Tax for the taxable services provided to M/s Kolkata Municipal Development Authority, Balmer Lawrie and Co. Ltd, Barrack pore Municipality & M/s. Westinghouse Saxby Farmer Ltd. to the extent of Rs. 3,43,35,059/- is justified which is recoverable from the notice.
Page 19 of 36Appeal No.: ST/76113/2014-DB 5.2 I am not inclined to accept the contention of the noticee that: 'When some materials such as steel, cement etc. are supplied free of cost by the recipient of service, they can in no way include the value of such materials in the gross amount charged and collect the cost of such free supply materials for which the recipient himself has incurred expenses." Since there is no provision in the statue requiring an assesse service provider to charge the value of the materials supplied by the receiver. The statute has asked to consider that amount for charging the service tax. The argument of the noticee is bereft of appreciation of legal provisions and thus not tenable. Therefore the gross amount of service tax to the tune of Rs.5,94,09,078/ is to be recovered from the noticee for the taxable services provided to various service recipients as mentioned supra. Since the noticee has already deposited an amount of deposited Rs.
33,73,536/- during the course of investigation conducted by the DGCEI and also deposited Rs. 3,32,217/- on 05/02/2014, amount total being Rs. 5,57,03,325/- is recoverable from the assessee.
5.3 From the discussion in the foregoing paragraphs, I find that M/s Madhumita Construction Pvt. Ltd. had evaded service tax by making short payment to the tune of Rs. 5,16,74,505/- (Five Crore Sixteen Lakh Seventy Four Thousand Five Hundred Five) only including education and secondary & higher education cess, by way of irregularly availing the benefit of abatement as Page 20 of 36 Appeal No.: ST/76113/2014-DB prescribed in the Notification No. 1/2006-ST, dated 01.03.2006 in case of some projects.
5.4 I find that suppression of fact, is evident as the issue relating to supply of construction materials like Steel, Cement etc. free of cost by the clients was never brought to the notice of the service tax authority in any manner. The issue came to light only during the DGCEI investigation. Such suppression of value of service surfaced during DGCEI investigation only.
5.5 Since the notice did not disclose the fact of non-payment of Service Tax for the taxable services they provided to various service recipients which include M/s Kolkata Municipal Development Authority, Balmer Lawrie and Co. Ltd, Barrackpore Municipality & M/s. Westinghouse Saxby Farmer Ltd. to the Service Tax Authority in the manner as prescribed in the Act and suppressed the actual value of taxable service also to the Service Tax Authority, charge for contravention the provisions of Finance Act 1994 with intent to evade Service Tax is established.
5.6 I find that the noticee has raised the issue of limitation and their argument revolves around three aspects: the concept of 'suppression', bonafide belief and interpretation of statute. I find that the noticee's arguments fail to defeat such charges. The facts indicate that they had not paid appropriate service tax by irregular availment of abatement in terms of Notification. No. 1/2006 ST and/ or Works Contact Composite Scheme. Thus, there was suppression on their part and consequently Page 21 of 36 Appeal No.: ST/76113/2014-DB the case-laws relied upon in this regard cannot be applied in the instant case. That the noticee did not act in a bona fide manner is evident from the fact that they never informed the department regarding the amount received from their clients. I have already discussed the aspect of interpretation of statute raised by the noticee. In the instant case the noticee acted as per their own convenience. I also find that the referred case-laws do not condone any violation statutory provisions where element of suppression of facts and intent to evade govt. due are absolutely clear. Thus I find that the extended period of limitation as provided under Section 73 of the Act has been correctly invoked in.
5.7 The present case I have noted that the SCNs proposed imposition of penalty in terms of section 76, 77 and 78. Regarding application of both section 76 and 78, I find it a settled law, penalty cannot be imposed both section 76 and 78 simultaneously. In this regard I would like to refer to one such case i.e. in the case of COMMISSIONER OF C. EX., AURANGABAD Versus PENDHARKAR CONSTRUCTIONS [2011 (23) S.T.R. 75 (Tri.
- Mumbai)]. The findings of the Hon'ble Tribunal is appended below:
7. As the show-cause notice has been issued when the provision of proviso 5 to Section 78 ibid were in force, therefore as held by the lower appellate authority, the penalty under Section 76 ibid is not imposable when penalty under Section 78 ibid is imposable.
Therefore, I do not find any infirmity in the Page 22 of 36 Appeal No.: ST/76113/2014-DB impugned order, same is upheld. Appeal filed by the revenue is rejected.
5.8 I find that in the instant case the SCN was Issued on 17.4.13 i.e. after the introduction of proviso to Section 78. 1, thus, find it improper to penalize the noticee in terms of Section 76 5.9 Regarding imposition of penalty in terms of Sec 78 I find, as already discussed in detail, while dealing with the aspect of limitation, the noticee had willfully suppressed the material fact with the sole intention to evade Service Tax. They had relied on flimsy rationales to justify their action. The facts reveal that the noticee had the sole intention to evade the ST liability, which but for the said investigation Initiated by DGCEI would not have come to light. Their act of omission or commission is nothing but willful suppression of facts with intent to evade service tax. Thus, penalty is imposable under Sec 78 of FA, 1994 5.10 I find that allegations have been raised in the SCN that there is failure on the part of the noticee to pay appropriate Service Tax and also there is allegation that they did not maintain their accounts. The noticee merely refers to their payment of tax electronically. They have not contested the allegation that they have not maintained their accounts in the prescribed manner. From the above discussions I find that they have not reflected the correct data in their ST-3 returns. I, thus, find that the noticee is liable to be penalized in terms of Sec 77.
Page 23 of 36Appeal No.: ST/76113/2014-DB 5.11 From the discussion made above I find that the noticee is liable to pay Rs.5,94,09,078/- (Rupees Five crore Ninety Four lakh Nine thousand Seventy Eight) along with Interest at the appropriate rate in terms of Sec. 75. Since the noticee has already deposited Rs.37,05,753/- in the course of investigation against their Service Tax liability, I find that this amount is appropriable to the government exchequer.
Amount in Rs.
Services Gross Bill Value Service Tax demanded Const. of complex services 25,03,91,220/- 2,73,55,070/- Const. of comm. & indust. service 6,06,23,806/- 63,98,118/-
Site formation - 5,81,865/- Total 31,10,15,029/- 3,43,35,053/- 4.3 The issue with regard to inclusion of free
supply of raw materials has been decided by the Hon'ble Supreme Court in the case of Bhayana Builders (P) Ltd. v Commissioner of Service Tax, Delhi 2018(10) G.S.T.L. 118 (S.C.) wherein the following has been observed: -
"11. As already pointed out in the beginning, all these assessees are covered by Section 65(25b) of the Act as they are rendering 'construction or industrial construction service', which is a taxable service as per the provisions of Section 65(105)(zzq) of the Act. The entire dispute relates to the valuation that has to be arrived at in respect of taxable services rendered by the assessees. More precisely, the issue is as to whether the value of goods/materials supplied or provided free of cost by a service recipient and used for providing the taxable service of construction or industrial complex, is to be included in computation of gross amount charged by the service provider, for valuation of taxable service. For valuation of Page 24 of 36 Appeal No.: ST/76113/2014-DB taxable service, provision is made in Section 67 of the Act which enumerates that it would be 'the gross amount charged by the service provider for such service provided or to be provided by him'. Whether the value of materials/goods supplied free of cost by the service recipient to the service provider/assessee is to be included to arrive at the 'gross amount', or not is the poser. On this aspect, there is no difference in amended Section 67 from unamended Section 67 of the Act and the parties were at ad idem to this extent.
12. On a reading of the above definition, it is clear that both prior and after amendment, the value on which service tax is payable has to satisfy the following ingredients :
a. Service tax is payable on the gross amount charged:- the words "gross amount" only refers to the entire contract value between the service provider and the service recipient. The word "gross" is only meant to indicate that it is the total amount charged without deduction of any expenses. Merely by use of the word "gross" the Department does not get any jurisdiction to go beyond the contract value to arrive at the value of taxable services. Further, by the use of the word "charged", it is clear that the same refers to the amount billed by the service provider to the service receiver. Therefore, in terms of Section 67, unless an amount is charged by the service provider to the service recipient, it does not enter into the equation for determining the value on which service tax is payable.
b. The amount charged should be for "for such service provided" : Section 67 Page 25 of 36 Appeal No.: ST/76113/2014-DB clearly indicates that the gross amount charged by the service provider has to be for the service provided. Therefore, it is not any amount charged which can become the basis of value on which service tax becomes payable but the amount charged has to be necessarily a consideration for the service provided which is taxable under the Act. By using the words "for such service provided" the Act has provided for a nexus between the amount charged and the service provided. Therefore, any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable under Section
67. The cost of free supply goods provided by the service recipient to the service provider is neither an amount "charged" by the service provider nor can it be regarded as a consideration for the service provided by the service provider.
In fact, it has no nexus whatsoever with the taxable services for which value is sought to be determined"
13. 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 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 Page 26 of 36 Appeal No.: ST/76113/2014-DB 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.
14. We may note at this stage that Explanation
(c) to sub-section (4) was relied upon by the learned counsel for the Revenue to buttress the stand taken by the Revenue and we again reproduce the said Explanation hereinbelow in order to understand the contention :
(c) "gross amount charges"
includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or debit notes and [book adjustment, and 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 account of a person liable to pay service tax, where the transaction of taxable service is with any associated Page 27 of 36 Appeal No.: ST/76113/2014-DB enterprise.]"
[emphasis supplied]
15. 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.
16. In fact, the definition of "gross amount Page 28 of 36 Appeal No.: ST/76113/2014-DB charged" given in Explanation (c) to Section 67 only provides for the modes of the payment or book adjustments by which the consideration can be discharged by the service recipient to the service provider. It does not expand the meaning of the term "gross amount charged" to enable the Department to ignore the contract value or the amount actually charged by the service provider to the service recipient for the service rendered. The fact that it is an inclusive definition and may not be exhaustive also does not lead to the conclusion that the contract value can be ignored and the value of free supply goods can be added over and above the contract value to arrive at the value of taxable services. The value of taxable services cannot be dependent on the value of goods supplied free of cost by the service recipient. The service recipient can use any quality of goods and the value of such goods can vary significantly. Such a value, has no bearing on the value of services provided by the service recipient. Thus, on first principle itself, a value which is not part of the contract between the service provider and the service recipient has no relevance in the determination of the value of taxable services provided by the service provider.
17. Faced with the aforesaid situation, the argument of the Learned Counsel for the Revenue was that in case the assessees did not want to include the value of goods/materials supplied free of cost by the service recipient, they were not entitled to the benefit of notification dated September 10, 2004 read with notification dated March 1, 2005. It was argued that since building construction contract is a composite contract of providing services as well as supply of goods, the said notifications were issued for the convenience of the assessees. According to the Revenue, the Page 29 of 36 Appeal No.: ST/76113/2014-DB purpose was to bifurcate the component of goods and services into 67% : 33% and to provide a ready formula for payment of service tax on 33% of the gross amount. It was submitted that this percentage of 33% attributing to service element was prescribed keeping in view that in the entire construction project, roughly 67% comprises the cost of material and 33% is the value of services. However, this figure of 67% was arrived at keeping in mind the totality of goods and materials that are used in a construction project. Therefore, it was incumbent upon the assessees to include the value of goods/material supplied free of cost by the service recipient as well otherwise it would create imbalance and disturb the analogy that is kept in mind while issuing the said notifications and in such a situation, the AO can deny the benefit of aforesaid notifications. This argument may look to be attractive in the first blush but on the reading of the notifications as a whole, to our mind, it is not a valid argument.
18. In the first instance, no material is produced before us to justify that aforesaid basis of the formula was adopted while issuing the notification. In the absence of any such material, it would be anybody's guess as to what went in the mind of the Central Government in issuing these notifications and prescribing the service tax to be calculated on a value which is equivalent to 33% of the gross amount. Secondly, the language itself demolishes the argument of the Learned Counsel for the Revenue as it says '33% of the gross amount 'charged' from any person by such commercial concern for providing the said taxable service'. According to these notifications, service tax is to be calculated on a value which is 33% of the gross amount that is charged from the service recipient. Obviously, no amount is charged (and it could not Page 30 of 36 Appeal No.: ST/76113/2014-DB be) by the service provider in respect of goods or materials which are supplied by the service recipient. It also makes it clear that valuation of gross amount has a causal connection with the amount that is charged by the service provider as that becomes the element of 'taxable service'. Thirdly, even when the explanation was added vide notification dated March 1, 2005, it only explained that the gross amount charged shall include the value of goods and materials supplied or provided or used by the provider of construction service. Thus, though it took care of the value of goods and materials supplied by the service provider/assessee by including value of such goods and materials for the purpose of arriving at gross amount charged, it did not deal with any eventuality whereby value of goods and material supplied or provided by the service recipient were also to be included in arriving at gross amount 'gross amount charged'.
19. Matter can be looked into from another angle as well. In the case of Commissioner, Central Excise and Customs, Kerala v. M/s. Larsen & Toubro Ltd. - (2016) 1 SCC 170 = 2015 (39) S.T.R. 913 (S.C.). This Court was concerned with exemption notifications which were issued in respect of 'taxable services' covered by sub-clause (zzq) of clause (105) read with clause (25b) and sub-clause (zzzh) of clause (105) read with clause (30a) and (91a) of Section 65 of Chapter V of the Act. This Court in the aforesaid judgment in respect of five 'taxable services' [viz. Section 65(105)(g), (zzd), (zzh), (zzq) and (zzzh)] has held as under :
"23. A close look at the Finance Act, 1994 would show that the fixed taxable services referred to in the charging Section 65(105) would refer only to service contracts simpliciter and not to composite works contracts. This is Page 31 of 36 Appeal No.: ST/76113/2014-DB clear from the very language of Section 65(105) which defines 'taxable service' as 'any service provided".
Further, while referring to exemption notifications, it observed :
"42. ...Since the levy itself of service tax has been found to be non- existent, no question of any exemption would arise."
It is clear from the above that the service tax is to be levied in respect of 'taxable services' and for the purpose of arriving at 33% of the gross amount charged, unless value of some goods/materials is specifically included by the Legislature, that cannot be added.
4.4 In view of the above judgement, we find force in the submission of the appellant that the value of free supply of raw materials could not have been included in the value of taxable services provided by the appellant and Service Tax could not have been demanded on this value. The demand needs to be worked out after reducing the value of free supply of materials in the present case. Accordingly, the matter is remanded for re-computing the demand after deducting the value of free supply raw materials provided by the service recipient to the appellant for providing these services.
4.5 We find that the appellant has provided a Chartered Accountant's certificate as reproduced below, working out the demand of service tax after claiming the deduction on the free supply raw material as reproduced below:
Page 32 of 36Appeal No.: ST/76113/2014-DB Page 33 of 36 Appeal No.: ST/76113/2014-DB 4.6 The above Chartered Accountant's certificate submitted by the appellant should also be considered while re-computing the demand.
4.7 In respect of the services provided to Government authorities/ bodies pertaining to various schemes such as Jawharlal Nehru National Urban Renewal Mission (JNNURM), funded by Govt. of India and State Govt., both, and implemented by Govt. of West Bengal with assistance of Urban Local Bodics (ULBs). The projects undertaken for construction were undertaken by the BSUP (Basic Services to the Urban Poor) scheme of the Govt. for social up-
liftment of the poor and their rehabilitation from slum areas to the projects. The appellant receive work orders from the Govt. authority on competitive bidding in all cases. The Govt., for every job of their project work has set out expenditure/rate for each job to be undertaken. For work undertaken by the appellant under such Govt. projects, the stipulated rates finalized as a guiding principle for working out the total cost involved in each job specification which includes of materials, cost of scaffolding, cost of labour, sundries, overhead characs, profit and labour cess. Here is no mention of any Central statutory taxation. The appellant received payments from the Govt, authorities for construction jobs undertaken by them including supply of materials which had already VAT and local taxes and gained a profit margin of 10% at the maximum. Central Govt. exempted such services provided to JNNURM projects from the whole of the Service tax vide notification no. 28/2010-ST Dt. 22.06.2010 with effect from 01.07.2010. When the JNNURM scheme was initiated in the year 2005-06 inconceivable to think that services provided to this project provided by the Page 34 of 36 Appeal No.: ST/76113/2014-DB appellant during 2005-06 to 22.06.2010 was not considered by the Govt. for granting exemption for public interest. Reliance was placed on the decision in the case of Himalayan Co-Op. Milk Product Union Ltd-2000 (122) Elt 327 (S.C.).
4.8 It is not the case that exemption is being denied for the period when it is in force. We are concerned with the demand for the period till 01.07.2010, when there was no specific exemption provided in respect of these services. Appellant has failed to provide/ refer to any exemption notification granting exemption in respect of these schemes during the period of dispute i.e. prior to 01.07.2010. It is a settled principle in law that an exemption Notification is to be construed strictly on the basis of the words used in the exemption Notification and a court/ Tribunal cannot add or subtract any word therein to give a wider or restrictive meaning to the same. Reference is made to the judgment of the Hon'ble Supreme Court in the case of Commissioner of Custom (Import), Mumbai v. Dilip Kumar & Company 2018 (361) E. L. T. 577 (S.C.). Wherein the Hon'ble Supreme Court has finally clarified on the law in this regard, observing as follows: -
"52. To sum up, we answer the reference holding as under -
(1) Exemption notification should be interpreted strictly, the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
(2) When there is ambiguity in exemption notification which is subject to strict Page 35 of 36 Appeal No.: ST/76113/2014-DB interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it it must be interpreted in favour of the revenue.
(3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled."
4.9 Even the decision relied upon by the appellant in Himalayan Co-Op. Milk Product Union Ltd. (supra) does not say so, that the exemption could have been extended for the period prior to issuance of the exemption Notification. The said decision only observes as follows: -
"8. Such Notifications by which exemption or other benefits are provided by the Government in exercise of its statutory power, normally have some purpose and policy decision behind it. Such benefits are meant to be provided to the investors and manufacturers. Therefore, such purpose is not to be defeated nor those who may be entitled for it are to be deprived by interpreting the notification which may give it some meaning other than what is clearly and plainly flowing from it."
4.10 Thus we do not find any merits in submissions made by the appellant in this respect for the demands for period prior to 01.07.2010.
4.11 The appellant have also claimed that certain part of the services were provided in respect of construction of roads (public roads) which are exempt. It is settled law that construction of road is exempt from the levy of Service Tax. The value of Page 36 of 36 Appeal No.: ST/76113/2014-DB such services therefore needs to be excluded during computation of the demand.
4.11 No submissions have been made by the appellant with respect to the site formation services, which admittedly are subjected to Service Tax on the value of services provided.
4.11 With the observations made in the above paragraphs, we are of the view that the matter needs to be remanded back to the original authority for de novo consideration and re-quantification of the demand of Service Tax.
4.12 As we are setting aside the impugned order and remanding the matter back for re-computation, we also set aside the penalties imposed upon the appellant, which need to be re-considered and re- quantified on the basis of the final amount of Service determined as payable by the appellant.
5.1 The appeal is allowed. The matter is remanded to the original authority for de novo consideration in light of the observations as above.
5.2 As the matter is quite old, the original authority to decide the issue within a period of three months from the date of receipt of this order.
(Operative part of Order was pronounced in Open court) (ASHOK JINDAL) MEMBER (JUDICIAL) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) rkp