Custom, Excise & Service Tax Tribunal
Anant Glass Emporium Pvt Ltd vs Cgst & Ce Kanpur on 2 April, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
I. Service Tax Appeal No.52482 of 2014
(Arising out of Order-in-Original No.KNP-EXCUS-000-COM-025-13-14 dated
10/01/2014 passed by Commissioner of Customs, Central Excise & Service
Tax, Kanpur)
M/s Anant Glass Emporium Pvt. Ltd. .....Appellant-I
(110/173, Ram Krishna Nagar, Kanpur)
VERSUS
Commissioner of Central Excise &
Service Tax, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur) WITH II. Service Tax Appeal No.52481 of 2014 (M/s Sakar Glazetech Pvt. Ltd.) .....Appellant-II III. Service Tax Appeal No.52517 of 2014 (M/s Swastik Enterprises) .....Appellant-III IV. Service Tax Appeal No.51935 of 2014 (M/s Anant Enterprises,) .....Appellant-IV (Arising out of Order-in-Original No.KNP-EXCUS-000-COM-025-13-14 dated 10/01/2014 passed by Commissioner of Customs, Central Excise & Service Tax, Kanpur) APPEARANCE:
Shri Dharmendra Srivastava, Chartered Accountant & Shri Md. Suhail, Advocate for the Appellants Shri Santosh Kumar, Authorised Representative for the Respondent CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NOs.70450-70453/2024 DATE OF HEARING : 02 April, 2024 DATE OF DECISION : 02 April, 2024 Service Tax Appeal No.51935, 52481,
2 52482 & 52517 of 2014 SANJIV SRIVASTAVA:
These appeals are directed against Order-in-Original Nos.KNP-EXCUS-000-COM-025-13-14 dated 10/01/2014 passed by Commissioner of Customs, Central Excise & Service Tax, Kanpur. By the impugned order following has been held:-
"65. In light of the foregoing discussions and the findings recorded therein, I pass the following orders. ORDER IN RESPECT OF M/S. ANANT GLASS EMPORIUM PRIVATE LIMITED i. I order that the services provided by M/s. Anant Glass Emporium Private Limited, 110/173 Ram Krishna Nagar, Kanpur should be classified under the "completion and finishing services in relation to services of "Commercial or Industrial Construction" or "Construction of Complex", as the case may. The amount shown against "freight & cartage inward or outward" should be considered as paid against services provided by 'GTA' and the amount shown against 'Commission, Rebate & Discount" should be considered as receipt against "Business Auxiliary Services".
ii. I also confirm the demand of Service Tax amounting to Rs. 2,18,78,418/- (Rs. Two Crore Eighteen lac Seventy Eight thousand Four hundred Eighteen only) [Basic Rs. 2,12,43,304/-, Ed. Cess Rs. 4,24,866/- and SHE Cess Rs.
2,10,248/-], as detailed in table mentioned in Annexure-A and adjudged against the aforesaid party and order for recovery of the said amount from them under the provisions of Section 73(1) of the Finance Act, 1994 by applying the provisions of extended period. Since, the party had already deposited Rs Ten Lac, I order for the appropriation of the same against the duty liability;
Service Tax Appeal No.51935, 52481, 3 52482 & 52517 of 2014 iii. I also confirm the demand of interest due on the aforesaid amount and order for recovery of the same from the aforesaid party under the provisions of Section 75 of the Finance Act, 1994; iv. I impose a penalty of Rs.200 per day or 2% of the Tax amount per month, whichever is higher, upto 09th May, 2008, upon the aforesaid party under Section 76 of the Finance Act, 1994, for failure to pay Service Tax under Section 68 of the said Act read with rule 6 of Service Tax Rules, 1994, as per the provisions existing at the relevant time. For the period from 10th May 2008 onwards, no penalty is being imposed under Section 76 of the Finance Act, 1994 due to the amendment in Section 78 of the Finance Act, 1994;
v. I also impose a penalty of Rs 200/- (two hundred only) per day, till the registration is sought, upon the aforesaid party, under Section 77 (1) (a) of the Finance Act, 1994, for failure to obtain registration as per the provision of Section 69 of the said Act read with rule 4 of Service Tax Rules, 1994, as per the provisions existing at the relevant time;
vi. I also impose a penalty of Rs.10,000/- (Ten Thousand only) under Section 77 (1) (b) of the Finance Act, 1994, for failure to maintain proper accounts as per the provision of Rule 5 of the Service Tax Rules, 1994, as per the provisions existing at the relevant time, vii. I also impose a penalty of Rs. 10,000/- (Ten Thousand only) under Section 77 (1) (e) of the Finance Act, 1994, for failure to issue proper invoices as per the provision of Rule 4-A of the Service Tax Rules, 1994, as per the provisions existing at the relevant time, Service Tax Appeal No.51935, 52481, 4 52482 & 52517 of 2014 viii. I also impose a penalty of Rs. 10,000/- (Ten Thousand only) under Section 77 (2) of the Finance Act, 1994, for failure to submit proper and authentic Service Tax Returns in a manner as provided under Rule 7 of the Service Tax Rules, 1994 and for failure in paying proper duty in a manner as provided under Rule 6 of the Service Tax Rules, 1994, as per the provisions existing at the relevant time ix. I also impose a penalty of Rs.2,18,78,418/-
(Rs. Two Crore Eighteen lac Seventy Eight thousand Four hundred Eighteen only) upon the aforesaid party, under Section 78 of the Finance Act, 1994, for suppressing value of taxable service with intent to evade payment of Service Tax and also for contravention of various provisions of the Act/Rules discussed hereinabove.
ORDER IN RESPECT OF M/S SAKAR GLAZETECH PRIVATE LIMITED, 82 BIMA VIHAR, LAKHANPUR, KANPUR i. I order that the services provided by Mis. SAKAR GLAZETECH PRIVATE LIMITED, 82 BIMA VIHAR, LAKHANPUR, KANPUR should be classified under the "completion and finishing services in relation to services of "Commercial or Industrial Construction" or "Construction of Complex", as the case may. The amount shown against "freight & cartage inward or outward" should be considered as paid against services provided by 'GTA' and the amount shown against 'Commission, Rebate & Discount should be considered as receipt against "Business Auxiliary Services";
ii. I also confirm the demand of Service Tax amounting to Rs. 15,19,127/- (Rs. Fifteen Lac Service Tax Appeal No.51935, 52481, 5 52482 & 52517 of 2014 nineteen thousand one hundred twenty seven only) [ Tax Rs. 14,74,881/-, Ed. Cess amounting to Rs. 29,498/- and SHE Cess amounting to Rs. 14,749/-,), as detailed in table mentioned in Annexure-C and adjudged against the aforesaid party and order for recovery of the said amount from them under the provisions of Section 73(1) of the Finance Act, 1994 by applying the provisions of extended period;
iii. I also confirm the demand of interest due on the aforesaid amount and order for recovery of the same from the aforesaid party under the provisions of Section 75 of the Finance Act, 1994; iv. I impose a penalty of Rs.200 per day or 2% of the Tax amount per month, whichever is higher, upto 09th May, 2008, upon the aforesaid party under Section 76 of the Finance Act, 1994, for failure to pay Service Tax under Section 68 of the said Act read with rule 6 of Service Tax Rules, 1994, as per the provisions existing at the relevant time. For the period from 10th May 2008 onwards, no penalty is being imposed under Section 76 of the Finance Act, 1994 due to the amendment in Section 78 of the Finance Act, 1994, v. I also impose a penalty of Rs 200/- (two hundred only) per day, till the registration is sought, upon the aforesaid party, under Section 77 (1) (a) of the Finance Act, 1994, for failure to obtain registration as per the provision of Section 69 of the said Act read with rule 4 of Service Tax Rules, 1994, as per the provisions existing at the relevant lime;
vi. I also impose a penalty of Rs. 10,000/- (Ten Thousand only) under Section 77 (i)(b) of the Service Tax Appeal No.51935, 52481, 6 52482 & 52517 of 2014 Finance Act, 1994, for failure to maintain proper accounts as per the provision of Rule 5 of the Service Tax Rules, 1994, as per the provisions existing at the relevant time, vii. I also impose a penalty of Rs.10,000/- (Ten Thousand only) under Section 77 (1) (e) of the Finance Act, 1994, for failure to issue proper invoices as per the provision of Rule 4-A of the Service Tax Rules, 1994, as per the provisions existing at the relevant time;
viii. I also impose a penalty of Rs.10,000/- (Ten Thousand only) under Section 77 (2) of the Finance Act, 1994, for failure to submit proper and authentic Service Tax Returns in a manner as provided under Rule 7 of the Service Tax Rules, 1994 and for failure in paying proper duty in a manner as provided under Rule 6 of the Service Tax Rules, 1994, as per the provisions existing at the relevant time ix. I also impose a penalty of Rs. 15,19,127/- (Rs.
Fifteen Lac nineteen thousand one hundred twenty seven only) upon the aforesaid party, under Section 78 of the Finance Act, 1994, for suppressing value of taxable service with intent to evade payment of Service Tax and also for contravention of various provisions of the Act/Rules discussed hereinabove.
ORDER IN RESPECT OF M/S. ANANT ENTERPRISES, 110/173, R. K. NAGAR, 80 FEET ROAD, KANPUR i. I order that the services provided by M/s. Anant Enterprises, 110/173 R. K. Nagar, 80 Feet Road, Kanpur should be classified under the "completion and finishing services" in relation to services of "Commercial or Industrial Construction" or "Construction of Complex", as Service Tax Appeal No.51935, 52481, 7 52482 & 52517 of 2014 the case may. The amount shown against "freight & cartage inward or outward" should be considered as paid against services provided by 'GTA' and the amount shown against "Commission, Rebate & Discount should be considered as receipt against "Business Auxiliary Services";
ii. I also confirm the demand of Service Tax amounting to Rs.43,83,184/- (Rs. forty three lac eighty three thousand one hundred eighty four only) [Tax 42.56 * 0.781 / , Ed.
Cess Rs. 85,136/- and SHE Cess Rs.
41,267/- only)], as detailed in table mentioned in Annexure-E and adjudged against the aforesaid party and order for recovery of the said amount from them under the provisions of Section 73(1) of the Finance Act, 1994 by applying the provisions of extended period, iii. I also confirm the demand of interest due on the aforesaid amount and order for recovery of the same from the aforesaid party under the provisions of Section 75 of the Finance Act, 1994, iv. I impose a penalty of Rs.200 per day or 2% of the Tax amount per month, whichever is higher, upto 09th May, 2008, upon the aforesaid party under Section 76 of the Finance Act, 1994, for failure to pay Service Tax under Section 68 of the said Act read with rule 6 of Service Tax Rules, 1994, as per the provisions existing at the relevant time. For the period from 10th May 2008 onwards, no penalty is being imposed under Section 76 of the Finance Act, 1994 due to the amendment in Section 78 of the Finance Act, 1994;
v. I also impose a penalty of Rs 200/- (two hundred only) per day, till the registration is sought, upon Service Tax Appeal No.51935, 52481, 8 52482 & 52517 of 2014 the aforesaid party, under Section 77 (1) (a) of the Finance Act, 1994, for failure to obtain registration as per the provision of Section 69 of the said Act read with rule 4 of Service Tax Rules, 1994, as per the provisions existing at the relevant time;
vi. I also impose a penalty of Rs.10,000/- (Ten Thousand only) under Section 77 (1) (b) of the Finance Act, 1994, for failure to maintain proper accounts as per the provision of Rule 5 of the Service Tax Rules, 1994, as per the provisions existing at the relevant time, vii. I also impose a penalty of Rs.10,000/- (Ten Thousand only) under Section 77 (1) (e) of the Finance Act, 1994, for failure to issue proper invoices as per the provision of Rule 4-A of the Service Tax Rules, 1994, as per the provisions existing at the relevant time;
viii. I also impose a penalty of Rs. 10,000/- (Ten Thousand only) under Section 77 (2) of the Finance Act, 1994, for failure to submit proper and authentic Service Tax Returns in a manner as provided under Rule 7 of the Service Tax Rules, 1994 and for failure in paying proper duty in a manner as provided under Rule 6 of the Service Tax Rules, 1994, as per the provisions existing at the relevant time ix. I also impose a penalty of Rs. 43,83,184/- (Rs.
forty three lac eighty three thousand one hundred eighty four only) upon the aforesaid party, under Section 78 of the Finance Act, 1994, for suppressing value of taxable service with intent to evade payment of Service Tax and also for contravention of various provisions of the Act/Rules discussed hereinabove.
Service Tax Appeal No.51935, 52481,
9 52482 & 52517 of 2014
ORDER IN RESPECT OF M/S. SWASTIK
ENTERPRISES, 109/388 R. K. NAGAR, KANPUR i. I order that the services provided by M/s. Swastik Enterprises, 109/388 R. K. Nagar, Kanpur should be classified under the "completion and finishing services in relation to services of "Commercial or Industrial Construction" or "Construction of Complex", as the case may. The amount shown against "freight & cartage inward or outward"
should be considered as paid against services provided by 'GTA' and the amount shown against "Commission, Rebate & Discount should be considered as receipt against "Business Auxiliary Services";
ii. I also confirm the demand of Service Tax amounting to Rs. 4,48,600/- (Rs. four lac forty eight thousand six hundred only) [Tax Rs. 4,35,534/-, Ed. Cess Rs. 8,711/- and SHE Cess Rs. 4,355/-], as detailed in table mentioned in Annexure-G and adjudged against the aforesaid party and order for recovery of the said amount from them under the provisions of Section 73(1) of the Finance Act. 1994 by applying the provisions of extended period; iii. I also confirm the demand of interest due on the aforesaid amount and order for recovery of the same from the aforesaid party under the provisions of Section 75 of the Finance Act, 1994; iv. I impose a penalty of Rs.200 per day or 2% of the Tax amount per month, whichever is higher, upto 09th May, 2008, upon the aforesaid party under Section 76 of the Finance Act, 1994, for failure to pay Service Tax under Section 68 of the said Act read with rule 6 of Service Tax Rules, 1994, as per the provisions existing at the relevant time. For the period from 10th May 2008 Service Tax Appeal No.51935, 52481,
10 52482 & 52517 of 2014 onwards, no penalty is being imposed under Section 76 of the Finance Act, 1994 due to the amendment in Section 78 of the Finance Act, 1994;
v. I also impose a penalty of Rs 200/- (two hundred only) per day, till the registration is sought, upon the aforesaid party, under Section 77 (1) (a) of the Finance Act, 1994, for failure to obtain registration as per the provision of Section 69 of the said Act read with rule 4 of Service Tax Rules, 1994, as per the provisions existing at the relevant time;
vi. I also impose a penalty of Rs.10,000/- (Ten Thousand only) under Section 77 (1) (b) of the Finance Act, 1994, for failure to maintain proper accounts as per the provision of Rule 5 of the Service Tax Rules, 1994, as per the provisions existing at the relevant time;
vii. I also impose a penalty of Rs. 10,000/- (Ten Thousand only) under Section 77 (1) (e) of the Finance Act, 1994, for failure to issue proper invoices as per the provision of Rule 4-A of the Service Tax Rules, 1994, as per the provisions existing at the relevant time;
viii. I also impose a penalty of Rs. 10,000/- (Ten Thousand only) under Section 77 (2) of the Finance Act, 1994, for failure to submit proper and authentic Service Tax Returns in a manner as provided under Rule 7 of the Service Tax Rules, 1994 and for failure in paying proper duty in a manner as provided under Rule 6 of the Service Tax Rules, 1994, as per the provisions existing at the relevant time ix. I also impose a penalty of Rs.4,48,600/- (Rs.
four lac forty eight thousand six hundred only) upon the aforesaid party, under Section 78 Service Tax Appeal No.51935, 52481, 11 52482 & 52517 of 2014 of the Finance Act, 1994, for suppressing value of taxable service with intent to evade payment of Service Tax and also for contravention of various provisions of the Act/Rules discussed hereinabove."
2.1 Appellant-I is a company engaged in the work of glass designing, etching, beveling, finishing of counter top glass, grinding, fabrication of aluminium doors, windows & partitions, stainless steel railing, Fenesta windows, structural Glazing and aluminium cladding including fitting and installation thereof to civil construction/ structures/building. They were not registered with the Service Tax Department and were not paying any service tax.
2.2 On the basis of intelligence that appellant-I was not paying any service tax due in respect of service tax provided, premises of the appellants were searched on 28.082012. 2.3 At the time of search it was observed that from the same premises four firms which have been marked as Appellant-I, Appellant-II, Appellant-III and Appellant-IV were operating and Shri Sanjay Jain was the Director in Appellant-I and Appellant-II and he was designated as Authorized Signatory in Appellant-III and Appellant-IV.
2.4 After completion of the investigations, revenue was of the view that Appellant-I had bifurcated the works undertaken by engaging Appellant-II, Appellant-III and Appellant-IV. Appellant I provided following services in relation to buildings or civil structures:
Glass designing by way of etching, grinding and similar works;
Fabrication of Aluminium door, windows and partition which can also be used in combination with glass/ pre- laminated board;
Stainless steel railing;
UPVC windows of Fenesta;
Structural Glazing, Aluminium Cladding etc. Service Tax Appeal No.51935, 52481, 12 52482 & 52517 of 2014 The services provided by the Appellant-I are covered under the category of „Completion and finishing services‟, as per definition of Construction of Residential Complex Services. 2.4 The fact that the services provided by Appellant-II, Appellant-III and Appellant-IV are used by Appellant-I for completion of the works undertaken by him could not impact the liability for payment of service tax by Appellant-I. In fact services provided by Appellant-II, Appellant-III and Appellant-IV are input services received by Appellant-I for providing the output services.
2.3 Service tax is to be paid by Appellant-I provider of the total work irrespective of the fact that the service tax is paid or not paid by sub contractor. Value of the services provided by sub contractor consumed by the main contractor or provider of output service would form integral part of the value of the taxable services so provided. Thus on the basis of investigations undertaken, revenue was of the view that Appellant-I had short/not paid service tax on the services provided by the them. 2.4 Appellant-II, Appellant-III and Appellant-IV who were providing the services on the behalf of appellant were also required to pay the service tax under category of Business Auxiliary Services. They have by suppressing the facts as above not paid service tax on the services provided by them under this category.
2.5 Since, Appellant-I & Appellant-II are company registered under the Companies Act, therefore Appellant-I & Appellant-II are covered under the list of specified persons, under Notification No.35/2004 - ST dated 03.12.04, hence as per provisions of Rule 2(1)(d) of Service Tax Rules, 1994, they are liable to pay service tax on the freight paid by them for the transportation of goods under GTA services.
2.6 Thus revenue was of the view that Appellants were liable to pay the service tax as detailed below for the period 2007-08 to 2012-13 (upto August 2012) Amount in Rs Appellant I II III IV Service Tax Appeal No.51935, 52481, 13 52482 & 52517 of 2014 Service Tax due 2,18,78,418 15,19,127 43,83,184 4,48,600 2.7 Thus it was alleged that the appellants have contravened the provisions as follows:
Rule 4 of Service tax Rules, 1994 read with Section 69 of Finance Act, 1994 by not getting registered with the department or by not getting all the services provided endorsed in their registration certificate; Rule 5 of Service tax Rules, 1994 by not maintaining the proper records related to service tax; Rule 6 of Service Tax Rules, 1994 read with Section 66, 67 & 68 of the Finance Act, 1994 by not paying the service tax;
Rule 7 of the service tax Rules, 1994 read with Section 70 of Finance Act , 1994 for not filing the Service Tax return as prescribed.
For the various contraventions made all four appellants are also liable for penal action.
2.4 Show cause notice dated 23.10.2012 was issued to all the four appellants asking them to show cause as to why-
I. M/s. Anant Glass Emporium Private Limited, 110/173 Ram Krishna Nagar, 80 Feet Road, Kanpur is required to show cause as to why, the services provided by them should not be covered under "Completion and Finishing Services" either of "Commercial or Industrial Construction"
or "Construction of Complex"; BAS and GTA services and the amount (gross) of Rs. 19,67,91,973/- charged & received by them should not be treated as value of taxable service and accordingly Service Tax amounting to Rs. 2,12,43,304/-, Ed. Cess amounting to Rs. 4,24,866/- and SHE Cess amounting to Rs. 2,10,248/-, total amounting to Rs. 2,18,78,418/- (Rs. Two Crore eighteen lakhs seventy eight thousand four hundred eighteen only) should not be demanded and recovered from them under proviso of Section 73(1) of the Finance Act, 1994 and the amount of Rs. 10 Lakhs voluntarily deposited by them should not be appropriated.
Service Tax Appeal No.51935, 52481, 14 52482 & 52517 of 2014 II. M/S Sakar Glazetech Private Limited, 82 Bima Vihar, Lakhanpur, Kanpur are hereby required to show Cause as to why, the services provided by them should not be covered under "Completion and Finishing Services" either of "Commercial or Industrial Construction" or "Construction of Complex": BAS and GTA services and the amount (gross) of Rs. 1,38,04,014/- charged & received by them should not be treated as value of taxable service and accordingly Service Tax amounting to Rs. 14,74,881/-, Ed.
Cess amounting to Rs. 29,498/- and SHE Cess amounting to Rs. 14,749/-, total amounting of Rs. 15,19,127/- (Rs. Fifteen Lakhs nineteen thousand one hundred twenty seven only) should not be demanded and recovered from them under proviso of Section 73(1) of the Finance Act, 1994;
III. M/s. Anant Enterprises, 110/173, R. K. Nagar, 80 Feet Road, Kanpur are required to show Cause as to why, the services provided by them should not be covered under "Completion and Finishing Services" either of "Commercial or Industrial Construction" or "Construction of Complex"; BAS and GTA services and the amount (gross) of Rs. 3,82,23,464/- charged & received by them should not be treated as value of taxable service and accordingly Service Tax amounting to Rs. 42,56,781/-, Ed. Cess amounting to Rs. 85,136/- and SHE Cess amounting to Rs. 41,267/- only), total amounting to Rs. 43,83,184/- (Rs. forty three lakhs eighty three thousand one hundred eighty four only) should not be demanded and recovered from them under proviso of Section 73(1) of the Finance Act, 1994; IV. M/s. Swastik Enterprises, 109/388 R. K. Nagar, Kanpur are required to show Cause as to why, the services provided by them should not be covered under "Completion and Finishing Services" either of "Commercial or Industrial Construction" or "Construction of Complex"
and the amount (gross) of Rs. 40,17,019/- charged & received by them should not be treated as value of taxable Service Tax Appeal No.51935, 52481, 15 52482 & 52517 of 2014 service and accordingly Service Tax amounting to Rs. 4,35,534/-, Ed. Cess amounting to Rs. 8,711/- and SHE Cess amounting to Rs. 4,355/-, total amount of Rs. 4,48,600/- (Rs. four lakhs forty eight thousand six hundred only) should not be demanded and recovered from them under proviso of Section 73(1) of the Finance Act, 1994;
V. Interest due thereon at the applicable rate should not be demanded and recovered from M/s. Anant Glass Emporium Private Limited, 110/173 Ram Krishna Nagar, 80 Feet Road, Kanpur, M/s. Sakar Glazetech Private Limited, 82 Bima Vihar, Lakhanpur, Kanpur, M/s. Anant Enterprises, 110/173 R. K. Nagar, 80 Feet Road, Kanpur and M/s. Swastik Enterprises, 109/388 R. K. Nagar, Kanpur under Section 75 of the Finance Act, 1994;
VI. Penalty should not be imposed upon M/s. Anant Glass Emporium Private Limited, 110/173 Ram Krishna Nagar, 80 Feet Road, Kanpur, M/s. Sakar Glazetech Private Limited, 82 Bima Vihar, Lakhanpur, Kanpur, M/s. Anant Enterprises, 110/173 R. K. Nagar, 80 Feet Road, Kanpur and M/s. Swastik Enterprises, 109/388 R. K. Nagar, Kanpur under Section 76 of the Finance Act, 1994 for their acts of omission and commission as mentioned in preceding paras;
VII. Penalty should not imposed upon M/s. Anant Glass Emporium Private Limited, 110/173 Ram Krishna Nagar, 80 Feet Road, Kanpur, M/s. Anant Enterprises, 110/173 R. K. Nagar, 80 Feet Road, Kanpur and M/s. Swastik Enterprises, 109/388 R. K. Nagar, Kanpur under Section 77 of the Finance Act, 1994 for their acts of omission and commission as mentioned in preceding paras; VIII. Penalty should not be imposed upon M/s. Anant Glass Emporium Private Limited, 110/173 Ram Krishna Nagar, 80 Feet Road, Kanpur, M/s. Sakar Glazetech Private Limited, 82 Bima Vihar, Lakhanpur, Kanpur, M/s. Anant Enterprises, 110/173 R. K. Nagar, 80 Feet Road, Kanpur and M/s. Swastik Enterprises, 109/388 R. K. Nagar, Service Tax Appeal No.51935, 52481, 16 52482 & 52517 of 2014 Kanpur under Section 78 of the Finance Act, 1994 for their acts of omission and commission as mentioned in preceding paras;
2.5 The said show cause notice has been adjudicated as per the impugned order as referred in para-1 above. 2.6 Aggrieved appellants have filed these appeals. 3.1 We have heard Shri Dharmendra Srivastava, Chartered accountant for the appellants and Shri Santosh Kumar, Authorized Representative for the revenue. 3.2 Arguing for the appellants learned Chartered Accountant submit that-
Impugned order classifying the activities of appellants which is the activity of sale of goods on completion of services under construction of complex services. It is also constructed that all four firms as associated enterprises and have clubbed the income of the same, the activities undertaken by the Appellant-I is the sale of goods and no service tax is leviable on the activities of such sale. They have paid VAT dues in respect of the activities undertaken as is evident from VAT Order of 2008-09, VAT Order of 2009-10, VAT Order of 2010-11, VAT Order of 2011-12, VAT Order of 2012-13 and VAT order of 200708 of M/s Anant Enterprises.
Dominant intention is sale of material and not provision of any service, proportion of charges pertaining to disputed activities would be very small percentage less than 5% of the total value of the percentage and remaining major portion being attributable to sale of material. So there cannot be any question of demand of service tax. Reliance was placed by the decision of this Tribunal in the case of M/s Laxmi Engineering (P) Ltd. Vs CST, Service Tax, Ahmadabad Final Order No.A/10803-10804/2023 dated 06.04.2023.
Even if the activities of appellant is considered as completion of certain services either commercial or industrial consideration of the services abatement would Service Tax Appeal No.51935, 52481, 17 52482 & 52517 of 2014 be available to the appellants to the extent of the value of goods sold as per notification no.12/2003.
After reducing the value of the goods sold the charges relied by the appellant under various categories or services rendered would fall much below the exemption limit provided in terms of Notification No.6/2005-ST dated 01.03.2005 as amended from time to time.
The four companies are distinct legal entities with separate registrations and file income tax return with individual capacities. The transactions between them were duly accounted for and there was no bifurcation of consideration whatsoever. Impugned order clubbing them as associated enterprises goes against the distinct legal indentity as a person in view of the law. The material fact that Mr. Sanjay Jain was having role in all the four firms could not wipe out the existence of four legal intities. Since all four are separate legal persons basic exemption under Notification No.6/2005-ST dated 01.03.2005 would admissible to each of them.
Impugned order confirms the demand of rebate and discount received from manufacturer by considering the same as Business Auxiliary Service. Such confirmation is contemporary to the decision of the Tribunal in the case of M/s My Car Pvt. Ltd. Vs CCE, Kanpur Final Order No.52197/2015 dated 08.07.2015, the demands confirmed on account of VAT and on account of Freight & Cartage Inward and Freight & Cartage Outward under GTA are without allowing the benefit of abatement i.e. 75%.
The amounts recorded in ledgers are inclusive of charges of local charges- local transport charges, who provided services for transporting the goods within the area of Kanpur but do not issue any consignment note and thus are not covered under the category of GTA services. This amount also includes cartage charges paid to sellers from whom material is purchased by appellants on FOR basis on which sellers are liable to pay tax under Rule 2 (l) (d) of Service Tax Appeal No.51935, 52481, 18 52482 & 52517 of 2014 Service Tax Rules, 1994 being persons liable to pay freight to GTA. The Department should have provide exemption of Rs.750/- and Rs.1,500/- under Notification No.34/2004-ST dated 03.12.2004 and abatement of 75%, which has been denied unilaterally.
This demand needs to be re-quantification on account of calculations after allowing such abatements.
Extended period of limitation cannot be applicable as all the transactions have been duly recorded in the books of accounts showing complete transparency on the part of the appellant. Further, appellant was acting in a bonafide manner and the present issues involved relates to interpretation of complex legal provision. It is now settled that in such cases extended period of limitation would not have been invoked.
As the demand itself is not sustainable on merits and limitation, penalties imposed on the appellant cannot be justified.
3.3 Learned Authorised Representative reiterates the findings recorded in the order.
4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument.
4.2 For confirming the demand against the appellant, impugned order records as follows:-
"ISSUE-I- CLASSIFICATION OF "COMPLETION AND FINISHING SERVICES", CLUBBING OF INCOME OF ALL THE FIRMS WORKING AS ASSOCIATES AND TAXABILITY OF CLUBBED INCOME:
55.1. After considering the allegations of the department and the arguments advanced by the party, I notice that the statements of Shri Sanjay Jain, the director of M/s AGEPL and M/s SGPL and the authorized person of M/s Anant Enterprises and Swastik Enterprises, the records resumed form the all the premises and the statements of the various persons are the main evidences to decide the Service Tax Appeal No.51935, 52481, 19 52482 & 52517 of 2014 issues. Therefore, before arriving at any conclusion, it would be in favour of justice to evaluate the evidences on record.
55.2. In para 03 of the show cause notice, the department had clearly brought out the outcome of the search conducted at the premises of M/s AGEPL on 28-08-2012. It has been mentioned that all the four concerns were operating from the said premises i.e. 110/173, Rarn Krishna Nagar, Kanpur and the records pertaining to all the four firms were resumed from the same premises. In this regard, the panchnama was also prepared on the spot and statement of Shri Sanjay Jain was recorded under Section 14 of the Central Excise Act, 1944. In the said statement, Shri Jain had categorically admitted that he was working as active/executive director in M/s. AGEPL & M/s. SGPL and as authorized signatory of M/s. Swastik Enterprises and M/s. Anant Enterprises, Kanpur, that he was fully aware of the working/activities of all these four companies/firms, that all the above firms/establishments were having one common 'Godown Cum Workshop' at Plot No. 470, Village - Maghni Purwa, Mauza Mallon, P.O. Choubepur, G. T. Road, District Kanpur, that M/s. AGEPL, were purchasing the glass, aluminium section/panel, stainless steel pipes, tape, hardware, silicone, Fenesta windows of UPVC etc., directly from the manufacturers and that M/s. AGEPL provided the services like glass designing by way of etching, grinding and similar works, Alurninium fabrication of door, windows and partition, which can also be used in combination with glass/pre-laminated board, Stainless Steel Railing, UPVC windows of Fenesta, Structural glazing, Aluminium cladding etc., in relation to buildings or civil structures. It has also been admitted by Shri Sanjay that basically, they were procuring the orders for 'Completing & Finishing Services' and after completing the job, the finished goods were sent/delivered through challan of M/s. AGEPL, also that the finished goods were Service Tax Appeal No.51935, 52481, 20 52482 & 52517 of 2014 installed/fitted at the site of service recipient by M/s.
AGEPL and that all the Completing and Finishing Services were done in M/s. AGEPL. In nutshell, it was admitted that the orders for 'C&FS' were procured in M/s AGEPL and after completing the job, the finished goods were also sent/delivered through challan of M/s. AGEPL. Further, it has also been admitted that instead of raising single detailed bill for complete work in M/s. AGEPL, they were raising the bill only in respect of quantity of raw materials/Accessories/items in M/s. AGEPL by segregating the amount and the bill relating to the job charges were being raised in any of the associate parties le. M/s, SGPL, M/s. SE, and M/s. AE. This amount collected as job-work is shown under the sub-head 'Completing and Finishing Service Charges' under the main head of job work' in Mis. SGPL on which proper service tax is regularly paid to the department. The service tax registration No. is AAPCS3001FSD002. In light of the facts accepted by Shri Sanjay Jain in his statement, which was never retracted, I have no hesitation in noting that M/s AGEPL was engaged in managing the accounts in such a manner that the liability to pay service tax may be avoided, which is nothing but an attempt to knowingly evade the payment of service tax. 55.3. I have noticed that it has also been gathered during investigations that for the sake of showing separate entity, different addresses have been shown as their registered addresses, i.e. family residence at 82 Bima Vihar, Lakhanpur, Kanpur was shown as the Registered Office of M/s. SGPL and the registered office of M/s. Swastik Enterprises was shown in a 15' * 20' room at 109/388 R. K. Nagar, Kanpur, although the operational place was the office of M/s AGEPL. The other admitted facts by Shri Sanjay Jain are that all the employees, workers and labours were employed in M/s AGEPL and the remaining three firm/companies were not having any employed Service Tax Appeal No.51935, 52481, 21 52482 & 52517 of 2014 labour, employee and worker. I have seen that the officers, in order to corroborate the facts ascertained during the visit at the office of M/s AGEPL, conducted follow-up at the addresses shown as registered premises of associate concerns. On 30-08-2012, the premises of M/s SGPI, was visited and it was revealed that neither any record was available there nor the premises was having any tool/machinery/office equipment installed therein so as to perform any activity. It was clearly admitted that the said premises was being used only for the residential purpose. The entire proceedings were recorded in panchnama and the facts were also affirmed by Shri Sanjay Jain in the statement recorded on the spot. Similarly, the premises of M/s Swastik Enterprises and M/s Anant Enterprises were also searched on 31-08-2013, where again the same situation of absence of record, stock of goods and tool/machinery/office equipment etc., was found Again, the statement of Shri Sanjay Jain was recorded, who was looking after the entire work of both the firms. He admitted that the entire activities recorded in the accounts of both the aforesaid concerns were performed at the premises of M/s AGEPL. The non- retracted statement is sufficient to understand the planning of the entire set of firms.
55.4. I have noticed that the departmental officers have also visited the godown of M/s AGEPL situated at Chaoubepur on 03-09-2012, where Shri Manish Kumar, the DTP operator was available. The detail of machines installed and the staff deployed therein was prepared. The records available on the spot were also resumed. The statement of Shri Manish was recorded on the spot. He had stated that neither any attendance register is maintained nor any stock registers regarding glass, aluminium section or the finished stock etc., are maintained in the godown. He had also admitted that the said workshop and the plant & machinery installed therein, Service Tax Appeal No.51935, 52481, 22 52482 & 52517 of 2014 are the property of M/s AEGPL and the entire work being undertaken in the said premises is performed under the supervision/direction of Shri Sanjay Jain. The directions regarding work to be performed was received on the order book of M/s AEGPL through fax/email or by hand and after completion, the processed goods were sent either to M/s AGEPL or at the customer's site for fitting/installation under the cover of "Goods Transfer note". He had clearly admitted that no other firm operates from that premises. The facts narrated in the statement were never retracted by Shri Manish or Shri Sanjay Jain, which in my view substantiate the departmental allegation that the firm viz., M/s AGEPL was the only firm engaged in providing taxable services and all the other firms have been created on papers just to distribute the income.
55.5 I have also observed that investigating officers have also called for the records and documents of all the four concerns pertaining to earlier period through proper summons issued on 06-09-2-13. Mainly, the order/estimate books, financial records, sale bills/invoices/cash memos tax invoices and transport challans were called by the officers. It is on record that the records in respect of M/s Swastik Enterprises were not maintained, in as much as, the assessment of profit is done on the presumptive basis as per Section 44AD of the Income Tax Act, 1961 and have intimated the turnover for the financial year 2007-08 to 2012-13. The ITR retums of the proprietor Shri Bhupendra Kumar Sharma were also provided. As regards, the records pertaining to M/s Anant Enterprises, it was informed that the records like invoices/job-bills were very volurninous and also untraceable hence, could not be provided and only the copies of sale ledgers and balance sheets were provided. For the records of M/s AGEPL and M/s SGPL, it was explained that in most of the cases either the records were Service Tax Appeal No.51935, 52481, 23 52482 & 52517 of 2014 destroyed being temporary in nature or were not traceable being voluminous. In plain words, I am forced to note that the records were provided on selective basis with a firm motive of suppressing the facts from the department.
55.6. I have viewed that the officers have examined the records/documents submitted in respect of all the parties and have recoded statement of Shri Sharad Verma, the manager of M/s AGEPL, on 18-09-2102 under Section 14 of the Central Excise Act, 1944, as made applicable in the matters of service tax. He has given a detailed statement regarding the practice being adopted while dealing with the customers and had explained the nature of records/documents and their respective uses. He has also explained about each and every column of the Estimate/Order Book and had explained how the job is get completed and delivered at the address of the client. In nutshell, what has been concluded from the statement is that the entire work from the stage of procuring the order to last stage of installation and fitting at the customer's site was being performed by M/s AGEPL on the strength of 'Estimate/Order book', I have noted that in order to corroborate the results of investigation, the officer have also conducted enquires at the end of the customer. One of the customers, Shri Vinay Gupta in his statement recorded on 28-09-2012 had admitted that he placed a single work of performing glass work in his shop, which included purchase of material and deliver & affixing the same at their premises. The order was given to M/s AGEPL for which payment was made in cash however, the billing was done vide two separate invoices i.e, one from M/s AGEPL and the other from M/s SGPL. The non-retracted statements of Shri Sharad Verma and Shri Vinay Gupta portray the management of accounts, which is nothing but, a clear-cut attempt to escape service liability.
Service Tax Appeal No.51935, 52481, 24 52482 & 52517 of 2014 55.7. From perusal of relied upon documents i.e. panchnama and the statements, I have also come to know that the facts narrated by Shri Manish Singh and Shri Sharad Verma, employees of Mis AGEPL in their respective statements were shown to Shri Sanjay Jain on 01-10- 2012, who after going through the contents of said statements agreed with the fact and in token of agreement signed the same. The panchnama proceedings and the fact narrated by Shri Sanjay Jain in his statements recorded on various earlier dates, were again shown to him and Shri Jain was again found to be agreement with all those statements and the panchnama proceedings. In order to re-confirm the earlier proceeding and also to confirm the facts stated by above mentioned employees, once again, a statement of Shri Sanjay Jain was recorded on 01-10- 2012, wherein the help of his employees was allowed to him. I have noticed that in reply to most vital question regarding billing pattern, he had categorically admitted that the glass was purchased only in M/s AGEPL and not in any other firm/concern, that after completing the job, the bill of material including accessories used/consumed was raised in M/s AGEPL, whereas, the bill for amount of job charges was separately raised in any of the remaining firms Le. M/s SGPL, M/s Anant Enterprises or M/s Swastik Enterprises, which are not reflected in AGEPL and that the goods, after completion of job, are dispatched to the site on the strength of "Goods Transfer Note" and "Challan" which are also issued by M/s AGEPL. It is also an admitted fact on record that on the basis of financial records resumed from the premises of M/s AGEPL and those produced in compliance of summons, the officers also prepared exhibit A to G, which contained the details of amount received on account of performing taxable activities. Those exhibits were also made available to Shri Sanjay Jain for verification, who after checking and verifying the same from the records admitted and in token Service Tax Appeal No.51935, 52481, 25 52482 & 52517 of 2014 of admission, signed the same by mentioning "Checked & Found Correct". This confirms that Shri Sanjay Jain was in full agreement of the contents of the exhibit. These facts undoubtedly convince me to record that the main unit was M/s AGEPL and all the other units were illusory.
55.8. I have further noticed that the statement of Shri Bhupendra Sharma, the proprietor of Mi's Swastik Enterprises, was also recorded on 12-10-2012 under Section 14 of the Central Excise Act, 1944, wherein he confirmed the facts deposed by Shri Sanjay Jain in the statement recorded on 31-08-2012 and also the facts recorded in panchnama dated 31-08-2102, prepared on the spot in token of agreement, he has signed the statement and the panchnama. Shri Sharma had also admitted that the entire business activities of M/s Swastik Enterprises were looked after by Shri Sanjay Jain, who was the director of M/s AGEPL and M/s SGPL: that the entire work of his firm was carried out from AGEPL; that the records of the firm were prepared by the staff of M/s AGEPL and the same were also kept in custody at M/s AGEPL; that the work done in their firm was related to M/s AGEPL. that no labour or staff was employed in his firm, that whatever work has been shown during last five years in his firm, it pertains to M/s AGEPL; that the orders were processed according to order noted by Mis AGEPL, that the goods were sent at site on the strength of challan issued by M/s AGEPL, that the fitting & installation work was done as per the direction of M/s AGEPL; that the bills were prepared on the computer of M/s AGEPL and the amount against such bills was also collected by M/s AGEPL and that their firm was situated in a shop wherein no stock of material, records or tools/plant/machinery etc were available. Here, I would like to record that the statement of Shri Bhupendra Sharma was never negated either by him or by Shri Sanjay Jain. Thus, these facts confirm Service Tax Appeal No.51935, 52481, 26 52482 & 52517 of 2014 that the existence of the firm M/s Swastik Enterprises was only on the papers as a sham concern and the income shown in its name has rightly been added to the income of M/s AGEPL by treating it an associate firm.
55.9. Finally, while consolidating the aforesaid facts in light of the statements tendered by Shri Sanjay Jain, Shri Bhupendra Sharma, Shri Manish and Shri Sharad Verma and the facts recorded in panchnama prepared during the visit at the respective premises of M/s AGEPL, M/s SGPL, M/s Anant Enterprises and M/s Swastik Enterprises and the workshop-cum-godown situated at Chaoubepur, Kanpur, I have no hesitation in holding that all the firms except M/s AGEPL were existing only on papers and were created by Shri Sanjay Jain only to manage the accounts in such a manner that the service tax liability may be escaped by availing smali scale service provider exemption in each firm. The other motive behind the account management was undervaluation of the services. If this was not the motive then, why the purchases were entirely shown in M/s AGEPL and the job-charges were booked in remaining firms despite the fact that the orders were taken in M/s AGEPL; the designs were finalized at M/s AGEPL; the measurement at site is taken by the staff of M/s AGEPL, the job was processed in the godown of M/s AGEPL, the goods were delivered on the challans of M/s AGEPL, the service on site was provided by the staff and labour of M/s AGEPI and finally and the payment was also received in Mis AGEPL I have failed to find any plausible submission from Shri Sanjay Jain at any point of time, till date, which stands against the allegations made in the demand notice. 55.10. Coming to the issue of demanding the service tax from all the firms viz. M/s AGEPL, M/s SGPI, M/s Anant enterprises and M/s Swastik Enterprises, I have noticed that the company M/s. SGPL was incorporated in the year 2010-11, wherein Shri Sanjay Jain, and his wife Mrs. Service Tax Appeal No.51935, 52481, 27 52482 & 52517 of 2014 Sabina Jain are the Directors. These persons are also directors in M/s. AGEPL, which means that directors in both the firms are same and common. The proprietor of the firm M/s. Anant Enterprises is Smt. Vimla Jain, who is the mother of Shri Sanjay Jain. The proprietor of the firm M/s. Swastik Enterprises is Shri Bhupendra Sharma, who is close friend of Shri Sanjay Jain. The discussions in the preceding paragraphs and the admitting statement of Shri Sanjay Jain dated 28/29.08.2012 and the statement of Shri Bhupendra Verma recorded on 12-10-2012 have established that firms other than M/s AGEPL were only the paper arrangement, that for all the practical purposes, Mis AGEPL was the main firm and that the entire show was being managed and controlled by Shri Sanjay Jain. The arrangement clearly shows that Shri Sanjay Jain was having mutual interest in each firm and also that the main fim i.e. Mis AGEPL was facilitating the business of other firms. Thus, it is clear that M/s. SGPL, M/s. Ariant Enterprises, M/s. Swastik Enterprises and M/s. AGEPL are the associated enterprises within the meaning assigned to it in Section 92A of the Income Tax Act, 1961 (43 of 1961) and covered in terms ol section 65(76) of the Finance Act, 1994. The provisions of Section 92A of the Income Tax Act, 1961 (43 of 1961) and Section 65(7b) of the Finance Act, 1994 are detailed in para 26 above, which I am not repeating for the sake of conciseness. Thus, the consideration shown as received or transactions reflected against any of the aforesaid four concerns is the taxable value received against the work orders taken and consequently executed by Mis. AGEPL. Since the single work order for services has exclusively been completed by single company i.e. M/s. AGEPL but, the consideration has been bifurcated in the name of other artificially created entities, I hold that all the aforesaid firms are liable to pay service tax along Service Tax Appeal No.51935, 52481, 28 52482 & 52517 of 2014 with interest against the receipts shown in their accounts besides penal action as per rules. 55.11. As regards, the classification of services provided by the parties under the category of "Completion and finishing Services", I have noticed that the parties in question have provided the services like glazing service which includes installation services of glass cladding, mirror walls and other glass products, closed in work such as window glass/ door instaliation work services, etc.; the installation services of fences, railings and similar enclosures covered under Fencing and Railing services and other similar services including sand blasting, etching, fusion glass, Structural Glazing, aluminium cladding, acoustic services, interior of walls and ceilings, general repair and maintenance services etc. I have seen that it is on record that in case of M/s SGPL, similar services have been treated as taxable services although the classification has shown under some other head; that service tax registration has also been taken and that all the formalities relating to discharging the tax liability are being complied by them. They are also submitting periodic returns at regular interval. Further, in his statement dated 28-08- 2012, duly re-admitted by statement dated 01-10-2012, Shri Sanjay Jain, the sole runner of the show has explained the nature of job and their uses that are being performed. I have seen that he had admitted that M/s, AGEPL procures the work order and after measurement done by the worker of the company, notes down in their 'Estimate/Order' Book for fitting/installation of Glass, which is designed by way of etching, grinding and similar works and for fitting/installation of Aluminium fabricated door, windows and partition, which can be used in combination with glass/pre laminated board, Stainless Steel Railing, UPVC windows of Fenesta, Structural glazing, Aluminium cladding, Counter table glass etc., in relation to building or civil structures or residential complex or Service Tax Appeal No.51935, 52481, 29 52482 & 52517 of 2014 repair/alteration/renovation or similar services. The services provided by M's. AGEPL are very well covered under the "completion and finishing services of taxable services Commercial or industrial construction'/ 'construction of complex. The detailed definition of "Commercial or Industrial Construction service" defined under Section 65(25b) and the definition of "Construction of Complex" defined under Section 65 (30a) of the Finance Act, 1994 have already been reproduced in para 16 & 18 above. which I am not reproducing again to avoid repetition. In both the said definition, the completion and finishing services relating to new construction or the existing construction have been covered. The use of word 'such as before the nature of services described therein denotes that these services are illustrative in nature and makes it clear that all the services analogous to the services mentioned therein, shall be covered under the definition. This gives the definition a large exposure. A simple reading of said definition makes it abundant clear that the services provided by the parties in question, are akin to those mentioned in the definition and are duly covered therein so as to treat them as taxable services. In light of the above definition, the nature of services provided by the parties and specific admittance by Shri Sanjay Jain, I am inclined to find that the classification of services proposed in the demand notice is legal & proper. I therefore hold that services provided by the aforesaid parties are correctly classifiable under the category of "completion and finishing services" of taxable services of the "Commercial or Industrial Construction service" defined under Section 65(25b) and the definition of "Construction of Complex"
defined under Section 65 (30a) of the Finance Act, 1994, as the case may be.
Service Tax Appeal No.51935, 52481,
30 52482 & 52517 of 2014 ISSUE-II-CLASSIFICATION AND TAXABILITY OF INCOME SHOWN AS 'REBATE & DISCOUNT A/C
56. Regarding the issue of demand of service tax on the income shown under the head of 'Rebate & Discount', I have noticed that the department had classified the said services under the category of business auxiliary services' whereas, the parties have disputed such classification and have challenged the leviability of lax. After considering the records like Profit & Loss A / C * (s) and Balance Sheets resumed under resumption memo and panchnama, during the visit and the records supplied in compliance of summons, I have seen that apart from amounts shown as income realized on account of cartage realized, installation charges realized, job- work realized, labour charges, repairing charges and scaffolding charges received, the party had also shown income on account of Commission or Rebate & Discount A/C. During the investigation and preparation of charts showing income under various heads, which are the part of the demand notice, the facts were ascertained from Shri Sanjay Jain and his statement was also recorded to this effect on 01-10-2012. The charts numbered from A to G, as appended with the demand notice were prepared and shown to him, so as to ascertain the factual position of taxability of amount. Shri Sanjay Jain, had seen and signed the said charts and noted certificate to that effect. Despite, given a chance, Shri Jain did not explain about the source of income, due to which the Income on account of Commission and Rebate & Discount was treated as income from services provided in the capacity of commission agent and was charged to tax under the taxable category of "Business Auxiliary Services". Since, the onus to explain about the nature and source of income rest upon the concerned person, it was for the parties to explain about the nature and source of income, which they failed to do at the material tine. Even, in the defence reply, the party did not produce any realistic Service Tax Appeal No.51935, 52481, 31 52482 & 52517 of 2014 & acceptable argument or evidence to show that the income was not liable to service tax. Thus, in absence of any convincing reason, I am not in a position to accept the argument advanced by the parties and hold that the income on that account has rightly been made liable to service tax.
ISSUE-III- CLASSIFICATION AND TAXABILITY OF "FREIGHT AND CARTAGE INWARD & OUTWARD"
57. I have further observed that in relation to tax proposed on freight and cartage inward & outward, the parties have submitted that the amount reflected in their accounts also included freight and cartage paid for local movements of goods i.e. within the city hence, the same requires reconsideration, Secondly, it has also been submitted by the party that the benefit of notification no. 13/2008-ST dated 01-03-2008 is also available to them, which has not been extended to them. In this regard, after going through the period covered under the demand notice i.e. from April, 2007 to August, 2012, I have noticed that in all, three different notifications were in operation, which are 1/2006-ST dated 01-03-2006, 13/2008-ST dated 01- 03-2008 and 26/2012-ST dated 20- 06-2102 Among those only the 13/2008-ST dated 01-03-2008 was unconditional and in rest of the condition of non-availment of CENVAT credit, while providing the services, was to be fulfilled. I notice that while working out the demand and also during the investigation proceedings, Shri Sanjay Jain was provided with fair opportunity to provide the actual figures chargeable to tax but, in response, he conveyed his inability to provide proper figures and admitted the method of calculation of tax and signed the annexures in token of his agreement Secondly, after going through the contents of defence reply and the annexures attached therewith, once again I have failed to find any document, which provides actual detail of amount to be charged to the service tax. As regards, the certificate of fulfilling the Service Tax Appeal No.51935, 52481,
32 52482 & 52517 of 2014 condition of not availing the CENVAT credit while providing the "GTA" services, again there is no evidence on record. Thus, in light of the facts discussed above, I am left with no option but, to confirm the tax liability on entire amount as has been proposed in the Demand notice. Accordingly, I hold the same.
ISSUE-IV- ADMISSIBILITY OF BENEFIT OF NOTIFICATION NO.01/2006-ST DATED 01-03-2006:
58. I have noticed that the parties have also challenged the issue of denial of benefit of abatement allowed under notification no.01/2006-ST dated 01-03-2006. The ground of argument is that the services provided by them are not the "Completion & Finishing Services". In this regard, I would like to recall my findings discussed in entire para 55, as above. In the said para, I have categorically discussed the issue of classification of services, the issue of clubbing of taxable value and the issue of firms working as associates and have held that the services have rightly been classified under the category of "completion and finishing services" of taxable services of the "Commercial or Industrial Construction service" defined under Section 65(25b) and the definition of "Construction of Complex"
defined under Section 65 (30a) of the Finance Act. 1994, as the case may be. The claim of the parties working as trading finns has already been set aside. Therefore, in terms of conditions defined at Sl. 07 & 10 of the table annexed to aforesaid notification, the benefit of abatement cannot be extended to the party. The contents of the table are reproduced as under-
7 (zzq) or Commercial This exemption shall not 33 (zn) or (zzi) or industrial apply in such cases where or (zzm) construction the taxable services provided service. are only completion and finishing services in relation to building or civil structure, referred to in sub-clause (c) of clause (25b) of section 65 of the Finance Act.
Explanation. The gross amount charged shall include Service Tax Appeal No.51935, 52481, 33 52482 & 52517 of 2014 the value of goods and materials supplied or provided or used by the provider of the construction service for providing such service.
10 (zzzh) or Construction This exemption shall not 33 (zn) or (zzi) of complex apply in cases where the or (zzm) taxable services provided are only completion and finishing services in relation to residential complex, referred io in sub-clause (b) of clause (30a) of section 65 of the Finance Act. Explanation. The gross amount charged shall include the value of goods and materials supplied or provided or used for providing the taxable service by the service provider.
The contents of column 04 readwith explanation of the aforementioned table are abundantly clear that the benefit cannot be extended to the party and also that the valuation shall be done after taking into account the value of goods and material supplied or provided or used for providing the taxable service. Accordingly, I hold so.
ISSUE-V- CLAIM OF BENEFIT OF NOTIFICATION NO.12/2003-ST DATED 20-06-2003:
59. I have observed that the parties have claimed benefit of notification no. 12/2003-ST dated 20-06-2003 by stating that they have shown the value of traded goods separately in the concerned invoices and whatever tax is required to be paid shall be in respect of incidental charges recovered from the customers. They have claimed that they have not availed the facility of CENVAT credit on inputs used in providing the services and have shown the value of goods separately hence, the conditions of said notification stand complied with and the benefit is available to them. In this regard, I would again like to refer to the findings discussed in para 55 above. wherein it has categorically been held that the parties associated with each other were providing "completion and finishing Service Tax Appeal No.51935, 52481, 34 52482 & 52517 of 2014 services" of taxable services of the "Commercial or Industrial Construction service under Section 65(25b) and the definition of "Construction of Complex" defined under Section 65 (30a) of the Finance Act, 1994 and the sale/supply of goods was incidental to service. In the discussion above, it has already been concluded that the party was managing the accounts in such a manner that the bills for goods and accessories were issued in one unit whereas, the invoices/bills for service portion were being issued in associate firms. I have failed to find a single invoice, which supports the claim of the party that they were showing the value of goods separately. In fact, either the invoices were bearing the detail of goods or were bearing the value of services. As far as the issue relating to non-availment of CENVAT credit is concerned, I find that the CENVAT credit can be availed only if the duty has been paid on the inputs used/consumed during providing the service. I have failed to find any evidence, which shows that the party procured the input on payment of duty.
Therefore, in my view, the issue of claiming benefit of notification is liable to be rejected. Accordingly, I hold that the benefit of the notification no. 12/2003- ST dated 20-06-2003 is not available to the party. ISSUE-VI- SUBMISSION REGARDING ISSUANCE OF CONSOLIDATED DEMAND FOR ALL THE SERVICES:
60. I have seen that the party had also raised the matter relating to issuance of consolidated demand in respect of all the services and had claimed that the dermand is liable to be rejected on this single issue. I do not agree with the submission of the parties. It appears that the parties have lost sight of the annexures of the demand notice numbered from 'A' to 'G'. It can be seen that each and every income has been mentioned in the charts, separately for each firm and after totaling the entire income of each firm, individual liability of service tax has been calculated and demanded.
Since, the rate of duty in respect of each service is same Service Tax Appeal No.51935, 52481, 35 52482 & 52517 of 2014 hence, instead of calculating the separate tax liability in respect of each service, consolidated liability in respect of each party has been calculated. I have also noticed that this fact was in knowledge of Shri Sanjay Jain, who has signed the annexures in token of agreement. It is seen that they he had not objected this fact at that time. I have failed to understand that how the parties can claim this as a valid reason for setting aside the entire demand I do not find force in this submission of the parties and reject the same. Regarding applicability of case laws quoted in their support, I find that the same cannot come in their rescue because, the tax liability has been worked out logically and specific provisions have been discussed in detail. ISSUE-VII- CLAIM IN RESPECT OF ACTIVITES BEING TRADING:
61,01. I have noticed that the parties have consistently pleaded that their activities are simple trading activities and no service element is therein. In support they have relied upon the Trade Tax registrations, nomenclature used in financial accounts & ledgers, the tax audil report, audited balance sheet & Profit & Loss A/c and the trade tax invoices issued for the purpose. They have also pleaded that they were regularly filing sales tax/trade tax retums and procuring assessment orders. In nutshell, they have tried to establish that they are engaged in trading of glass items and aluminium & related items and not in providing any taxable service as alleged in the demand notice. They have also relied upon various case laws in their support and have tried to plead that where VAT is charged no service tax can be levied 61.02. I have gone through case laws relied upon by the party and after considering the contents, I have noticed that these case laws are in relation to composite contracts or indivisible contract. In the said case laws, the situation dealt with pertains to the contracts, where the provision of service is secondary motive whereas, is this case the Service Tax Appeal No.51935, 52481,
36 52482 & 52517 of 2014 primary motive of the customer is to avail service. It can be seen from the statements of Shri Sanjay Jain and Shri Bhupendra Verma that the customers approach M/s AGEPL for the purpose of availing services at their premises. It has been categorically admitted by both of the persons that as the customers approach, M/s. AGEPL procures work order and thereafter sends their worker for taking measurement at customer's site. These orders are noted down in their 'Estimate/Order book for desired work of fitting/installation of Glass, which is designed by way of etching, grinding and similar works and for fitting/installation of Aluminium fabricated door, windows and partition, which can be used in combination with glass/pre laminated board, Stainless Steel Railing, UPVC windows of Fenesta, Structural glazing, Aluminium cladding, Counter table glass etc. It is an admitted fact that these orders are in relation to new building or Gvil structures or residential complex or repair/alteration/renovation or similar services of old structures. On evaluating the facts, it can be concluded that in this case, the motive is not sale or purchase of aforementioned goods. Instead, the motive is to receive service and the supply of goods is incidental. The contract in this case is not for sale of good, as has been projected by the parties and for arriving at the conclusion regarding nature of transaction the intention has to be verified and taken into consideration. One more fact, which I would like to record on the cost of repetition, is that the parties through their respective proprietors, directors and authorized persons have admitted that they were managing the invoicing in a manner to escape payment of service tax, although they have admitted to have engaged in providing services. Needless to say that one of the firm was already registered with the department and was paying service tax, which is evidence against their claim. In light of the aforesaid discussions, i have arrived Service Tax Appeal No.51935, 52481, 37 52482 & 52517 of 2014 at the conclusion that there is no force in the submission of the party.
ISSUE-VIII- DEMAND BEING TIME BARRED, PROVISO TO SECTION 73(1) NOT INVOKABLE 62.01. I observe that all the parties have also disputed the entire demand cum show-cause notice by arguing that the proviso to Section 73(1) of the Finance Act, 1994 for recovery of tax for earlier period are not invokable, in as much as, the transactions were recorded in the books of accounts and also that the matter related to interpretation of complex provisions of law. The parties have also claimed that they were under the bonafide belief that the activities of trading are not liable to service tax. In this regard, I notice that the their claim cannot be accepted because, when it is on record that in case of one of the firm Le. M/s SGPL. the director/authorized person viz., Shri Sanjay Jain had taken registration; had paid service tax and had also submitted the periodical returns then, how he can claim that he was not aware of the provisions of law or was not in a position to interpret the provisions of law. Secondly, mere recording of transactions in the account books cannot be considered a ground to exonerate the parties under question from any service tax liability for part period. The Investigations made by the departmental officers have clearly established that M/s AGEPL/ M/s. SGPL/ Anant Enterprises /M/s. Swastik Enterprises were engaged in providing taxable services and the services rendered/provided by them during the period 01.04.2007 to 31.08.2012, were not trading activities, as have been claimed by them. It is established beyond doubt the parties were engaged in providing the services under the category of 'completing and finishing services either "Commercial or Industrial Construction" or "Construction of Complex", which are covered under Section 65(25b) and 65(30a) of the Finance Act, 1994 and are chargeable to service tax alongwith other taxable services as discussed Service Tax Appeal No.51935, 52481, 38 52482 & 52517 of 2014 above. Not only, they [Except M/s SGPL) failed to apply for service tax registration within the prescribed time limit, as required under Rule 4 of the Service Tax Rules, 1994 but, they did not deposit the service tax for the services provided by them, during the period from April, 2007 to August 2012. They [Except M/s. SGPL) also did not file the prescribed ST-3 returns for the past period i.e. from April, 2007 to August, 2012. Except in the case of M/s SGPL, they did not disclose the fact of rendering the taxable services and this fact came into the knowledge of the department only when the department searched the premises of M/s AGEPI. and initiated the enquiry regarding non-payment of Service Tax by them, which clearly proves their intention to evade payment of duty. Had the department not initiated the enquiry, the fact of non- payment of service tax for the period prior to August, 2012 would have not been exposed.
62.02. It is on record that Shri Sanjay Jain, the director of M/s. AGEPL was engaged in providing the aforesaid taxable services since inception of M/s. AGEPL and later on also created the firms viz. M/s. Anant Enterprises in the year 2004 under the proprietorship of his mother Smt. Vimia Jain, M/s. Swastik Enterprises in the year 2007 under the proprietorship of his close friend Shri Bhupendra Kumar Sharma and M's. SGPL in the year 2011 under the common directorship of himself and his wife, as was in M/s. AGEPL. It has categorically been admitted by Shri Sanjay Jain in his statement dated 28/29.08.2012 & 01.10.2012 that he controlled/managed all the four concerns and was fully aware about the activities being carried in those concerns. On the cost of repetition, I would like to mention that the fact that M/s AGEPL obtained the standalone work order exclusively for the 'completion and finishing services' and also collected the amounts has got established. Only a part amount of the receipts from the customers was shown as receipts against Service Tax Appeal No.51935, 52481, 39 52482 & 52517 of 2014 other three concerns by way of raising the bills. No documents or records viz., challans elc, at any point of time, were made available by Shri Sanjay Jain, to prove that the concems other than M/s AGEPL, individually performed any activity. This fact confirms that all the four firms/companies are covered in the definition of associated enterprises as defined under Section 65(7b) of the Act. During investigation/enquiry, Shri Sanjay Jain also failed to adduce any evidence showing the place of storage of goods, processing of goods, workshop, tools/machinery, labours details etc in respect of M/s. SGPL, M/s Anant Enterprises and M/s. Swastik Enterprises. Thus, it gets proved that there is no substance in the claim of the parties that they have a common 'Godown cum Workshop' at Choubepur. The creation of M/s. SGPL and its registration with the service tax department and making a payment of service tax only on the value of the job charges is a clear cut intention to suppress the actual service tax liability and mislead the department. 62.03. Thus, in view of the foregoing discussion, it gets confirmed that by not getting themselves registered with the Service Tax Department; by getting failed to assess and pay the service tax and by not filing the prescribed returns with the department, they have willfully suppressed the material fact of providing taxable services from April, 2007 with intent to evade payment of Service Tax. Since, M/s AGEPL and the associate concerns have willfully suppressed the facts and contravened the various provisions of the Finance Act, 1994 and the Service Tax Rules, 1994, with an intent to evade payment of Service Tax, in my opinion, the provisions of section 73(1) of Finance Act, 1994 for invoking the extended period to demand service tax, are applicable against them. In this era of liberalization and showing faith on the tax payers and giving them the facility of self- assessment, the onus is upon the party to disclose the figures of incomes on Service Tax Appeal No.51935, 52481, 40 52482 & 52517 of 2014 which the tax liability has to be discharged. Recording the financial transactions in the books of account cannot be made a ground to seek immunity from proceedings for recovery of service tax for the extended period. If there was no intention to evade payment of tax then why all the parties did not disclose the nature of business to the department as like M/s SGPL.
62.04. As far as their submission regarding the issue being interpretation of law is concerned, i notice that the party had complicated a simple issue, which in fact, was never a bone of contention for the department. From the very day, when the departmental officers started investigations, the issue was explained to the party and opportunity to deposit the tax was given, which was also followed by them by voluntarily depositing the amount of server tax of Rs. 10 Lac but later on, unfortunately, the parties instead of resolving the issue and depositing the tax acted in defiance of law. The facts discussed above make it ample clear that the parties concealed and misdeclared the facts with intent to evade service tax and willingly did not pay the service tax on the gross amount. It is also confirmed that the parties with an intent to evade Service Tax, have willfully suppressed the actual value of the services detailed in the annexure to the demand notice in as much as at no point of time they disclosed this fact to the Department that they are paying Service Tax only on the limited amount and not on the total amount on which they are required to discharge their Service Tax liability under provisions of the Finance Act, 1994 and rules framed there under. This fact came in the knowledge of the Department only during the investigation. Thus, it is proved beyond doubt that the parties would have succeeded in their intention of evading proper payment of Service Tax on the said services provided by them, had the Department not scrutinized their records. Hence, for this deliberate evasion of Service Tax by the parties as Service Tax Appeal No.51935, 52481, 41 52482 & 52517 of 2014 discussed hereinabove, provisions of extended period for recovery of Service Tax under the proviso of Section 73 (1) of the Finance Act, 1994 are invokable in the instant case. Accordingly, I nold that the service tax involved on the amounts detailed in Tables prepared in Annexure A to H of the demand- cum-show cause notice, is liable to be demanded and recovered from respective parties under Section 73 (1) of the Finance Act, 1994 by invoking provision for recovery of demand for extended period." 4.3 The demands have been made against the appellant in respect of the services classifiable under the category of "Completion & Finishing Services", "Business Auxiliary Services"
& "GTA Services‟.
4.4 It is also observed that the calculation sheet annexed with the show cause notices records as follows:-
Calculation Chart Appellant I Amount in Rs Financial Sales as per Other Total Rate of Service tax due Year Audited Taxable taxable Service Balance Income Value tax Sheet and as per (including Sales balance Cess) Account Sheet 1 2 3 4=2+3 5 6 2007-08 1821007 0 1821007 12.24 222891 upto 10.05.07 2007-08 32941010 650628 33591638 12.36 4151926 from 11.05.07 2008-09 28698671 1287265 29985936 12.36 3706262 upto 23.02.09 2008-09 3948509 0 3948509 10.3 406696 from 24.02.09 2009-10 31647468 2274730 33922198 10.3 3493986 2010-11 31739445 2619731 34359176 10.3 3538995 2011-12 43731670 2625097 46356767 10.3 4774747 2012-13 12806742 0 12806742 12.36 1582913 upto 31.08.12 Total 187334524 9457454 196791978 21878422 Service tax on Other Incomes Other Taxable 2007-08 2008-09 2009-10 2010-11 2011-12 Income service Cartage Completion 0 262973 216466 344191 443988 Installation and 0 0 0 10566 0 Charge Finishing Job Work Services. 0 34046 854612 354514 0258870 Labour 0 79336 1100 67188 337232 Charges Scaffolding 0 0 0 9300 273526 Charges Repairing 0 0 0 8400 0 Charges Service Tax Appeal No.51935, 52481, 42 52482 & 52517 of 2014 Sub Total 0 376355 1072178 794159 1313616 Service tax Payable 0 46517 110434 81798 135302 Rebate & BAS 0 134959 319522 791887 179773 discount Sub Total 0 134959 319522 791887 179773 Service tax Payable 0 16681 32911 81564 18517 Freight GTA 119007 248113 321680 451022 547023 Inwards Freight GTA 531621 527838 561350 582663 584686 Outwards Sub Total 650628 775951 883030 1033685 1131709 Service tax Payable 80418 95908 90952 106470 116566 Grand Total 650628 1287265 2274730 2619731 2625098 Total Service tax Payable 80418 159106 234297 269832 270385 Calculation Chart Appellant II Amount in Rs Financial Sales as Other Total Rate of Service tax Service tax due Year per Taxable taxable (including Cess) Audited Income Value Balance as per Sheet and balance Sales Sheet Account 1 2 3 4=2+3 5 6 2010-11 36949 0 36949 10.3 3806 2011-12 7063689 197939 9043084 10.3 931438 5 2012-13 3786694 937287 4723981 10.3 583884 upto 31.08.12 Total 10887334 291668 1380401 1519134
5 4 Service tax on Other Incomes Other Taxable 2007-08 2008-09 2009-10 2010 2011-12 2012-13 Income service -11 Cartage Completio 0 0 0 0 16626 -
Job Work n and 0 0 0 0 624682 937287 Labour Finishing 0 0 0 0 1310918 - Charges Services. Sub Total 0 0 0 0 1952226 937287 Service tax Payable 0 0 0 0 201079 115849 Rebate & BAS 0 0 0 0 1924 - discount Sub Total 0 0 0 0 1924 0 Service tax Payable 0 0 0 0 198 0 Freight GTA 0 0 0 0 7925 - Inwards Freight GTA 0 0 0 0 17320 - Outward s Sub Total 0 0 0 0 25245 0 Service tax Payable 0 0 0 0 2600 0 Grand Total 0 0 0 0 1979395 937827 Total Service tax 0 0 0 0 203878 115849 Payable Calculation Chart Appellant III Amount in Rs Financial Sales as Other Total taxable Rate of Service Service tax due Year per Taxable Value tax (including Audited Income Cess) Balance as per Sheet and balance Sales Sheet Account 1 2 3 4=2+3 5 6 2007-08 0 0 0 12.24 0 Service Tax Appeal No.51935, 52481, 43 52482 & 52517 of 2014 upto 10.05.07 2007-08 203845 0 203845 12.36 25195 from 11.05.07 2008-09 847921 0 847921 12.36 104803 upto 23.02.09 2008-09 0 0 0 10.3 0 from 24.02.09 2009-10 978369 0 978369 10.3 100772 2010-11 472242 0 472242 10.3 48641 2011-12 874798 0 874798 10.3 90104 2012-13 639844 0 639844 12.36 79085 upto 31.08.12 Total 4017019 0 4017019 448600 Calculation Chart Appellant IV Amount in Rs Financial Sales as Other Total taxable Rate of Service Service tax due Year per Taxable Value tax (including Audited Income Cess) Balance as per Sheet and balance Sales Sheet Account 1 2 3 4=2+3 5 6 2007-08 1083743 0 1083743 12.24 132650 upto 10.05.07 2007-08 11410928 2534754 13945682 12.36 1723686 from 11.05.07 2008-09 0 6256638 6256638 12.36 773320 upto 23.02.09 2008-09 0 1010278 1010278 10.3 104059 from 24.02.09 2009-10 0 4909484 4909484 10.3 505677 2010-11 0 6198525 6198525 10.3 638448 2011-12 0 4383430 4383430 10.3 451493 2012-13 0 435684 435684 12.36 53851 upto 31.08.12 Total 12494673 25728796 38223464 4383184 Service tax on Other Incomes Other Taxable 2007-08 2008-09 2009-10 2010-11 2011-12 2012- Income service 13 Cartage Completio 4600 0 0 0 0 - Job n and 2055828 5177883 3748753 4365951 3492424 43568 Work Finishing 4 Labour Services. 269458 2089033 1160731 1832574 395250 - Charges Sub Total 2329886 7266916 4909484 6198525 3887674 43568 4 Service tax Payable 287974 898191 505677 638448 400430 53851 Rebate BAS 94479 0 0 0 0 - & discount Commis BAS 0 0 0 0 495756 0 sion Sub Total 94479 0 0 0 495756 0 Service tax Payable 11678 0 0 0 51063 0 Freight GTA 110389 0 0 0 0 - Inwards Sub Total 110389 0 0 0 0 0 Service Tax Appeal No.51935, 52481, 44 52482 & 52517 of 2014 Service tax Payable 13644 0 0 0 0 0 Grand Total 2534754 7266916 4909484 6198525 4383430 43568 4 Total Service tax 313296 898191 505677 638448 451493 53851 Payable 4.5 During the course of arguments appellants have
vehemently contested the demand stating that Appellant-I was engaged in marketing/ trading of goods and have produced copies of the VAT Orders for the concern period, on perusal of the VAT Orders for the said periods following is observed:-
S.No. Head Remarks
1. VAT Order of 2008-09 Total Taxable Sale-
Rs.3,26,47,179/-
2. VAT Order of 2009-10 Total Taxable Sale-
Rs.3,16,47,468/-
3. VAT Order of 2010-11 Total Taxable Sale-
Rs.3,18,39,444.60/-
4. VAT Order of 2011-12 Total Taxable Sale-
Rs.4,37,31,669.75/-
5. VAT Order of 2012-13 Total Taxable Sale-
Rs.4,84,29,316.39/-
6. VAT Order of 2007-08 of Total Taxable Sale-
M/s Anant Enterprises Rs.1,11,85,258.44/-
4.6 On perusal of the above charts which are part of the show cause notice along with value of sales as per the VAT orders, we are of the view that the certain activities undertaken by the appellants were in respect of trading of certain goods and this fact is confirmed by the VAT order passed for the relevant period, having observed so, in our view, the value of the traded goods should have been excluded while computing the value of taxable services provided. This view has been in line with the view expressed in the case of M/s Laxmi Engineering (P) Ltd. (supra) wherein the Ahmadabad Bench of the Tribunal has held as follows:-
"5.1 As per the facts prevailing on records and argued by both the sides there is no dispute that there is also contract for supply of goods/Sale of goods and contract for services namely erection, installation and commissioning. Appellant have not paid service tax on supply portion on which they have paid VAT/CST. We have also gone Service Tax Appeal No.51935, 52481, 45 52482 & 52517 of 2014 through the statement of Shri Dipak Bhailalbhai Patel, Manager (Finance and Accounts) of appellant„s company, against the question No. 3 he stated as under:
Q3. It seems that your contract are composite contracts which includes goods and material as well as erection commissioning and installation of these goods and materials. Please specify regarding payment of service tax under works contract service and erection commissioning and installation service. Answer: - We are paying service on the gross amount received from the customers including value of goods and materials under the category of works contract service. I state that in some case we have availed works contract composition scheme and paid service tax @4.12% on the value and in other cases we have paid service tax @10.3% and taken cenvat credit of inputs. In respect of erection commissioning and installation service category the installation charges and supply of the goods are bi-furcated in the tender itself and according we are paying service tax only on installation charges and showing goods and materials as supply.
5.2 After appreciating the above facts and going through the contracts and documentary evidences in the form of invoices, Balance sheet and Profit and Loss account, VAT return and detailed work sheet showing bifurcation of supply of goods and service portion separately submitted by the Appellant before us, we find that the contracts entered into by the appellants with their customers also gave the break-up of value of service portion and supply of material/goods portion. The Appellant as per the contract raise the bills and also account for the transaction in their books of account. On service portion they have paid the Service tax and on material supply portion paid the VAT/CST as applicable. We find that there is no dispute about the factual aspects. Admittedly, the contract showed Service Tax Appeal No.51935, 52481,
46 52482 & 52517 of 2014 the cost of each and every item separately. In terms of Notification No. 12/2003-S.T., dated 20-6-2003, the value of the goods and materials sold by the service provider to the recipient of services stand exempted from the service tax leviable therein, subject to the condition that there is documentary proof specifically indicating the value of the said goods and materials. Admittedly, the value of the goods and materials, which are required to be used for providing service stand separately disclosed in the agreement/contract as also separately mentioned in the invoices raised by the appellants and their books of account. Appellants have paid the VAT on the supply of goods, in such case it has to be held that the same were sold to the customers and the service tax cannot be demanded from the appellant on the value of the said goods.
5.3 The Learned Commissioner, in fact accepts the above proposition of law, but does not extend the benefit to the appellants on the ground that Notification No. 12/2013-ST provide a condition for non-availment of Cenvat Credit. Appellant following a practice wherein they procured goods by placing order to manufacturers, such manufacturer supply their goods under invoice by indicating the name of the Appellant as the "Buyer" and the name of the service recipient as the „Consignee„. Based on these invoices, service recipients were availing cenvat credit of duty paid on the goods and such Cenvat availment would amount to breach of the restrictions provided in this regard under Notification No. 12/2003-ST. In order to appreciate the said controversy, it would be necessary to reproduce the relevant portion of the said Notification, which reads as under :-
"Notification No. 12/2003-S.T., dated 20-6- 2003. - In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is Service Tax Appeal No.51935, 52481, 47 52482 & 52517 of 2014 necessary in the public interest so to do, hereby exempts so much of the value of all the taxable services, as is equal to the value of goods and materialssold by the service provider to the recipient of service, from the service taxleviable thereon under Section 66 of the said Act, subject to condition that there is documentary proof specifically indicating the value of the said goods and materials.
Provided that the said exemption shall apply only in such cases where -
(a) no credit of duty paid on such goods and materials sold, has been taken under the provisions of the Cenvat Credit Rules, 2004; or
(b) where such credit has been taken by the service provider on such goods and materials, such service provider has paid the amount equal to such credit availed before the sale of such goods and materials."
Upon perusal of the same, we find that the benefit is available only subject to satisfaction of conditions specified therein above Notification No. 12/2003- S.T., dated 20-6- 2003 provides for excluding the value of goods and materials sold by the assessee to the recipient of service for the purpose of computation of Service Tax liability. This notification applies to all the services including ―erection, commissioning and installation services‖ rendered by the appellant herein. If that be so, benefit of notification cannot be denied to the assessee and has to be allowed, if the assessee has fulfilled the terms and conditions of the notification. The above notification provide the condition that no credit of duty paid on such goods and materials sold has been taken under Cenvat Credit Rules, 2004; or when such Cenvat credit has been taken by the service provider on such goods and materials, he has paid an amount equal to such credit availed before the sale of such goods and material. In this regard, we are in agreement Service Tax Appeal No.51935, 52481, 48 52482 & 52517 of 2014 with the Appellant„s view that above Notification restricted for availment of Cenvat Credit to Service provider only, the said Notification nowhere imposed the condition related to non- availment of cenvat credit to service recipient. Therefore, the benefit of exemption under Notification No. 12/2003-S.T. cannot be denied to Appellant. 5.4 In the present case, we also find that the Tribunal vide Order No. A/10865/2014 dated 23.04.2014 while remanding the matter in para 3 observed as under:
"3. On perusal of the records, we find that the issue involved in this case is regarding service tax liability on the appellant under the category of erection, installation and maintenance Service on the contracts which were executed by them with different parties. It is the claim of the assessee before the adjudicating authority as well as before us that they had billed separately for the materials and for the services. It is also the claim that the Service Tax liability on the services rendered was discharged and VAT was discharged on the supply of portion. Learned Counsel brings to our notice the findings recorded in para 6.4.1 to 6.4.4, we find that the adjudicating authority has recorded that the appellant has made this plea, came to conclusion against the appellant only on the ground that they had not produced any evidence in support of such claim. From the voluminous record which is produced before us, we find that appellant has, in fact, produced records. Basically, the issue needs to be verified from the factual matrix. Hence, instead of going into the merit of the case, we deem it fit to remand the matter back to the adjudicating authority to reconsider the issue afresh by going into all the claims by the appellant as regards discharge of VAT on supply portion and discharge on service tax on the service portion. We make it clear that we have Service Tax Appeal No.51935, 52481, 49 52482 & 52517 of 2014 not recorded any findings on the merits of the case and are leaving all the issue open. We also direct the appellant not to seek the refund of the amount already deposited during the proceedings."
However without verifying the factual position whether appellant paid the VAT on supply portion and service tax on service portion Learned Commissioner has decided the impugned matter which is legally not correct and against the remand direction of Tribunal.
5.5 Further, from the documentary evidence produced by the Appellant before us we find that the appellant have paid sales tax as also VAT on the material used in providing the said service by them. The ratio of the various decisions of the Tribunal are to the effect that where the sales tax and VAT stands paid on the material it has to be held that the goods were sold by the assessee. In such a scenario, the value of the same, cannot be added in the value of taxable service. Reference in this regards is made to the following decisions :-
WIPRO G.E. MEDICAL SYSTEMS PVT. LTD. V. CST, BANGALORE - 2009 (14) S.T.R. 43 (TRI.-BANG.) DISPALLA HOTELS LTD. V. CCE, VISAKHAPATNAM
- 2010 (18) S.T.R. 75 (TRI.-BANG.) LSG SKY CHEFS (INDIA) PVT. LTD. V. CST, BANGALORE - 2010 (18) S.T.R. 37 (TRI.-BANG.) IMAGIC CREATIVE PVT. LTD. V. CCT - 2008 (9) S.T.R. 337 (S.C.) DELUX COLOUR LAB PVT. LTD. V. CCE, JAIPUR -
2009 (13) S.T.R. 605 (TRI.-DEL.) PLA TYRE WORKS V. CST, TRICHY - 2009 (14) S.T.R. 32 (TRI.-CHENNAI).
5.6 In several decisions it has been held that service tax cannot be levied on that portion of the value representing the sale of the goods on which sales tax has been charged. This position has been elaborately Service Tax Appeal No.51935, 52481, 50 52482 & 52517 of 2014 dealt with in the decision of the Shilpa Colour Lab v.
CCE, Calicut reported in 2007 (5) S.T.R. 423 (T) supra. This view has been affirmed in many decisions. Once, the sales tax has been paid on the materials, then on the same, service tax also cannot be charged. At this stage, we also take note of the Board„s Circular No. 96/7/2007-S.T., dated 23-8-2007 laying down that the value of spare parts sold by a service provider is not required to be taken into consideration if the same are subjected to levy of sales tax and VAT and there is clear evidence to show the sale of the same. Circular further goes on to say that the fact of payment of VAT/sales tax on a transaction value indicates that the said transaction is treated as sale of goods. Keeping in view the Board circular as also the precedent decisions of the Tribunal, we hold that the appellant are not liable to pay service tax on the value of supply of goods/ material." 4.7 In any case the benefit of Notification No.12/2003 could not have been denied just for the reason stated in the impugned order. The Notification provides that appellant should have not availed the Cenvat credit in respect of the Central Excise duty paid on the inputs used in providing the output services. The fact that appellant have not taken Cenvat credit is not in dispute. Impugned order records that there is nothing available to show that central excise duty was paid in respect of the inputs used for providing the output services. Such an inquiry is neither contemplated in the notification nor does it fall within the jurisdiction of the Commissioner adjudicating the present case, if there was short /none payment of duty in respect of these inputs inquiries should have been made by the jurisdictional Commissioner from where these inputs have been cleared after undergoing the process of manufacture. In our view, looking from any angle the value of the traded goods needs to be excluded while determining the value of taxable services, on this ground itself, matter needs to be remitted back to the Original Service Tax Appeal No.51935, 52481, 51 52482 & 52517 of 2014 Adjudicating Authority for re-determination of the correct taxable value on which demand for service tax would be made. 4.8 Appellant has claimed the benefit of basic exemption under Notification No 6/2005-ST dated 01.03.2005 which has been denied by the impugned order by holding all the four companies as associated enterprises in terms of section 92 A of Income Tax At, 1961 and Section 65 (7b) of the Finance Act, 1994. However we find that all the four entities (Appellants) are distinct legal entities and are filing income tax in individual capacity. The transactions between them are duly accounted for. We also note that impugned order itself admits the fact that the all the four entities are distinct entities and have confirmed the demand separately against each entity and have also imposed penalty on each entity separately. The text of Notification No 6/2005-ST to the extent relevant is reproduced below:
"G.S.R. (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 Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts taxable services of aggregate value not exceeding four lakh rupees in any financial year from the whole of the service tax leviable thereon under section 66 of the said Finance Act:
Provided that nothing contained in this notification shall apply to,-
(i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person; or
(ii) such value of taxable services in respect of which service tax shall be paid by such person and in such manner as specified under sub-section (2) of section 68 of the said Finance Act read with Service Tax Rules,1994.
2. The exemption contained in this notification shall apply subject to the following conditions, namely:-
Service Tax Appeal No.51935, 52481, 52 52482 & 52517 of 2014
(vii) where a taxable service provider provides one or more taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises or each services;
and
(viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed rupees four lakhs in the preceding financial year."
From the perusal of the above it is quite evident that the benefit of the notification is to be determined qua the entity - service provider, and not by clubbing the clearances of services provided by different service provider, even if they are termed as associated enterprises. The concept of associated enterprises is totally alien to the said notification and the benefit of same could not have been denied by clubbing the value of services provided by the so called associated enterprises. In case of Trichy Inst. Of Management Studies (P) Ltd. [2009 (14) S.T.R. 786 (Tri. - Chennai)] following has been held:
"8. As regards the claim of the centres to the exemption contained in the notification No. 6/2005-ST dated 1-3-05, I find that the same is admissible subject to the condition that the service provider does not use a brand name, logo, monogram or any symbol to indicate a connection between such specified services and some person using such name or trade mark. The exemption is denied to the appellants on account of the following proviso in the notification:
"Provided that nothing contained in this notification shall apply to, -
(i) taxable services provided by a person under a brand name or trade name, whether registered or not, of another person".
The lower authorities held that by using the logo of the University in its correspondence/stationery etc., a Service Tax Appeal No.51935, 52481, 53 52482 & 52517 of 2014 connection in the course of rendering such services and the University was indicated. The centres had submitted that the University was not engaged in rendering commercial training or coaching. Therefore, use of the logo of Alagappa University by the centres did not disentitle them to the benefit of the Notification No. 6/2005-S.T., dated 1-3-2005. The original authority rejected the claim of the centres. I find that the lower appellate authority has not dealt with this issue. In the circumstances, the impugned orders demanding service tax are set aside for quantifying the liability of the centres after examining their entitlement of the benefit of Notification No. 6/2005-S.T., dated 1-3-2005."
Thus in our view this issue also needs to be reconsidered by the adjudicating authority while determining the demand under the category completion and finishing services.
4.9 In respect of Appellant-II, Appellant-III and Appellant-IV the demand needs to be computed after excluding the value of the goods from the total value. For this reason, issue in respect of these three appellants also needs to be remanded back. 4.10 In respect of rebate and discount received from the manufacturers, we are of the view that the issue is squarely covered by the decision of this Tribunal in the case of M/s My Cars Pvt. Ltd. (supra), wherein following has been held:-
"(iv) For incentive on spare parts it is the case of the appellant that these incentives are given to the appellant for achieving certain targets of purchase of spare parts which is purely an activity of buying and selling on which local VAT is paid at the time of sale. Appellant strongly argued that such an incentive is only a trade discount based on performance. Appellant has relied upon the case law Deputy Commissioner of Sales Tax vs. Motor Industries Co., Ernakulam (supra). Similarly appellant is getting incentives on MGA, Incentive on Free MGA, Balance Score Card, Incentive on Wagon R and Alto Cars, Incentive Service Tax Appeal No.51935, 52481, 54 52482 & 52517 of 2014 on Esteem and Maruti 800 etc., Incentive of free Credit, Incentive on sale of employees of LIC, SBI and Fetchers Scheme, Misc. Spot Credit and IFC, Finance pay out and National Subvention of MUL, part reimbursement of advertisement and incentive for arranging camps/sales mela and Free Mega Checkup Camps. It is the case of the appellant that all these amounts received from MUL, are either compensatory payments or in the nature of performance based trade discounts on achieving certain performance targets or is an activity which is mutually beneficial to both the appellant and MUL. It is not the case of the Revenue that MUL continues to remain the owner of the goods dealt by the appellant. All the vehicles/spares are purchased by the appellant and then sold. The incentives given by MUL has to be considered performance based trade discounts and will not be in the nature of BAS commissions On perusal of the case records and the factual matrix we agree with the arguments of the appellant that payments received on these accounts cannot be held to be classifiable as provision of taxable services of BAS under Section 65 (19) of the Finance Act, 1994."
4.11 In view of the above, we do not find any merits in the demand made in respect of these services under the category of Business Auxiliary Service.
4.12 Demand in respect of Goods Transport Operator Services needs to be recomputed after allowing the abatements claimed by the appellant on account of local transportation and others for which the appellants need to produce necessary documents before the Original Adjudicating Authority. In para 57 of the impugned order there is no denial that deduction on account of local movement of the goods within the city would be admissible, neither there is any denial to the effect that benefit of the notification No 13/2008-ST shall not be admissible, however these benefits which are admissible have been denied after recording that the appellants have expressed inability to provide Service Tax Appeal No.51935, 52481, 55 52482 & 52517 of 2014 required documentary evidences. As the matters are being remanded back as indicated above, appellant should produce the required documents before the adjudicating authority to claim the benefit of such deductions for determining the service tax payable under this category.
4.13 As we are remanding the matter back to the Original Adjudicating Authority for redetermination of value of taxable services after allowing the deduction in relation to the value of the traded goods/ goods supplied as per Notification No 12/2003-ST, we do not intend to record any finding in respect of invocation of extended period of limitation and penalties imposed. The questions of law are kept open for consideration if needed at appropriate time.
5.1 Appeals are allowed by way of remand to the Original Adjudicating Authority for de-novo consideration in the light of the observations made as above.
5.2 As the matter is considerably old, Adjudicating authority should decide the matter in de-novo proceedings within three months from the date of receipt of this order.
(Operative part of the order pronounced in open court) Sd/-
(P.K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp