Custom, Excise & Service Tax Tribunal
Rama Shankar Sharma vs Alwar on 17 May, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. - IV
Service Tax Appeal No. 54802 of 2023 [SM]
[Arising out of Order-in-Appeal No. 127(RLM)ST/JPR/2023 dated 31.03.2023
passed by the Commissioner of Central Excise & CGST (Appeals), Jaipur]
M/s. Rama Shankar Sharma ...Appellant
Prop. M/s. Riddhi Construction,
343, Arya Nagar, Scheme No.1,
Alwar (Rajasthan) - 301001
VERSUS
Commissioner of CGST, Customs
& Central Excise, Alwar ...Respondent
A Block, Surya Nagar, Alwar, Rajasthan - 301001 APPEARANCE:
Shri Ajay K. Mishra, Advocate for the Appellant Shri Rohit Issar, Authorized Representative for the Respondent CORAM: HON'BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL) DATE OF HEARING: 18.01.2024 DATE OF DECISION: 17.05.2024 FINAL ORDER No. 55779/2024 DR. RACHNA GUPTA The appellant in the present case is engaged in providing taxable services as defined under Section 65B(44) of the Finance Act, 1994. Based on the third party information received from the Income Tax Department got to know that the appellant had received an amount of Rs.10,25,639/- under Section 194C of the Income Tax Act, 1961 during the Financial Year 2014-15. On being enquired appellant provided Balance Sheets, ITR/26AS, work orders/contracts etc. After scrutinizing the same, department formed an opinion that the appellant has provided taxable services against consideration whereupon TDS has also been deducted by 2 Service Tax Appeal No. 54802 of 2023 [SM] the service receivers, hence the services were taxable. These are otherwise not mentioned in Section 66D of the Finance Act, 1994 nor are exempted under Mega Exemption Notification No. 25/2012- ST dated 20.06.2012. Thus, appellant was observed to be liable to pay service tax vide Show Cause Notice No. 603 dated 26.06.2020, an amount of Rs.6,11,686/- on taxable amount of Rs.42,80,540/- is proposed to be recovered as service tax from the appellant along with the proportionate interest and the appropriate penalties under Section 77 and 78 of the Finance Act. The said show cause notice was issued while invoking extended period of limitation observing that not disclosing the fact of rendering the taxable services to the department amounts to suppression of material information. While adjudicating the said proposal, the original adjudicating authority had confirmed the demand of service amounting to Rs.4,05,430/- out of total demand of Rs.6,11,686/-. In addition, the penalties under Section 78 of the Act for an equal amount of Rs.4,05,430/- has been imposed upon the appellant. In an appeal against the said order, the amount of service tax confirmed has been upheld except that the demand for an amount of Rs.9,344/- has also been dropped. In addition, the penalty of Rs.4,05,430/- has been reduced to an amount of Rs.3,96,086/-. Still being aggrieved, the appellant is before this Tribunal.
2. I have heard Shri Ajay K. Mishra, learned Advocate for the appellant and Shri Rohit Issar, learned Authorized Representative for the department.
3. Learned counsel for the appellant has mentioned that appellant is engaged in providing construction services to Indian 3 Service Tax Appeal No. 54802 of 2023 [SM] Railways, besides, acting as a sub-contractor to M/s. L & T Construction, Chennai. The activities in the impugned show cause notice are with respect to a particular project for construction of metering rooms at GMR Aravali Transmission Project. It is submitted that appellant was not registered under the service tax law under the advice that the services provided by the appellant are exempted from the levy of service tax. It is further submitted that the demand in question has been confirmed based upon the third part data as was received from the Income Tax Department. All relevant documents were provided by the appellant but no proper scrutiny has been done by the adjudicating authorities below. The work orders are composite involving use of material subject to levy of VAT/sales tax, hence the services rendered are in the nature of Works Contract Service and being original. Hence the service tax exemption is otherwise available to them. Learned counsel has relied upon the decision of this Tribunal in the case of Voestalpine VAE VKn India Pvt. Ltd. Vs. CCE, Appeal-I, New Delhi reported as 2023 (12) TMI 782 - CESTAT NEW DELHI. 3.2 It is further submitted that suppression has wrongly been alleged against the appellant who was under bona fide belief of incurring no tax liability. The services rendered are otherwise exempted from payment of tax, it being the original work and for the reason that the services are provided to Indian Railways. It is mentioned that extended period has also been wrongly invoked. Learned counsel has relied upon the decision of Hon'ble Supreme Court in the case Padmini Products Vs. CCE, reported as 1989 (43) ELT 195 (SC). With these submissions, the order under 4 Service Tax Appeal No. 54802 of 2023 [SM] challenge is prayed to be set aside and appeal is prayed to be allowed.
4. To rebut these submissions, learned Departmental Representative has mentioned that the adjudicating authority below have meticulously examined work orders and accordingly have categorized the services rendered by the appellant during different periods as tabulated in Para 16 of the Order-in-Original. It is after the examination of said work contracts that the authorities have concluded that the work done by the appellant specifically mentioned in Schedule-A of the work order is not the original work. 4.1 It is further mentioned that the services have not been found to be covered under Works Contract Service as the work orders are merely the labour contracts without supply of the material. Hence, abatement of 50% payment of service tax under Notification No. 30/2012-ST dated 20.06.2012 has rightly been denied to the appellant. It is further pointed out that appellant has admitted for not obtaining the service tax registration which is an apparent contravention of provisions of Section 68 and 69 and non-filing of returns is in violation of Section 70 of the Finance Act, 1994. These observations have rightly been made the basis for imposition of penalty. The non-filing of returns and not getting registration have been rightly held as the suppression. Thus the extended period has rightly been invoked and even penalty under Section 78 has also been rightly imposed. With these submissions, appeal is prayed to be dismissed.
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Service Tax Appeal No. 54802 of 2023 [SM]
5. Having heard the rival contentions and perusing the records, I observe and hold as follows:
5.1 While passing the impugned order which is under challenge, the adjudicating authority have examined following two work orders:
(i) Composite Work Order No. W/3/4 dated 25.05.2015-
Work order amount-Rs.28,07,425/- taxable amount-Rs. 24,95,459/- Service Tax-Rs.3,64,596/-
(ii) Work Order No. W/2/5 dated 18.02.2016-Value- Rs.1,94,351/-Service Tax-Rs.29,153/-
Appellant has submitted that these work orders are composite in nature and involved execution of the work of original nature. However, the adjudicating authority has considered the work awarded under Schedule-A of work order as original work and those under Schedule-B as the orders related to alterations/modifications. 5.2 To adjudicate the correctness, I have seen both the work orders. The following are the observations with respect to the work awarded under respective schedules:
Description of Description of Gross Service Reasons for Remarks in support of work part work receipt Tax rejection/allowing of appellant exemption by the DC A. Work Order no. W/3/4 dated 25/05/2015 by Railways Replacement of Schedule-A- 2495459 364596 Work related to 1. VAT payment/EC damaged Applying pain, 'Maintenance" only and issued for the entire sleepers & cement primer, not in the nature of value of the contract for Jammed ERC laying bitumen 'original' work, hence, Rs. 2807425/- hence, from track sheet, new work exemption not available- entire contract to be maintenance for etc-Rs No findings on WCS or considered composite consolidated Rs 22,26,870.28 abatement by AO- works contract 28,07,425.18 Appellate authority held involving transfer of pure labour contract property in goods.
2. Works contract 6 Service Tax Appeal No. 54802 of 2023 [SM] cannot be vivisected for levy of service tax.
3. Use of material in applying paint, primer and laying bitumen layer evident, hence, schedule-A covered under works contract.
In contrast, no evident use of material in activities of Schedule-B.
4. Activity of schedule-A as is the case with the activities of Schedule-B, essential for working of railway, hence, 'original' work
5. Schedule- A activities also related to dismantling/ dressing of structures, hence, covered under "all types of additions and alterations to abandoned or damaged structures that are required to make them workable", thus, 'original' work as held in case of Schedule-B, thus, exempted vide entry no. 14(a) Schudule-B- 650577 0 Related to "alteration to Removal of abandoned or damaged Jammed ERCS structures on land that are and re- fixing, required to be make them removal of PRC workable, hence, original BG sleepers and work and exempted under re-fixing-Rs. s. no. 14(a) of notfn. no.
5,80,554.90 25/2012-ST
B. Work Order no. W/2/5 dated 18/02/2016 by Railways
Leading & 194351 29153 Work related 1. Activity essential for
stacking of P. to material working of railway, hence,
way material in picking up 'original work'
SSE Alwar unloading, 2. Activities also related
section stacking and dismantling/dressing of
lead and not in structures, hence, covered
the nature of under "all types of
'original' work, additions and alterations to
hence, abandoned or damaged
exemption not structures that are
available-No required to make them
findings on workable", thus, 'original'
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Service Tax Appeal No. 54802 of 2023 [SM]
WCS or work as held in case of
abatement by work order no W/2/6
AO-Appellate related to removal of
authority held broken/seized plate screws
pure labour in work order no W/2/6,
contract thus, exempted vide entry
no. 14(a)
3340387 393749
5.3 The bare perusal reveals that the work of Schedule-A are in the nature of original works whereas those under Schedule-B are the works related to alterations. It is the original work which is exempted vide Entry No. 14(a) of Notification No. 25/2012-ST dated 20.06.2012. Hence I hold that the demand with respect to the work orders mentioned in Schedule-A has rightly been dropped. With respect to Schedule-B work those are not the original work, the exemption from tax under above said Entry No. 14(a) is not available. However, it is not in dispute that the services with respect to Schedule-B work orders are provided to Indian Railways. The Entry at serial no. 12A(a) of Notification No. 25/2012-ST, exempts the following services:
"12A. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -
(a) a civil structure or any other original works meant pre-
dominantly for use other than for commerce, industry, or any other business or profession"
5.4 Thus irrespective the work of Schedule-B was not of original nature but was covered under the aforesaid exemption clause. Resultantly, it stands clear that the appellant had no tax liability even with respect to the service, the demand whereto has been confirmed in the order under challenge. I draw my support from 8 Service Tax Appeal No. 54802 of 2023 [SM] the decision of this Tribunal in the case of Krishna Construction Co. Vs. CCE & ST, Bhavnagar reported as 2022 (8) TMI 644 CESTAT AHMEDABAD.
5.5 Coming to the allegations of suppression of facts, it is observed that appellant is alleged to have suppressed the fact of rendering the taxable service. From the above discussion, it is clear that though the appellant was rendering a service in the nature of Works Contract Service but the activity being in the nature of original work that too being provided to the Railways. There remains no tax liability with the appellant even with respect to non- original work as being provided to the Indian Railways. The appellant was not liable to discharge any tax. Hence, not getting itself registered under Service Tax Department and non-filing of service tax return is wrongly held to be an act of suppression on part of the appellant. Otherwise also it is not the mere act of the suppression which entitles department to invoke the extended period while issuing show cause notice and to impose the penalty. The alleged act has to be proved to be a positive act done by the assessee that too with an intent to evade tax. 5.6 As already discussed above, since there was no liability of the appellant to pay any tax the question of having any intent to evade the same is absolutely redundant. We hold that there is no mala fide suppression on the part of the appellant. The department is therefore held to have wrongly invoked the extended period. I draw my support from the decision in the case of Anand Nishikawa Company Limited Vs. CCE, reported as 2005 (188) ELT 149 (SC) wherein it has been held that mere failure to declare 9 Service Tax Appeal No. 54802 of 2023 [SM] not amounts to willful suppression. Resultantly the show cause notice itself is held to be barred by time. Since there is no intent to evade the payment, no question arises of any penalty under Section
78. Since the appellant is held to have been rendering exempted services, question of any penalty under Section 77 is also absolutely redundant.
6. As a Consequence of the entire above discussion, the order under challenge is hereby set aside and the appeal is hereby allowed.
[Order pronounced in the open court on 17.05.2024] (DR. RACHNA GUPTA) MEMBER (JUDICIAL) HK