Custom, Excise & Service Tax Tribunal
Ntpc Ltd vs Bharuch on 21 October, 2024
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
Service Tax Appeal No. 10449 of 2018 - DB
(Arising out of OIA-VAD-EXCUS-002-APP-439-2017-18 dated 25/09/2017 passed by
Commissioner ( Appeals ) Commissioner of Central Excise, Customs and Service Tax-
VADODARA-I)
NTPC LTD ........Appellant
Sankalp Bhavan Jhanor Gandhar
Jhanor Gandhar Gas Power Project Ntpc Township
BHARUCH, GUJARAT
VERSUS
Commissioner of C.E-Bharuch ......Respondent
Vadodara-II,GST Bhavan, Subhanpura,Vadodara, Gujarat-390023 APPEARANCE:
Shri Amber Kumrawat, Advocate appeared for the Appellant Shri Anand Kumar, Superintendent (AR) appeared for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. RAJU Final Order No. 12407/2024 DATE OF HEARING: 21.06.2024 DATE OF DECISION: 21.10.2024 RAMESH NAIR The issue involved in the present case is that Whether the security services received by NTPC Ltd. from CISF has been correctly valued under Section 67 of the Finance Act, 1994 for the purpose of discharging service tax liability on reverse charge basis. M/s NTPC Ltd. (hereinafter referred to as "the Appellant") are holding Service Tax registration for payment of Service Tax under various categories of services such as rent a cab service, consulting engineer service, manpower recruitment and supply agency service business support service, etc. The Appellant are availing security services from Central industrial security force on the strength of MOU (memorandum of understanding) signed between the appellant and the CISF. The appellant are availing security services from Central industrial security force on the strength of MOU (memorandum of understanding) signed between the appellant and the CISF.
2 ST/10449/2018-DB 1.1 The appellants are paying Service Tax on the security services availed from CISF under reverse charge mechanism basis as provided under provisions of Rule 2 (1) (d) (i) (E) of the Service Tax Rules of 1994 read with Notification No. 30/2012 -ST dated 20.06.2012. It is a matter of record that as per the MOU entered between the appellant and the CISF the scope of service provided by CISF to the appellant is restricted only to supply of security personnel which is utilized by the appellant for the purpose of security of their premises. The appellants are making available accommodation, transport, etc facilities to CISF personnel deployed by CISF to the appellant during the period they remain deployed with the appellant.
1.2 An audit was carried out at the premises of the Appellant during 17.03.2015 till 30.05.2015 for the period April 2013 to September 2014. On the basis of the said audit, Final Audit Report 21.08.2015 was issued raising objections against the Appellant for the non-payment of service tax. The Appellants vide letter dated 31.10.2015 submitted a reply to the audit objection.
1.3 The aforesaid audit culminated into issuance of Show Cause Notice dated 19.11.2015 wherein the Department proposed to demand Service Tax amounting to Rs. 10, 39,382/- for the period from July 2012 to September 2014, under proviso to Section 73(1) of the Act along with interest under Section 75 of the Finance Act, 1994 and penalty under Section 78 of the Finance Act, 1994. The case of the department in the show cause notice is that the value of free housing/ accommodation facility provided by the appellant to the CISF personnel should be treated as additional consideration flowing to CISF and the value of such facilities need to be included in the service value for the purpose of payment of Service tax. The Appellant filed a detailed Reply to the above Show Cause Notice vide letter dated 25.01.2016 denying all the allegations levelled against them by the Department.
1.4 Subsequently, a statement in lieu of Show Cause Notice was issued to the Appellant on the same grounds under Section 73(1A) of the Finance Act, 1994 demanding an amount of Rs. 5,58,727/- for the period October 2014 to September 2015 along with interest and imposition of 3 ST/10449/2018-DB penalty. The Appellant submitted their Reply dated 17.05.2016 to the above Statement.
1.5 The aforesaid Show Cause Notices were adjudicated upon by the Ld. Commissioner vide Order-in-Original No. 119-120/ADJ/DEM/JC- VVP/16-17 dated 29.09.2016 wherein the Ld. Joint Commissioner confirmed the proposals made in the show cause notices. Being aggrieved and dissatisfied by the order in original passed by the Ld. Joint Commissioner, the Appellants preferred an appeal dated 09.02.2017 before the Commissioner (Appeals) Central Excise, Customs and Service Tax, on various grounds.
1.6 The Ld. Commissioner (Appeals) vide Order-in-Appeal No. VAD- EXCUS-002- APP-439-2017-18 dated 25.09.2017 (hereinafter referred to as "the Impugned Order") wherein the Ld. Commissioner dismissed the appeal of the Appellants on the following grounds:
The Appellants have not paid service tax on the total amount charged by CISF for providing security service along with additional consideration by way of cost of additional facilities in accordance with the MOU entered between the Appellants and CISF. Therefore, the allowance in terms of residential accommodation need to be converted into money value and liable to service tax. The Appellants always knew the terms of said MOU, never arrived at proper valuation. Hence, the appellants have suppressed the facts and contravened the provisions of the Finance Act, 1994 and rules made thereunder. Therefore, extended period has been rightly invoked.
Being aggrieved by the Impugned Order dated 25.09.2017 to the extent demand has been confirmed against the Appellant, the Appellant has filed the present appeal on the detailed grounds as mentioned in the appeal memo.
2. Shri Amber Kumrawat, Learned Counsel appearing on behalf of the appellant at the outset submits that the present matter has already been adjudicated in favour of the Appellant by this Hon'ble Tribunal in the identical case of NTPC LTD vs C.C.E. & S.T.- Surat-I. It is submitted that the charge for service tax is on providing taxable services by service provider to a service receiver. The assessable value is the "gross amount 4 ST/10449/2018-DB charged" by the service provider for the service provided by it. It is further submitted that for any value to constitute a consideration, whether monetary or otherwise it should flow from a service recipient to a service provider and should accrue to the benefit of the latter; and that this is a precondition of taxability under Section 67.
2.1 The Appellants submit that they were under a bona fide belief that they are not liable to pay service tax on the value of accommodation, vehicles for transportation, telephone facilities, etc. provided by the Appellants, for the reasons stated hereinabove. Therefore, the extended period of limitation is not invocable. Moreover, the Appellants have furnished all information as and when required. Hence, the demand is hit by time bar.
2.2 The Appellants submit that the OIO had imposed penalty of Rs. 50,000/- under Section 76 of the Finance Act, 1994 for SCN dated 08.03.2016 which has been upheld by the impugned OIA. It is submitted that when the demand on merits is not sustainable, there is no question of imposition of penalty under Section 76.
2.3 The Appellants submit that there was a bona fide belief on part of the appellants that no service tax is payable on the value of free facilities which was provided by the Appellants. Therefore, there was reasonable cause for failure, if any, on part of the Appellants not to pay service tax. Hence, in terms of section 80 of the Act, penalty cannot be imposed under Section 78 of the Act.
2.4 The Appellants submit that where the demand is not maintainable, there is no question of interest on the differential demand of service tax. Hence, the interest demand on the differential service tax liability is not maintainable. He has relied on the following judgments:-
Union Of India and Anr. versus M/S. Intercontinental Consultants And Technocrats Pvt. Ltd., 2018 (3) TMI 357 - SUPREME COURT;
Central Industrial Security Force versus Commissioner Of Customs, C.E. & S.T., ALLAHABAD, 2019 (1) TMI 1661 - 5 ST/10449/2018-DB CESTAT ALLAHABAD;
C.G.S.T,C.C.E., Dehradun versus Commandant CISF Unit, 2019 (2) TMI 1175 - CESTAT NEW DELHI;
Central Industrial Security Force versus Commissioner of Central Excise & ST, Rajkot, 2024 (4) TMI 391 - CESTAT AHMEDABAD;
Central Industrial Security Force versus Commissioner of Central Tax, Visakhapatnam, 2024 (5) TMI 565 - CESTAT HYDERABAD;
Commissioner of Central Excise & St, Rajkot versus the Commandant Central Industrial Security Force, Unit : Civil Air Port Rajkot and the Commandant Central Industrial Security Force, Unit: Civil Air Port Rajkot versus Commissioner of Central Excise & ST, Rajkot, 2024 (6) TMI 910 - CESTAT AHMEDABAD.
CGST Vs Commandant CISF Unit 2019 (2) TMI 1175-CESTAT New Delhi SR. Commandant Central Industrial Security Force Vs CC 2023(4) TMI 872-CESTAT New Delhi Bharat Coking Coal Ltd Vs CCE 2021 (9) TMI 23-CESTAT Kolkata
3. Shri Anand Kumar, Learned Superintendent (AR) appearing on behalf of the revenue, reiterates the findings of the impugned order.
4. We have carefully considered the submissions made by both the sides and perused the records. We find that issue of valuation of free housing facility provided by the appellant to the CISF personnel is no longer res integra as this Tribunal vide it's Final Order No.11035/2024 dated 15.05.2024 in the appellant's own case NTPC Ltd vs. CCE & ST- Surat-I decided the issue in favour of the appellant, the relevant portion of which is extracted below:-
6 ST/10449/2018-DB " 4. We have heard both the sides and we find that the matter is no longer res Integra as this Tribunal Vide it's Final Order No. 10779/2024 dated 08.04.2024 in case of M/s. CISF V/s.
Commissioner of Central Excise and Service Tax, Rajkot has already decided the issue at hand in favour of the appellant. The relevant extract of the above order is reproduced here below:-
"2. It is matter of record that since the value of certain facilities was not available, the department by invoking the provisions of Section 72 of the Finance Act, 1994 (best judgment method) has calculated the value of above mentioned free services at 25% of the cost of deployment as the value of such facilities extended by Reliance Industries Limited to the appellant. On the above contention, a show cause notice dated 09.04.2015 has been issued to the appellant demanding service tax of Rs. 89,46,991/- by invoking the provisions of Section 71(1) of Finance Act, 1994. Interest and penal provisions have also been invoked in the show cause notice. The matter has been adjudicated by learned Principal Commissioner vide his order dated 21.01.2016 where under all the charges as invoked in the show cause notice have been confirmed.
3. We have heard both the sides. We find that the matter is no longer res-integra as this Tribunal in the case of M/s. Bharat Coking Coal Limited vs. CCE & ST, Dhanbad reported under 2021-TIOL 551- CESTAT-KOL has decided the same issue pertaining to the appellant. The relevant extract of the above mentioned decision is reproduced below:-
"7. We find that the issue to be decided is whether costs reimbursed by the appellant to CISF for medical & telephone facilities, imprest expenses and notional value for rent free accommodation, free supply of rented vehicles, etc. are to be added to the assessable value for payment of service tax on reverse charge basis. The appellant is already depositing service tax on reverse charge basis on the cost of deployment, cost of arms and ammunition, cost of clothing items (uniforms), etc. which is not in dispute.
We find that the Allahabad Bench of the Tribunal in the case of Central Industrial Security Force v Commissioner of Customs, C.E. & S.T., Allahabad, Appeal No. ST/70293/2016-CU[DB] decided on 9th January, 2019, has already settled the issue in favour of the appellant to hold that expenses incurred towards medical Services, vehicles, expenditure on Dog Squad, stationery expenses, telephone charges, expenditure incurred by the service recipient for accommodation provided to CISF etc are not includible. Further, the Principal Bench at New Delhi in the case of Commr. of CGST, Cus & C. Ex, Dehradun vs. Commandant CISF, CISF Unit, 2019 (24) GSTL 232 (Tri- Delhi), has also held that free accommodation provided by the service recipient to CISF security personnel providing security services is not includable in taxable value. Service Tax Appeal No. 75020/2017 We find that the Ld. Commissioner has merely confirmed the demand, in para 26 appearing in Page 25 of the impugned adjudication order, on the ground that the issue was pending for consideration before the Supreme Court in the case Bhayana Builders (P) Ltd (Supra) and 7 ST/10449/2018-DB Intercontinental Consultants and Technocrats Private Limited (Supra), on the date of passing the impugned order. Since the issue is no longer res-integra, as the legal position has already been decided by the Hon'ble Supreme Court in both the above judgments, this Tribunal is bound by the said legal position.
We also note that in the Tribunal decision in the case of Impact Communications (Supra) which has been heavily relied by the Ld. A/R for the Revenue, the demand was confirmed for the reason that the reimbursement was not claimed on actual basis and that there was no pre-arrangement with the client for authorizing such reimbursement of expenses which is not the case herein inasmuch as there is a specific MOU agreed with the CISF as also appearing in the appeal paper book. There is no dispute in the entire case proceedings that expenses have been reimbursed on actual basis. Hence, the contentions of the Revenue cannot be accepted. In so far as the issue of extended period of limitation is concerned, we do not find any case of fraud or suppression and hence, the notice issued by invoking extended period is not sustainable. In view of the above discussions, the impugned order cannot be sustained and therefore, the same is set aside. The appeal is thus allowed with consequential relief.
4. Following the above decision, we hold that impugned order- in-original is without any merit therefore, we set-aside the same. Appeal is allowed."
4.1 We further find that on the issue of whether monetary or otherwise it should flow from a service recipient to a service provider and should accrue to the benefit of the latter; and that this is a precondition of taxability under Section 67, the CESTAT, Allahabad has decided the matter in the case of Central Industrial Security Force versus Commissioner Of Customs, C.E. & S.T., ALLAHABAD, 2019 (1) TMI 1661, relevant portion of which is reproduced below:
"3. Having considered the submissions made by both sides, we find that Hon'ble Delhi High Court held in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. (supra) that provisions of Rule 5 of Service Tax (Determination of Value) Rules, 2006 were not in accordance with the provisions of Section 67 of Finance Act, 1994 and therefore, the reimbursable expenses paid to the service provider are not includable in the assessable value. We also note that Hon'ble Supreme Court has upheld the said decision of Hon'ble Delhi High Court and held that Section 67 of Finance Act, 1994 authorizes only such consideration which is received by the service provider for assessment of service tax. By following the said ruling of Hon'ble Supreme Court we hold that the impugned order is not sustainable.
4. We, therefore, set aside the impugned order and allow the appeal."
8 ST/10449/2018-DB From the above decisions, it is seen that the demand raised by the Department is unsustainable and liable to be set aside.
4.2 We further observed that the appellant are not liable to pay service tax on the value of accommodation, vehicles for transportation, telephone facilities, etc. and it is found that as regard the issue penalty, the demand on merits is not sustainable, there is no question of imposition of penalty under Section 76. It is also observed that when the demand is not maintainable, there is no question of interest on the differential demand of service tax. Hence, the interest demand on the differential service tax liability is not maintainable.
5. Considering the above decision and finding, the impugned order is set aside, the appeal is allowed.
(Pronounced in the open court on 21.10.2024) (RAMESH NAIR) MEMBER (JUDICIAL) (RAJU) MEMBER (TECHNICAL) Bharvi