Custom, Excise & Service Tax Tribunal
Utsav Constructions vs Commissioner Of Central Excise - ... on 30 September, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. - IV
Service Tax Appeal No. 55168 of 2023 [SM]
[Arising out of Order-in-Appeal No. 62(AK)ST/JDR/2023 dated 21.03.2023
passed by the Commissioner of Central Excise & Central Goods and Service Tax
(Appeals), Jodhpur]
M/s. Utsav Constructions ...Appellant
(Prop. Sampat Kumar Jain),
H.No. 63-64, Subhash Nagar,
Behind Manoj Hospital,
Bundi-323001
VERSUS
Commissioner of Central Excise,
Udaipur ...Respondent
NCR Building, 142-B, Sector-11, Udaipur - 313002 APPEARANCE:
Shri Vijai Kumar, Advocate for the Appellant Shri Rohit Issar, Authorized Representative for the Respondent CORAM: HON'BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL) DATE OF HEARING: 30.09.2024 DATE OF DECISION: 30.09.2024 FINAL ORDER No. 59412/2024 DR. RACHNA GUPTA Present is an appeal filed to assail the Order-in-Appeal No. 62/2023 dated 21.03.2023 vide which the demand of service tax for constructing a channel by the appellant for Rajasthan Rajya Vidyut Prasaran Nigam Ltd. (RRVPNL) has been confirmed along with the interest and the penalties. The facts in brief for the present purpose are as follows:
1.1 Appellant M/s. Utsav Constructions is a registered taxable service provider for rendering 'Construction Services' and alike other services. During the course of verification of third party 2 Service Tax Appeal No. 55168 of 2023 [SM] information received from the Income-Tax Department that the appellant was called upon to provide details of services provided by them during the period 2016-17 along with the requisite documents as that of returns, balance sheets, work orders, agreements, invoices etc. relevant for the said period. From the perusal of the documents as provided, specifically the profit and loss account statement and the comparison thereof with Form 26AS received from the Income-Tax Department, the Revenue Department observed that from January 2016 to March 2017, the appellant has shown gross receipt of Rs.90,00,000/-, also in the ST-3 return filed for the said period. However, no service tax has been paid claiming benefit of S.No. 13(a) of Notification No. 25/2012-ST dated 20.06.2012. However, department alleged that the said exemption is not available to the appellant as the structure constructed by the appellant is not a canal. Resultantly, vide Show Cause Notice No. 23/2021 dated 16.09.2020 service tax amounting to Rs.3,94,336/-
was proposed to be recovered along with the proportionate interest and the appropriate penalties. The proposal has been confirmed vide Order-in-Original No. 01/2022 dated 31.01.2022. The appeal against the said order has been dismissed vide the order assailed in the present appeal.
2. I have heard Shri Vijai Kumar, learned Advocate for the appellant and Shri Rohit Issar, learned Authorized Representative for the department.
3. Learned counsel for the appellant has mentioned that Commissioner (Appeals) has rejected the appellant's claim about 3 Service Tax Appeal No. 55168 of 2023 [SM] benefit of Mega Exemption Notification No. 25/2012-ST on two grounds:
(i) Denying RRVPNL to be a government authority alleging that the Government of Rajasthan is not holding more than 90% participation in the said body.
(ii) The water body constructed by the appellant is denied to be canal for the reasons mentioned in the order.
3.1 Learned counsel has impressed upon the photographs of the channels constructed by him on record emphasizing that irrespective of the nomenclature i.e. 'channel', the water body constructed is nothing less than a canal, it being meant for the water way. Learned counsel has also impressed upon the letter issued by the service recipient RRVPNL dated 08.12.2021 wherein it has been certified that the diversion channel constructed by the appellant is actually a canal as it is meant for the disposal of storm water.
3.2 Learned counsel further impressed upon that the extended period has also been wrongly invoked while issuing the impugned show cause notice as the service tax was not paid due to bona fide belief of benefit of exemption being available to the appellant. With these submissions, the order under challenge is prayed to be set aside and appeal is prayed to be allowed.
4. Per contra learned Departmental Representative has mentioned that Commissioner (Appeals) has meticulously examined the documents and has considered the very purpose of the water body constructed by the appellant. It is in light thereof that the 4 Service Tax Appeal No. 55168 of 2023 [SM] findings of the original adjudicating authority as given in Para 28.2, 28.3 and 28.4 of the Order-in-Original have been affirmed by Commissioner (Appeals). It is impressed upon that it is not only the nomenclature i.e. 'channel' which is different but the purpose also of the said body constructed is different as is required to claim the exemption of this notification. The canal has to be constructed to for being used for irrigation purposes for claiming the exemption benefit. The water body constructed by the appellant is neither a canal nor, admittedly, it is used for irrigation purposes. Thus the benefit of notification has rightly been denied by Commissioner (Appeals).
4.1 While coming to the issue of invocation of extended period of limitation, learned Departmental Representative has relied upon the findings in Para 33 of the Order-in-Original as have been upheld by Commissioner (Appeals). It is impressed upon that since no exemption was available to the appellant the mention of 'Nil' taxable value in the service tax returns is nothing but the suppression of fact. Extended period is therefore rightly been invoked. With these submissions, the appeal is prayed to be dismissed.
5. Having heard the rival contentions, perusing the record including the photographs of the water body constructed by the appellant, I observe that following issues need adjudication in the present appeal:
(i) Whether the RRVPNL is a governmental authority. 5
Service Tax Appeal No. 55168 of 2023 [SM]
(ii) Whether the diversion channel constructed by the appellant for RRVPNL for disposal of storm/rain water is eligible for exemption in terms of Mega Notification No. 25/2012-ST dated 20.06.2012. 6. Issue No. 1 6.1 The governmental authority is defined as entry at serial number 2(s) of Mega Exemption Notification which reads as follows:
"governmental authority" means and authority or a board or any other body:
(i) set up by an Act of Parliament or a State Legislature; or
(ii) established by Government, With 90% or more participation by way of equity or control, to carry out any function entrusted to a municipality under article 243W of the Constitution;
6.2 The service recipient herein is admittedly being set up under the state legislature of State of Rajasthan by the government of State of Rajasthan. Admittedly, the recipient, RRVPNL, is interested to carry out such function as is interested to municipality under article 243W of the constitution. This particular perusal is sufficient for me to hold that the appellant is covered under the definition of governmental authority as is given in the said function. Commissioner (Appeals) has rejected this contention of the appellant on the ground that more than 90% of participation is not of State of Rajasthan. However, I observe that for any authority established by State Legislature to be called as the governmental authority either of the following two conditions has to be fulfilled.
(i) It is established with 90% or more participation by way of equity; or 6 Service Tax Appeal No. 55168 of 2023 [SM]
(ii) The government has control on such authority with the object of carrying out the function entrusted to amunicipality under Article 243 W of the Constitution.
6.3 As already observed above, the service recipient, RRVPNL, is under the control of State of Rajasthan and is meant for discharging municipality functions. Hence, I hold that the findings of Commissioner (Appeals) for denying the service recipient to be a government authority are not sustainable. Those are hereby set aside. Issue No. 1 stands decided in favour of the appellant. 7. Issue No. 2 For the purpose, I foremost look into the notification and relevant entry. It reads as follows:
12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -
(a)xxxxxxxxxx
(b) xxxxxxxxxxxx
(c)xxxxxxxxxxxxxx
(d) canal, dam or other irrigation works;
(e) xxxxxxxxxxxx
(f) xxxxxxxxxxxx
7.1 The perusal makes it abundantly clear that the construction of canal or dam or any other irrigation work is eligible for exemption. The Commissioner (Appeals) has held the water body constructed by the appellant to not to be a canal. On the contrary, I observe that the service recipient, the governmental authority itself has 7 Service Tax Appeal No. 55168 of 2023 [SM] issued a letter dated 08.12.2021 certifying that the diversion channel constructed by RRVPNL is synonymous to the canal. However, it was for disposal of storm water. It has been certified that the diversion channel was not constructed for any industrial or commercial purpose. This letter shows that channel is synonymous to canal but the object of the channel is not irrigation. Resultantly, the exemption to the water body constructed under 12(d) is found not eligible to the appellant. Commissioner (Appeals), hence has considered the construction made by the appellant to be a water body as different from canal. Accordingly, I do not find any fault with the appellant when the service tax has not been paid while constructing a water body for a governmental authority to be used for water supply (rainy or storm water). With these observations, the findings of Commissioner (Appeals) denying the exemption benefit to the appellant are also hereby set aside. Accordingly, issued no. 2 also stands decided in favour of the appellant. 7.2 I further observe that there is an amendment in Entry No. 12 w.e.f. 01.03.2016 according to which the services provided to the government, local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of -
(a) a civil structure or any other original works meant predominantly for use other than for commerce, industry, or any other business or profession;
7.3 The work done in the present case is the construction of a diversion channel/canal for rainy/storm water. It is definitely for 8 Service Tax Appeal No. 55168 of 2023 [SM] non-commerce, non-business use. Seen from this amendment, applicable for the period in question, the appellant is still eligible for the exemption from payment of service tax. Commissioner (Appeals) has failed to be observe, the said amendment in the Entry No.12 of the mega exemption notification while confirming the demand of service tax. Hence, the order of Commissioner (Appeals) to this aspect is also liable to be set aside. Consequently, the Issue No. 2 also stands decided in favour of the appellant. 7.4 I observe from the photographs that water body is much more wider water way than a drain. It is a human made broad water way, may be of a shorter length. To ascertain whether such a water body can be called as canal or not, I refer to the dictionary meaning of canal, drain and channel which are as follows:
Canal : a deep cut that is made through land so that boats or ships can travel along it or so that water can flow to an area where it is needed.
Drain: a pipe or hole in the ground that dirty water, etc. goes down to be carried away.
Channel: a passage that water can flow along, such as a river, drainage channels, or a passage connecting two areas of water. Thus the terms are overlapping hence the distinction created by Commissioner (Appeals) is not acceptable.
8. Finally coming to the invocation of extended period of limitation, the departmental authorities has justified the said invocation on the ground that despite the liability of paying service tax, the appellant had filed nil service tax returns. The said act is 9 Service Tax Appeal No. 55168 of 2023 [SM] alleged by the department to be a definite act of suppression. But from the findings arrived at on the above said two questions, It stands clear that appellant was not liable to pay any service tax for the services being rendered to a governmental authority and the structure constructed is a civil structure meant for non-commerce use that non-payment of any service tax is not at all an act of suppression or mala fide on part of the appellant. Admittedly, the returns have been filed by the appellant. There is no allegation of even any delay in filing the same. Resultantly, to my understanding there is no act of suppression committed by the appellant other than the said observation in Para 33 of Order-in- Original. There is no evidence by the department to prove any act of suppression or mis-representation to ever being committed by the appellant. Otherwise also, non-declaration is very much different from willful mis-declaration. The declaration of appellant is already held to not to be a mis-declaration. None of the circumstance exist based whereupon the extended period could have been invoked. I rely upon the decision of Hon'ble Apex Court in the case of Continental Foundation Joint Venture Vs. Commissioner of Central Excise Chandigarh-I reported as 2007 (216) ELT 177 (SC) wherein it is held as follows:
10. The expression "suppression" has been used in the proviso to Section 11A of the Act accompanied by very strong words as 'fraud' or 'collusion' and, therefore, has to be construed strictly.
Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the 10 Service Tax Appeal No. 55168 of 2023 [SM] facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct."
9. In the light of entire above discussion, the order under challenge is hereby set aside. Consequent thereto, the appeal is hereby allowed.
[Dictated and pronounced in the open Court] (DR. RACHNA GUPTA) MEMBER (JUDICIAL) HK