Custom, Excise & Service Tax Tribunal
U P State Construction And ... vs Cgst & Ce Kanpur on 18 February, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
E-Hearing
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.70127 of 2021
(Arising out of Order-in-Original No.KNP-EXCUS-ADT-COM-002-20-21 dated
29.10.2020 passed by Commissioner (Audit) CGST & Central Excise, Kanpur)
M/s U. P. State Construction & Infrastructure
Development Corporation Ltd., ......Appellant
(C-178/113, Moti Villa Daudpur Gorakhpur
D-70 Satya Marg Behind Purvanchal Gramin Bank Gorakhpur)
VERSUS
Commissioner of Central Goods &
Service Tax, Kanpur ....Respondent
(117/7, Sarvodaya Nagar, Kanpur) APPEARANCE:
Shri Kapil Vaish, Chartered Accountant for the Appellant Smt. Chitra Srivastava, Authorized Representative for the Respondent CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) FINAL ORDER NO.- 70080/2025 DATE OF HEARING : 02.01.2025 DATE OF PRONOUNCEMENT : 18.02.2025 This appeal has been filed by UP State Construction & Infrastructure Development Corporation Ltd., assailing the Order-in-Original dated 29.10.2020 passed by the learned Commissioner (Audit), CGST & Central Excise, Kanpur.
2. The facts of the case in brief are that the Appellant is a State Government Company, registered under the Companies Act, 1956. They are engaged in construction of Government Buildings, Road etc. Consequent to the audit of service tax record of the Appellant for the period from October, 2014 to June, 2017, a Show Cause Notice1 dated 03.06.2020 had been issued proposing to demand service tax of Rs.2,33,60,613/- on various counts. It also invoked extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994. Vide 1 SCN Service Tax Appeal No.70127 of 2021 2 the impugned order dated 29.10.2020, the learned Commissioner has confirmed following demands :-
(a) Short payment of service tax of Rs.33,04,058/-
(b) Wrong availment of Cenvat credit on Rent a Cab and Goods Transport Agency Rs.61,255/-
(c) Non payment of service tax on availing Legal services (on reverse charge basis) Rs.2,512/-
(d) Non payment of service tax on availing Manpower Supply Service (on reverse charge Rs.5,747/- basis).
(e) Non payment of service tax on SBC Rs.1,263/-
(f) Total Rs.33,74,835/-.
3. The learned Commissioner imposed equal penalty under Section 78(1) of the Finance Act, 1994 and Rule 15 of Cenvat Credit Rules, 20042. He also imposed penalty of Rs.10,000/-
under Section 77(2) of the Act, on account of non payment of service tax correctly.
4. The Appellant by way of the aforesaid appeal have challenged following demands and corresponding imposition of penalty under Sections 78 and 77(2) of the Act, 1994.
(a) Short payment of service tax Rs.33,04,058/-
(b) Non payment of service tax on availing Legal services Rs.2,512/-
(c) Non payment of service tax on availing Manpower supply service. Rs.5,747/-
(d) Total Rs.33,12,317/-.
5. The learned Chartered Accountant appearing on behalf of the Appellant submitted that the service tax of Rs.33,04,058/- has been demanded on gross amount of Rs.2,20,26,953/-; that the said differential amount of Rs.2.2 crore pertained to the amount received from DRDA and Gorakhpur Development Authority towards construction of road. All these payments have been released out of MP/MLA funds. He drew my attention to page 44 of the appeal paper book wherein there are several entries relating to receipt of funds for construction of road. He 2 CCR, 2004 Service Tax Appeal No.70127 of 2021 3 further submitted that construction of road has remained exempted under entry 13(a) of Notification No.25/2012 dated 20.06.2012. As regards short payment of service tax for availing Legal and Manpower Supply service, the learned Chartered Accountant submitted that the said short payment is a revenue neutral exercise in as much as the Appellant is also eligible for availing Cenvat credit. In support of his submissions, he relied upon the following decisions:-
(a) Hyundai Motor India (P) Ltd. Vs. CCE (29) G.S.T.L. 452 (T) As upheld by the Hon'ble Supreme Court 2020 (32) G.S.T.L. J 54 (SC);
(b) Indus Valley Partners (I) Pvt. Ltd. Vs. CCE 2024 (389) E.L.T. 403 (Tri.).
6. With regard to invocation of extended period of limitation, the learned Chartered Accountant submitted that the Appellant is a State Government undertaking, it has regularly been filing ST- 3 returns and have been paying service tax regularly. He relied upon the Final Order No.51088/2023 dated 21.08.2023 passed by the Tribunal in the case of G. D. Goenka Pvt. Ltd, wherein it has been held that the extended period of limitation cannot be invoked in cases where assessee has regularly been filing ST-3 returns. Even otherwise, it is a dispute on interpretation of service tax law for which extended period of limitation cannot be invoked. He also relied upon various other decisions on limitation. He therefore prayed to allow the appeal by setting aside the aforesaid demands and corresponding penalties.
7. The learned Departmental Authorized Representative justified the impugned order. However, she fairly conceded that service tax was not payable on construction of road.
8. Heard both the sides and perused the appeal records.
9. The main issue in this appeal is relating to demand of service tax of Rs.33,04,058/- on gross amount of Rs.2,20,27,053/- being short paid during the year 2016-17. The Appellant in their grounds of appeal as well as during the hearing have submitted that the said amount of Rs.2.20 crore relates to receipt of funds towards construction of road. I have seen pages Service Tax Appeal No.70127 of 2021 4 44 & 45 of the appeal paper book wherein details of funds received during 2016-17 have been given. I find that there are several entries wherein amounts have been received towards construction of road. These funds have been received either from DRDA, Gorakhpur or Gorakhpur Development Authority, out of MP/MLA funds. I find that entry 13(a) of Notification No.25/2012 dated 20.06.2012 grants exemption from payment of service tax on construction of road, bridge, tunnels or terminals for road transportation for use by general public. I hold that the said amount of Rs.2.20 crore having been received towards construction of road was exempted from payment of service tax. Therefore, the demand of Rs.33,04,058/- is liable to be set aside.
10. On the issue of demand of service tax Rs.8,259/- on availing Legal and Manpower Supply service, the Appellant have not challenged the demand on merit. It has however been submitted that they have regularly been paying service tax and were eligible for its Cenvat credit. Therefore, the entire demand is revenue neutral. It has also been submitted that demand is barred by limitation in as much as SCN has been issued much after the normal period of limitation of 30 months. I find that some of the services provided by the Appellant are exempted from payment of service tax. Therefore, demand of service tax on availing Legal and Manpower Supply service cannot be considered to be revenue neutral. However, the issue of limitation is being dealt with separately. Appellant have vehemently argued that for demanding service tax for the period from April, 2014 to June, 2017, SCN had been issued on 30.06.2020 and that the entire demand is barred by limitation. The learned Commissioner in para 13.2 and para 15.2, has upheld the invocation of extended period of limitation on the ground that Appellant have deliberately disclosed the lower taxable values with the intention to evade payment of service tax. There is no dispute that Appellant have regularly been filing ST-3 returns. A similar matter of limitation had come up for consideration before the Division Bench of this Tribunal in the case of G. D. Goenka Pvt. Ltd. (Final Order No.51088/2023 dated 21.08.2023). In the said case, the demand had been Service Tax Appeal No.70127 of 2021 5 raised consequent to audit. The extended period of limitation was invoked on the ground that under self assessment, the Appellant assessee was required to assess its own tax due on the services provided by it and file returns under Section 70. By claiming the wrong Cenvat credit, the Appellant willfully and deliberately suppressed the facts from the Department.
11. In the said case, the Division Bench referred to the decision of the Hon'ble Supreme Court in the case of Pushpam Pharmaceuticals Company Vs. CCE, Mumbai 1995 (78) E.L.T. 401 (S.C.) and made detailed observation for holding that extended period of limitation could not have been invoked. Para 16,19,20,21 and 22 of the said order reads as under :-
"16. Another ground for invoking extended period of limitation given in the impugned order is that the Appellant was operating under self-assessment and hence had an obligation to assess service tax correctly and take only eligible CENVAT credit and if it does not do so, it amounts to suppression of facts with an intent to evade and violation of Act or Rules with an intent to evade. We do not find any force in this argument because every assessee operates under self-assessment and is required to self- assess and pay service tax and file returns. If some tax escapes assessment, Section 73 provides for a SCN to be issued within the normal period of limitation. This provision will be rendered otiose if alleged incorrect self-assessment itself is held to establish wilful suppression with an intent to evade. To invoke extended period of limitation, one of the five necessary elements must be established and their existence cannot be presumed simply because the assessee is operating under self-assessment".
19. It has also been pointed out that but for the audit, the allegedly irregularly availed CENVAT credit would not have come to light. It is incorrect to say that but for the audit, the alleged irregular availment of CENVAT credit would not have come to light. It is undisputed that the Appellant has Service Tax Appeal No.70127 of 2021 6 been self-assessing service tax and filing ST-3 Returns. Unlike the officers, the assessee is not an expert in taxation and can only be expected to pay service tax and file returns as per its understanding of the law. The remedy against any potential wrong assessment of service tax by the assessee is the scrutiny of the Return and best judgment assessment by the Central Excise Officer under Section 72. This Section reads as follows:-
"72. Best judgment assessment. If any person, liable to pay service tax,--
(a) fails to furnish the return
under Section 70;
(b) having made a return, fails to assess
the tax in accordance with the
provisions of this Chapter or rules
made thereunder, the Central Excise
Officer, may require the person to
produce such accounts, documents or
other evidence as he may deem
necessary and after taking into account all the relevant material which is available or which he has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment."
20. Thus, „the central excise officer‟ has an obligation to make his best judgment if either the assessee fails to furnish the return or, having filed the return, fails to assess tax in accordance with the Act and Rules. To determine if Service Tax Appeal No.70127 of 2021 7 the assessee had failed to correctly assess the service tax, the central excise officer has to scrutinize the returns. Thus, although all assessees self-assess tax, the responsibility of taking action if they do not assess and pay the tax correctly squarely rests on the central excise officer, i.e., the officer with whom the Returns are filed. For this purpose, the officer may require the assessee to produce accounts, documents and other evidence he may deem necessary. Thus, in the scheme of the Finance Act, 1994, the officer has been given wide powers to call for information and has been entrusted the responsibility of making the correct assessment as per his best judgment. If the officer fails to scrutinise the returns and make the best judgment assessment and some tax escapes assessment which is discovered after the normal period of limitation is over, the responsibility for such loss of Revenue rests squarely on the shoulders of the officer. It is incorrect to say that had the audit not been conducted, the allegedly ineligible CENVAT credit would not have come to light. It would have come to light if the central excise officer had discharged his responsibility under Section 72".
21. This legal position that the primary responsibility for ensuring that correct amount of service tax is paid rests on the officer even in a regime of self- assessment was clarified by the Central Board of Excise and Customs in its Manual for Scrutiny of Service Tax Returns the relevant portion of which is as follows:
"1.2.1A The importance of scrutiny of returns was also highlighted by Dr. Kelkar in his report on Indirect Taxation. The observation made in the context of Central Excise but also found to be relevant to Service Tax is reproduced below:
Service Tax Appeal No.70127 of 2021 8 It is the view that assessment should be the primary function of the Central Excise Officers. Self-assessment on the part of the taxpayer is only a facility and cannot and must not be treated as a dilution of the statutory responsibility of the Central Excise Officers in ensuring correctness of duty payment. No doubt, audit and anti-evasion have their roles to play, but assessment or confirmation of assessment should remain the primary responsibility of the Central Excise Officers.
(emphasis supplied)
22. Therefore, to say that had the audit not been conducted, the incorrect availment of CENVAT credit would not have come to light is neither legally correct nor is it consistent with the CBEC‟s own instructions to its officers."
12. Finally the Division Bench allowed the appeal on limitation by summing up its observation in para 25 as under :-
"To sum up:
a) The Appellant assessee was required to file the ST 3 Returns which it did. Unless the Central Excise officer calls for documents, etc., it is not required to provide them or disclose anything else.
b) It is the responsibility of the Central Excise Officer with whom the Returns are filed to scrutinise them and if necessary, make the best judgment assessment under Section 72 and issue an SCN under Section 73 within the time limit. If the officer does not do so, and Service Tax Appeal No.70127 of 2021 9 any tax escapes assessment, the responsibility for it rests on the officer.
c) Although the Central Excise Officer is empowered to scrutinise all the Returns call for records and if necessary, make the best judgment assessment, if, as per the instructions of CBIC, the officer does not conduct a detailed scrutiny of same Returns and as a result is unable to discover any short payment of tax within the period of limitation, neither the assessee nor the officer is responsible for such loss of revenue. Such a loss of Revenue is the risk taken by the Board as a matter of policy.
d)Extended period of limitation cannot be invoked unless there is evidence of fraud or collusion or wilful misstatement or suppression of facts or violation of the provisions of Act or Rules with an intent.
e)Intentional and wilful suppression of facts cannot be presumed because (a) the Appellant was operating under self-assessment or (b) because the Appellant did not agree with the audit and claimed that CENVAT credit was admissible; or (c) because the Appellant did not seek any clarification from the Revenue;
or (d) because the officer did not conduct a detailed scrutiny of the Returns and the availment of CENVAT credit which is alleged to be inadmissible and was discovered only during audit."
13. I find that the Appellant's case on limitation is squarely covered by aforesaid order of the Division Bench of the Tribunal. Respectfully following the aforesaid order, I hold that the Service Tax Appeal No.70127 of 2021 10 demand of service tax (Rs.33,04,058/- as well as Rs.8,259/-) could not have been raised by invoking of extended period of limitation. As the demands itself are being set aside, penalties under Section 78(1) as well as Section 77(2) are also liable to be set aside.
14. I find that the facts of the present case are squarely covered by the aforesaid decision. In the light of above discussions, the appeal filed by the Appellant is allowed on merits as well as on limitation with consequential relief, as per law.
(Order pronounced in open court on - 18.02.2025) (P. K. CHOUDHARY) MEMBER (JUDICIAL) LKS