2012 (11) TMI 291 - AT - Service Tax

Tribunal orders deposit to waive service tax, interest, and penalties on disputed contract amounts

The Tribunal ruled in favor of the Revenue, directing the applicant to deposit a specified amount within a deadline to waive the remaining service tax, ... Extended period of limitation for suppression with intent to evade - assessable value of taxable service (commutation of assessable value) - exclusion of value of goods under Notification No.12/2003-ST - abatement under Notification No.1/2006-ST - disqualification of abatement by availment of Cenvat/credit - pre-deposit for obtaining interim reliefExtended period of limitation for suppression with intent to evade - assessable value of taxable service (commutation of assessable value) - Whether invocation of the extended period of limitation for the period 2005-06 to 2009-10 was sustainable and whether the Revenue correctly computed assessable value by taking gross receipts. - HELD THAT: - The Tribunal found that the controversy was not about taxability but about computation of assessable value. An audit conducted by the Revenue in 2009 had raised objections and resulted in payment of certain demands, which, prima facie, undermines the Revenue's case that there was suppression with intent to evade for earlier years. Consequently, the applicants have a strong prima facie case on the question of time bar for periods prior to 2009-10. The demand for 2009-10, being within the normal limitation period, was treated separately and upheld for consideration on merits. [Paras 13]Prima facie the invocation of the extended period for years before 2009-10 is unsustainable; 2009-10 demand falls within the normal period and remains contestable on merits.Exclusion of value of goods under Notification No.12/2003-ST - Whether the applicants were entitled to exclude the value of goods and materials supplied under the contracts from the assessable value under Notification No.12/2003-ST. - HELD THAT: - Notification No.12/2003-ST excludes the sale consideration of goods supplied under a contract from the value of the taxable service provided there is documentary proof specifically indicating the value of goods sold and no credit of duty on such inputs/materials has been availed. The applicants failed to produce invoices or documentary proof before the Tribunal to establish the value of goods sold to the service recipients. On this basis, the applicants could not prima facie claim the benefit of the notification. [Paras 14]Benefit under Notification No.12/2003-ST is not available to the applicants in the absence of documentary proof of sale of goods and materials.Abatement under Notification No.1/2006-ST - disqualification of abatement by availment of Cenvat/credit - Whether the applicants were entitled to the 67% abatement under Notification No.1/2006-ST in respect of erection, commissioning and installation services. - HELD THAT: - Notification No.1/2006-ST grants abatement subject to the condition that no credit (Cenvat) in respect of duty on inputs/capital goods or Cenvat credit of service tax on input services has been taken. The admitted fact before the Tribunal was that the applicants had availed Cenvat credit of input services to the extent of about Rs.30 lakhs. That availment disqualified them, prima facie, from claiming the abatement in full. Therefore, the applicants did not make out a prima facie case for total waiver of dues on the basis of the said notification. [Paras 15]Applicants are not entitled to the full benefit of the 67% abatement under Notification No.1/2006-ST because they availed Cenvat/credit.Pre-deposit for obtaining interim relief - What interim pre-deposit should be directed pending disposal of the appeal. - HELD THAT: - Balancing the applicants' prima facie case on time-bar for earlier years against the Revenue's contentions and the disallowance of claimed notifications, the Tribunal exercised its discretion to require a substantial but partial pre-deposit. Considering the facts and the admitted availment of credit, the Tribunal directed a specific pre-deposit to secure the Revenue's interest while permitting the appeal to proceed and waiving the balance during pendency upon compliance. [Paras 15]Applicants directed to deposit Rs One crore within eight weeks; on such compliance, pre-deposit of the balance of service tax, interest and penalties is waived during the pendency of the appeal.Final Conclusion: The Tribunal held that while the assessable value computation and invocation of the extended period raised a strong prima facie case in favour of the applicants for years prior to 2009-10, the applicants failed to establish entitlement to exclusions or abatement under Notifications No.12/2003-ST and No.1/2006-ST; a partial pre-deposit of Rs One crore was directed, with the balance of the pre-deposit waived during the appeal on compliance. Issues:1. Waiver of pre-deposit of service tax, interest, and penalties.2. Interpretation of taxable services under erection, commissioning, and installation of power stations.3. Demand of service tax based on gross amount received in contracts.4. Invocation of extended period of limitation for demand confirmation.5. Consideration of balance-sheet figures for confirmation of demand.6. Exclusion of material cost for levy of service tax on erection, commissioning, or installation charges.7. Applicability of Notification No. 1/2006-ST providing abatement.8. Cum-duty tax benefit allowance.9. Terms and conditions of the contract for lump sum consideration.10. Requirements for benefit under Notification No. 12/2003-ST.11. Availment of credit affecting benefit under Notification No. 1/2006-ST.12. Time bar issue regarding disclosure of contract terms.13. Taxability of service value and time bar issue.14. Demand calculation within the normal period of limitation and benefit claims under Notifications.15. Compliance and deposit requirements for waiver of pre-deposit.Analysis:1. The applicant sought waiver of pre-deposit of a substantial service tax amount, interest, and penalties. They provide taxable services related to power stations and pay service tax based on material value. The Revenue demanded service tax on gross contract amounts, citing suppression of facts to evade tax.2. The dispute revolves around the interpretation of taxable services provided by the applicant during erection, commissioning, and installation activities. The Revenue contends that lump sum contract amounts received constitute taxable service consideration, leading to the demand for service tax.3. The Revenue invoked the extended period of limitation, alleging suppression of material facts. The applicant argued against this, highlighting the inclusion of trading activities in balance sheet figures and the exclusion of material costs for service tax calculation under specific notifications.4. The applicant challenged the demand based on the time bar issue, emphasizing the Revenue's audit in 2009 and subsequent tax payments. The Tribunal found merit in the time bar argument, considering the audit history and objections raised.5. The Tribunal assessed the demands for different periods, addressing the benefit claims under Notifications No. 12/2003-ST and No. 1/2006-ST. The applicant's failure to provide documentary evidence regarding material sales impacted the benefit eligibility.6. Ultimately, the Tribunal directed the applicant to deposit a specified amount within a deadline, considering the non-fulfillment of notification conditions and credit availed. Compliance with the deposit requirement would lead to the waiver of the remaining service tax, interest, and penalties during the appeal process.