2014 (2) TMI 807 - AT - Service Tax

Joint Venture Company Liable for Service Tax on Works Contract Service: Tribunal Orders Pre-Deposit for Waiver and Stay

The Tribunal ruled against the appellant, a Joint Venture company, in a case concerning waiver and stay of adjudged dues for service tax and education ... Waiver of pre deposit - Demand of service tax - Works Contract Service - Held that:- entire demand in the present case is within the normal period of limitation. Though the appellant has pleaded financial hardships in the stay application, the plea appears to be a feeble haphazard attempt to get over the statutory requirement of pre-deposit. There is no documentary support to the plea of financial hardships - Conditional stay granted. Issues:1. Waiver and stay of adjudged dues including service tax and education cesses for a specific period.2. Tax liability of a Joint Venture company providing 'works contract service' to the State Government.3. Financial hardships claimed by the appellant in the stay application.Analysis:Issue 1: Waiver and Stay of Adjudged DuesThe appellant filed an application seeking waiver and stay of the adjudged dues amounting to Rs. 1,04,75,948/- for service tax and education cesses from October 2009 to September 2010. The works executed by the appellant, a Joint Venture company, for the State Government were under the head of 'Works Contract Service.' The Tribunal noted that the Joint Venture company was constituted between M/s L & T Ltd. and M/s Kirloskar Brothers Ltd., and the consideration for the service was received in the name of the Joint Venture company. Despite the appellant's claim of not providing taxable service to the State Government, the Tribunal found that prima facie, they were providing 'works contract service' and hence liable to pay service tax. The Tribunal referred to a previous decision to support this conclusion.Issue 2: Tax Liability of Joint Venture CompanyThe Tribunal considered the nature of the works executed by the Joint Venture company for the State Government and concluded that they were indeed providing 'works contract service' and thus liable to pay service tax. The appellant's argument that the design and other works were divided between the partners of the Joint Venture was not accepted as a defense against tax liability. The Tribunal emphasized that the cited stay orders were not applicable to the current case due to differences in facts and that the financial hardships claimed by the appellant were not supported by documentary evidence.Issue 3: Financial Hardships Claimed by the AppellantAlthough the appellant pleaded financial hardships in the stay application, the Tribunal found this plea to be lacking in substantial evidence. Despite the financial difficulties claimed, the Tribunal directed the appellant to pre-deposit a significant amount within a specified period, failing which waiver and stay would not be granted. The Tribunal set a deadline for compliance and specified the consequences of non-compliance.In conclusion, the Tribunal directed the appellant to pre-deposit a substantial amount within a specified timeframe to be eligible for waiver and stay regarding the penalty imposed, as well as interest and education cesses on service tax. The decision was made based on the nature of the services provided by the Joint Venture company and the lack of sufficient evidence to support the appellant's claims of financial hardships.