2019 (5) TMI 371 - AT - Service Tax

Tribunal Allows Appeals, Waives Penalties

The Tribunal allowed the appeals on most issues, setting aside demands related to composite works contracts and reimbursable expenses, while remanding ... Composite works contract - Commercial or Industrial Construction Service (CICS) / Construction of Complex Service (CCS) - taxability of composite contracts - Renting of Immovable Property Service (RIPS) - entitlement to cenvat credit and remand for substantiation - Management, Maintenance and Repair Service (MMRS) - amounts collected from buyers to be passed to owners not consideration - reimbursed expenses (electricity, water, diesel) - not taxable where merely reimbursed - interest re-quantification on admitted tax liabilities - remand for limited purpose - penalty waiver in long running litigationComposite works contract - Commercial or Industrial Construction Service (CICS) / Construction of Complex Service (CCS) - taxability of composite contracts - Demands of service tax confirmed under CICS / CCS on composite contracts for the periods in dispute are not sustainable and are set aside. - HELD THAT: - The Tribunal applied the ratio of the Supreme Court in L&T and this Bench's decision in Real Value Promoters to conclude that the impugned demands relating to composite works contracts (both pre and post 1.6.2007 periods as pleaded) cannot be sustained. Consequently, the portions of the original orders confirming such demands in the several appeals were quashed and the appeals allowed with consequential relief as per law.Demands under CICS/CCS on composite contracts set aside; appeals allowed on those grounds with consequential benefits.Management, Maintenance and Repair Service (MMRS) - amounts collected from buyers to be passed to owners not consideration - Amounts collected from buyers which are to be passed on to the future owners' association are not consideration for MMRS and the demand confirmed by the original authority is set aside. - HELD THAT: - Relying on precedents cited by the appellants (including Tri Chennai and Tribunal/Bombay decisions), the Bench held that monies collected from buyers that are merely held for and payable to the owners' association do not constitute consideration for a taxable service. The impugned demand in respect of such receipts was therefore quashed and the appeal allowed with consequential benefits.Demand under MMRS on amounts to be passed to owners' association set aside; appeal allowed.Renting of Immovable Property Service (RIPS) - entitlement to cenvat credit and remand for substantiation - The plea that appellants were entitled to cenvat credit of service tax paid by property owners requires rectification at fact stage and the matter is remanded to the adjudicating authority for substantiation. - HELD THAT: - The Tribunal found merit in the appellants' contention that they may be entitled to cenvat credit of service tax purportedly paid by the owners and therefore remanded the RIPS related demand for the original authority to examine and verify the claim. Given the protracted litigation, penalties relating to this demand under the Finance Act, 1994 were set aside.RIPS demand remanded for verification of cenvat credit claim; penalties relating to this demand set aside.Reimbursed expenses (electricity, water, diesel) - not taxable where merely reimbursed - Amounts reimbursed by clients for electricity, water, diesel etc. are not taxable and the demand is set aside. - HELD THAT: - Applying the ratio of the Supreme Court decision in Intercontinental Consultants and Technocrats, the Tribunal held that amounts which are mere reimbursements by clients (and not consideration for a service) cannot be subjected to service tax. The impugned demand under MMRS for such reimbursed expenses was therefore quashed and the appeal allowed with consequential benefits.Demands in respect of reimbursed electricity/water/diesel expenses set aside; appeal allowed.Interest re-quantification on admitted tax liabilities - remand for limited purpose - Computation of interest on admitted/paid tax liabilities contains discrepancies; the issue is remanded to the adjudicating authority for re quantification. - HELD THAT: - The appellants did not dispute the underlying tax demands but challenged the correctness of interest computation. The Tribunal observed inconsistencies between annexures and the impugned order as to interest amounts and permitted a limited remand to the adjudicating authority solely for correct quantification of interest. Penalties relating to these demands were set aside considering prolonged litigation.Interest computation remanded for re quantification; penalties set aside insofar as related to the remanded matters.Renting of Immovable Property Service (RIPS) - short payment demand - The appeal against the demand for short payment under RIPS (for specified tenants/periods) is dismissed. - HELD THAT: - The Tribunal examined the show cause notice and found that the demand under RIPS was sufficiently articulated (referencing the relevant para of the SCN) as relating to letting out premises to specified clients; the appellants' plea that the demand was not clear was rejected and no interference was warranted with the confirmed demand.Appeal against the RIPS short payment demand dismissed.Penalty waiver in long running litigation - Penalties imposed under the Finance Act, 1994 in relation to several disputed demands are set aside in view of long running litigation, subject in some cases to payment of outstanding interest. - HELD THAT: - The Tribunal repeatedly noted the prolonged nature of litigation on the taxability issues and exercised discretion to set aside penalties imposed in relation to those demands. Where tax and part interest had been paid, penalties were waived conditional on discharge of outstanding interest amounts as directed.Penalties under Finance Act, 1994 set aside in the specified matters; waiver subject to fulfillment of conditions directed.Final Conclusion: The Tribunal allowed multiple appeals in part by setting aside demands confirmed under CICS/CCS insofar as they arose from composite works contracts, quashed MMRS and reimbursable expense demands that were not consideration, remanded specified RIPS/cenvat and interest quantification issues to the adjudicating authority for verification/ re quantification, upheld one RIPS short payment demand, and set aside penalties in several instances having regard to protracted litigation. Issues Involved:1. Demand under Commercial or Industrial Construction Service (CICS)2. Demand under Renting of Immovable Property Service (RIPS)3. Demand under Management, Maintenance, and Repair Service (MMRS)4. Demand under Construction of Residential Complex Service (CCS)5. Alleged adjustment of excess service tax paid6. Interest calculation on delayed payment of service tax7. Demand related to reimbursable expenses for electricity, water, diesel, etc.8. Demand under Works Contract Service (WCS)Issue-wise Detailed Analysis:1. Demand under Commercial or Industrial Construction Service (CICS):- Appeal ST/258/2012: The demand of Rs. 94,62,842/- under CICS was found unsustainable for composite contracts involving transfer of property in goods prior to the introduction of Works Contracts Service. This decision aligns with the Supreme Court's ruling in L&T Ltd. and the Tribunal's decision in Real Value Promoters Pvt. Ltd.- Appeal ST/259/2012: Demands of Rs. 59,08,138/-, Rs. 7,39,011/-, and Rs. 61,04,851/- under CICS were similarly found unsustainable for composite works contracts, following the same legal precedents.- Appeal ST/40901/2014: Demands of Rs. 9,20,20,954/-, Rs. 3,14,06,336/-, Rs. 93,38,878/-, Rs. 2,66,03,013/-, and Rs. 77,28,508/- under CICS were also set aside for the same reasons.- Appeal ST/1/2012: Demands of Rs. 8,67,749/- and Rs. 66,363/- under CICS were similarly dismissed.2. Demand under Renting of Immovable Property Service (RIPS):- Appeal ST/258/2012: The demand of Rs. 11,68,534/- was remanded to the original authority to verify the appellant's claim for availing cenvat credit of service tax paid by the property owners.- Appeal ST/40901/2014: The demand of Rs. 2,01,305/- under RIPS was upheld as the grounds for the demand were found clear and justified.3. Demand under Management, Maintenance, and Repair Service (MMRS):- Appeal ST/258/2012: The demand of Rs. 7,32,183/- was set aside as the amounts received from buyers were to be passed on to the owner's association, hence not considered as consideration for service. This decision was supported by case laws such as Vijayashanti Builders Ltd. vs. CST.- Appeal ST/40901/2014: The demand of Rs. 16,19,255/- for reimbursable expenses was set aside, following the Supreme Court's judgment in UOI vs. Intercontinental Consultants and Technocrats Pvt. Ltd.- Appeal ST/1/2012: The demand of Rs. 24,09,527/- for amounts collected as a corpus fund was similarly dismissed.4. Demand under Construction of Residential Complex Service (CCS):- Appeal ST/258/2012: The demand of Rs. 5,18,152/- was found unsustainable for composite works contracts, following the same legal precedents.- Appeal ST/259/2012: Demands of Rs. 1,06,22,800/- and Rs. 3,45,27,514/- under CCS were similarly found unsustainable.- Appeal ST/40901/2014: The demand of Rs. 43,49,793/- was set aside for the same reasons.- Appeal ST/1/2012: Demands of Rs. 41,65,692/-, Rs. 12,26,638/-, Rs. 33,75,598/-, and Rs. 10,11,386/- under CCS were similarly dismissed.5. Alleged Adjustment of Excess Service Tax Paid:- Appeal ST/259/2012: The allegation of irregular adjustment of excess service tax paid was found unconvincing as the appellants clarified that they had not adjusted any excess service tax but had not paid service tax on amounts appropriated towards the cost of land sold.6. Interest Calculation on Delayed Payment of Service Tax:- Appeal ST/40901/2014: The interest liability of Rs. 57,41,432/- and Rs. 33,54,564/- was remanded for re-quantification due to errors in computation. Penalties related to this demand were set aside.- Appeal ST/1/2012: The demand of Rs. 1,07,419/- for short payment of interest was upheld.7. Demand Related to Reimbursable Expenses for Electricity, Water, Diesel, etc.:- Appeal ST/40901/2014: The demand of Rs. 16,19,255/- was set aside as these amounts were reimbursed by clients, following the Supreme Court's judgment in Intercontinental Consultants and Technocrats.8. Demand under Works Contract Service (WCS):- Appeal ST/40901/2014: The demand of Rs. 3,69,76,010/- under WCS was not contested by the appellants, who had paid the amount. However, the interest liability was remanded for re-quantification.Conclusion:The Tribunal allowed the appeals on most issues, setting aside demands related to composite works contracts and reimbursable expenses, while remanding certain matters for re-quantification of interest liabilities. Penalties were generally waived due to prolonged litigation.