2019 (6) TMI 210 - AT - Service Tax

Tribunal overturns Commissioner's order, remands case for fresh decision with emphasis on evidence and case law.

M/s. Chetana Consultants Versus Commissioner Of Central Tax, Bangalore North

M/s. Chetana Consultants Versus Commissioner Of Central Tax, Bangalore North - TMI Issues Involved:1. Classification of services under the correct service tax category.2. Exclusion of reimbursable expenses from the taxable value.3. Treatment of services provided to foreign clients as 'Export of Service.'4. Double taxation on services provided as a subcontractor.5. Invocation of the extended period of limitation for demand.6. Simultaneous imposition of penalties under multiple sections.Issue-wise Detailed Analysis:1. Classification of Services:The appellant contended that the services of soil testing, survey and map making, site formation and clearance excavation, earth moving, and demolition should not be classified under 'Consulting Engineer Service.' Instead, these services should be classified under 'Survey and Map Making Service,' 'Site Formation Service,' and 'Business Auxiliary Service,' which were introduced later. The appellant argued that classifying these services under 'Consulting Engineer Service' would render the specific entries redundant, defeating legislative intent. The Tribunal noted that the Commissioner failed to consider this classification and relied on a circular issued in 2007, which was not applicable for the period in dispute (2001-2005).2. Exclusion of Reimbursable Expenses:The appellant argued that the Commissioner did not exclude reimbursable expenses incurred on behalf of the service recipient from the taxable value, contrary to the Supreme Court judgment in UOI vs. Intercontinental Consultants and Technocrats Pvt. Ltd. The Tribunal found that the Commissioner did not consider this aspect and failed to provide findings on the exclusion of reimbursable expenses.3. Treatment as 'Export of Service':The appellant claimed that the provision of services to foreign clients and the receipt of consideration in foreign convertible currency should be treated as 'Export of Service' under the Export of Service Rules, 2005. The Tribunal observed that the Commissioner did not consider this contention and failed to return findings on the treatment of services provided to foreign clients.4. Double Taxation on Subcontractor Services:The appellant argued that they acted as a subcontractor and provided services to the prime consultant, who had already paid the service tax. Imposing service tax again on the appellant would amount to double taxation. The Tribunal noted that this contention was supported by the Trade Notice dated 4.7.1997 and several Tribunal decisions, which held that once the contractor pays the service tax, the subcontractor need not pay the service tax. The Tribunal found that the Commissioner did not consider these decisions and relied on a circular issued after the period in dispute.5. Invocation of Extended Period of Limitation:The appellant contended that the demand for the period beyond the normal period of limitation was not sustainable as there was no willful suppression or misstatement with an intent to evade tax. The appellant was under a bona fide belief that they were not liable to discharge service tax since the prime consultant had already paid it. The Tribunal found that the Commissioner did not consider the bona fide belief and the Trade Circular of 1997, which supported the appellant's contention. The Tribunal cited several Supreme Court decisions stating that mere non-payment of service tax or suppression of facts does not justify invoking the extended period of limitation without evidence of fraud or willful misstatement.6. Simultaneous Imposition of Penalties:The appellant argued that imposing penalties simultaneously under Sections 76 and 78 was not sustainable, citing the High Court decision in Ravai Trading Company vs. CST. The Tribunal agreed that the simultaneous imposition of penalties was not justified and noted that the Commissioner did not consider this aspect.Conclusion:The Tribunal found that the Commissioner failed to consider various contentions and documentary evidence presented by the appellant. The Tribunal set aside the impugned order and remanded the case back to the adjudicating authority to pass a de novo order after considering all documentary evidence and various case laws. The Cross Objections filed by the Revenue were disposed of accordingly.