2019 (7) TMI 723 - AT - Service Tax

Tribunal upholds service tax demands, remands for recomputation, penalties imposed, late fees set aside.

The tribunal upheld the demands of service tax and interest, remanded for recomputation after excluding canteen charges, upheld penalties under Section ... Demand and appropriation of service tax - interest on delayed payment of service tax - penalty for failure to deposit tax in time - penalty for delay in filing returns and late fees - penalty under tax delinquency provision - exemption as job work under Notification No. 25/2012 ST - inclusion of reimbursable expenses in taxable value - extended period of limitation by reason of suppressionDemand and appropriation of service tax - interest on delayed payment of service tax - Validity of demand and appropriation of service tax for the period April 2012 to March 2014 and entitlement to interest on delayed payment - HELD THAT: - The Tribunal found no dispute as to the admitted late payment of service tax for April 2012 to March 2014 and upheld the Commissioner's demand and appropriation of the amounts paid by the assessee. The Tribunal applied established principles that interest is chargeable on delayed payment and rejected the contention that deposit of tax before adjudication precludes interest. The decision follows precedent that self ascertainment or late deposit does not absolve liability to interest unless statute provides otherwise. [Paras 5]Demand and appropriation of the service tax for April 2012 to March 2014 upheld and interest on the delayed payment sustained.Exemption as job work under Notification No. 25/2012 ST - demand and appropriation of service tax - Whether services rendered to M/s Sigma qualify as job work exempt under Notification No. 25/2012 ST, and consequent demand for the period specified - HELD THAT: - The Tribunal examined the contract terms and the statutory scheme including the Contract Labour (Regulation & Abolition) Act, 1970. On the facts it held the agreement was a contract labour arrangement (contractor supplying and managing his personnel, responsibility for wages/ESI/PF, records, muster rolls etc.) and not a job work contract within the meaning of the exemption entry. The Tribunal rejected the authorities relied upon by the assessee as inapplicable to the post 1 July 2012 regime or to contract labour arrangements. Consequently the demand of service tax attributable to supplies to M/s Sigma was upheld subject to adjustment on a limited point of valuation. [Paras 5]Demand in respect of services to M/s Sigma is upheld; however the computation is to be revisited for valuation adjustment as directed separately.Inclusion of reimbursable expenses in taxable value - Whether canteen charges recovered from the assessee's own employees form part of taxable value of the service - HELD THAT: - The Tribunal accepted the assessee's submission that the canteen charges were recovered from the assessee's own employees and not recovered from the service recipient; thus such amounts are not consideration for the taxable service and cannot be added under Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006. The Commissioner's addition of canteen charges was therefore held to lack merit and the Tribunal directed that the taxable value be recomputed excluding those amounts. [Paras 5]Canteen charges recovered from the assessee's employees are not to be included in the taxable value; demand to be recomputed accordingly (remand limited to recomputation).Extended period of limitation by reason of suppression - Validity of invocation of the extended period of limitation for the demand - HELD THAT: - Having considered the conduct of the assessee and the fact that non payment in respect of supplies to M/s Sigma and related facts were not disclosed to the department until investigation, the Tribunal held that the extended period under the proviso to Section 73(1) was rightly invoked. The Tribunal relied on authorities establishing that when material facts are not disclosed and the department is unaware, invocation of extended limitation is justified. [Paras 5]Invocation of the extended period of limitation upheld.Penalty for failure to deposit tax in time - penalty for delay in filing returns and late fees - penalty under tax delinquency provision - Whether penalties under Sections 76, 77 and 78 and late fees under Section 70 are sustainable - HELD THAT: - The Tribunal treated the penalty regime as remedial and not requiring proof of mens rea for Sections 76 and 77. On the facts it upheld imposition of penalty under Section 76 for failure to deposit tax in time. However, having found that the ST 3 returns were filed within the extended dates communicated by the Board, the Tribunal set aside penalty under Section 77(2) and the late fees under Section 70(1). Further, because Section 78 expressly bars simultaneous application of Section 76 where Section 78 penalty is payable, and the Tribunal sustained Section 76 penalties, the penalties imposed under Section 78 were set aside. [Paras 5]Penalty under Section 76 upheld; penalty under Section 77(2) and late fees under Section 70(1) set aside; penalty under Section 78 set aside because Section 76 penalty is upheld.Final Conclusion: The appeal is partly allowed and partly dismissed: the Commissioner's demands for service tax and interest for April 2012 to March 2014 are upheld; the demand relating to supplies to M/s Sigma is upheld but remanded for recomputation after excluding canteen charges recovered from the assessee's employees; penalty under Section 76 is sustained while penalties under Section 77(2), Section 78 and late fees under Section 70(1) are set aside. Issues Involved:1. Demand of Service Tax and Education Cess for delayed payment.2. Demand of Service Tax and Education Cess for short payment or non-payment.3. Recovery of interest on confirmed demands.4. Imposition of penalties for failure to pay service tax within due dates.5. Imposition of penalties for incorrect details in service tax returns and late filing of returns.6. Imposition of penalties for tax delinquency.7. Applicability of exemption under Notification No 25/2012-ST for job work activities.8. Inclusion of canteen charges in taxable value.9. Invocation of extended period of limitation.10. Simultaneous imposition of penalties under Sections 76 and 78.Detailed Analysis:1. Demand of Service Tax and Education Cess for Delayed Payment:The Commissioner confirmed the demand of Service Tax and Education Cess amounting to Rs. 10,81,74,382/- for the delayed payment by the assessee, appropriating the amount already paid by the assessee. The tribunal upheld this demand and appropriation, noting that the appellant admitted their liability and deposited the tax along with interest.2. Demand of Service Tax and Education Cess for Short Payment or Non-Payment:The Commissioner confirmed the demand of Service Tax and Education Cess amounting to Rs. 39,33,395/- for short payment or non-payment in respect of services provided to M/s Sigma. The tribunal upheld this demand but remanded the matter for recomputing the demand after reducing the taxable value by the canteen charges recovered from employees.3. Recovery of Interest on Confirmed Demands:The Commissioner ordered the recovery of interest on the confirmed demands under Section 75. The tribunal upheld the recovery of interest, citing the Bombay High Court decision in Padmashree V V Patil SSK, which held that interest is chargeable even if the short duty is deposited before the issuance of a show cause notice.4. Imposition of Penalties for Failure to Pay Service Tax Within Due Dates:The Commissioner imposed a penalty under Section 76 for failure to pay service tax within due dates. The tribunal upheld this penalty, referencing the Supreme Court decision in Gujarat Travancore Agency Cochin, which stated that penalty for tax delinquency is a civil obligation and does not require proof of mens rea.5. Imposition of Penalties for Incorrect Details in Service Tax Returns and Late Filing of Returns:The Commissioner imposed penalties under Section 77(2) for incorrect details in service tax returns and late filing of returns. The tribunal set aside these penalties, noting that the appellants had filed their ST-3 returns within the extended due dates notified by the CBEC.6. Imposition of Penalties for Tax Delinquency:The Commissioner imposed a penalty under Section 78 for tax delinquency. The tribunal set aside this penalty, citing the proviso to Section 78, which states that penalties under Sections 76 and 78 should not be imposed simultaneously.7. Applicability of Exemption under Notification No 25/2012-ST for Job Work Activities:The appellants claimed that their services to M/s Sigma were exempt under Notification No 25/2012-ST as job work. The tribunal rejected this claim, determining that the agreement between the appellants and M/s Sigma was for contract labour and not job work, thus not qualifying for the exemption.8. Inclusion of Canteen Charges in Taxable Value:The Commissioner included canteen charges recovered from employees in the taxable value. The tribunal disagreed, holding that canteen charges recovered from employees should not be added to the taxable value for service tax purposes.9. Invocation of Extended Period of Limitation:The Commissioner invoked the extended period of limitation under the proviso to Section 73(1) due to suppression of facts by the appellants. The tribunal upheld this invocation, noting that the appellants did not inform the department about the non-payment of service tax for services provided to M/s Sigma.10. Simultaneous Imposition of Penalties under Sections 76 and 78:The tribunal set aside the penalties imposed under Section 78, as penalties under Sections 76 and 78 cannot be imposed simultaneously according to the proviso to Section 78.Conclusion:The tribunal upheld the demands of service tax and interest, remanded the matter for recomputing the demand after excluding canteen charges, upheld penalties under Section 76, and set aside penalties under Sections 77(2) and 78 and late fees under Section 70(1).