2019 (10) TMI 1043 - AT - Service Tax

VCES discharge certificate bars reopening assessment absent substantial conscious misdeclaration; department's attempt to reopen rejected

Commissioner of Central Excise, Customs & Service Tax, Hyderabad – I Versus Giridhari Constructions

CESTAT, Hyderabad (AT) held that once a VCES declaration is accepted and a discharge certificate issued, the department cannot reopen assessment absent ... VCES Declaration - reopening of proceedings/VCES Assessment on the basis of declarations made - HELD THAT:- The discharge certificate is issued by the department on 11.04.2014 and the show cause notice is subsequently issued on 29.12.2014 - The Tribunal in the case of Ashok Kumar Kesharwani [2019 (5) TMI 1247 - CESTAT ALLAHABAD] had occasion to analyse similar situation wherein the Tribunal held that after acceptance of the declaration and issuance of discharge certificate the department cannot reopen the proceedings in respect of the declarations made. It would result in deviation from the immunity provided under section 108 of the Finance Act 2013 and would render the scheme redundant and meaningless. When the declaration is filed, the department gets sufficient time to enquire and satisfy as to the category of service and value declared. On entertaining a different view the department cannot allege misdeclaration. There should be substantial and conscious misdeclaration for reopening a matter for which discharge certificate is issued - There is no evidence to show that there is any conscious and substantial misdeclaration on the part of the respondent. The Tribunal in the case of Sravanthi Contractors and Developers [2019 (9) TMI 648 - CESTAT HYDERABAD] had followed the decision in the case of Frontline Builders & Developers reported in [2017 (12) TMI 1440 - CESTAT BANGALORE] to hold that unless there is substantial misdeclaration, the VCES assessment cannot be reopened. Appeal dismissed - decided against Revenue. Issues:Department's appeal against Commissioner's order setting aside demand, interest, and penalties; Classification of services under Construction of Residential Complex services or Works Contract Services (WCS); Interpretation of discharge certificate issuance and reopening of proceedings.Analysis:1. The department appealed against the Commissioner's order setting aside the demand, interest, and penalties proposed in the show cause notice. The case involved a dispute regarding the classification of services provided by the respondent under either Construction of Residential Complex services or Works Contract Services (WCS). The respondents initially filed a VCES declaration under section 107 of the Finance Act 2013 and paid service tax for services rendered. Subsequently, a show cause notice was issued proposing to reclassify the services as WCS, leading to the current appeal before the Tribunal.2. The department argued that the services provided by the respondent should be classified under WCS instead of Construction of Residential Complex services. They contended that the declaration made by the respondent was false and incorrect as it did not include the construction services provided on their own land, resulting in a higher tax liability. The department insisted that the show cause notice was rightly issued, and the proceedings against the assessee should be reinstated.3. On the other hand, the respondent's counsel argued that after the issuance of the discharge certificate by the department, no proceedings could be reopened against the assessee regarding the declaration made. They maintained that the respondent correctly disclosed the value of taxable services for construction activities done on the land taken for development from another owner, as per prevailing revenue circulars. The counsel cited relevant case law to support the argument that the VCES assessment cannot be reopened based on interpretational issues without substantial misdeclaration.4. After hearing both sides and examining the records, the Tribunal found that the discharge certificate was issued before the show cause notice, following which the department sought to reclassify the services. Citing precedent, the Tribunal held that reopening proceedings after the issuance of a discharge certificate would defeat the purpose of the immunity provided under the Finance Act 2013. Additionally, the Tribunal noted that the respondent had followed the circular issued by the Board regarding the taxation of construction services on one's own land, which was considered self-service and exempt from tax.5. The Tribunal concluded that there was no substantial misdeclaration on the part of the respondent, and the department's attempt to reclassify the services under WCS was merely an issue of interpretation. Relying on previous decisions and considering the facts of the case, the Tribunal dismissed the department's appeal, stating that the impugned order did not warrant any interference.In summary, the Tribunal upheld the Commissioner's order, emphasizing the importance of following circulars and precedent in tax classifications and highlighting the significance of discharge certificates in preventing arbitrary reopening of proceedings.