2022 (5) TMI 142 - AT - Service Tax

Tribunal rules in favor of Appellant on Service Tax issues

The Tribunal ruled in favor of the Appellant on various issues related to Service Tax liabilities. The Appellant was found not liable to pay Service Tax ... Levy of service tax - entire construction activity is sub-contracted - appellant not undertaking any construction by themselves - whether the Appellant is liable to pay Service Tax under complex service prior to 1.6.2007? - HELD THAT:- As per decision of the Hon’ble Supreme Court in COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] held that composite contracts involving transfer of property in goods is not liable to Service Tax prior to 1.6.2007. Thus, the law on this point is well settled. Though the said grounds were not raised in the Show Cause Notice or in the impugned order, since the decision of the Hon’ble Supreme Court is binding on this Tribunal it cannot be held that the Appellant was liable to pay Service Tax. Hence, the finding of the Commissioner that the Appellant was not liable to pay Service Tax during the relevant period i.e. from April 2005 to March 2007, is upheld. Once the Appellant is not liable to pay Service Tax, they are also not entitled to avail cenvat credit of the amount collected in the name of Service Tax and is liable to be paid to the Government Exchequer. Applicability of provisions of Section 11D - HELD THAT:- The present case is one where tax was collected even though the activity was liable to tax. Only sub-section (1A) of Section 11D covers such a situation and this sub-section was introduced only in 2008 - The present case is not covered under Sub-section (1) which deals with collection of an amount of tax in excess of the liability - the demand under Section 11D for the period upto 17.04.2006 is set aside. Demand under Section 73A(2) for the period after 18.04.2006 is upheld - The demand of interest under Section 73B is set aside - The imposition of penalty under Section 77 (2) set aside - The demand towards ineligible credit is confirmed and the amount reversed as payment of Service Tax will be treated as reversal - The demand of Service Tax of Rs.17,85,000 on import of service, along with interest and imposition of penalty are set aside. Appeal allowed in part. Issues Involved:1. Liability of the Appellant to pay Service Tax under 'Construction of Complex Service.'2. Eligibility of the Appellant to avail CENVAT Credit.3. Demand of Service Tax under reverse charge mechanism for technical services received from foreign persons.4. Applicability of Section 11D of the Central Excise Act and Section 73A of the Finance Act.5. Imposition of interest and penalties under various sections of the Finance Act.Issue-wise Detailed Analysis:1. Liability to Pay Service Tax under 'Construction of Complex Service':The Tribunal observed that as per the Supreme Court's decision in CCE v L&T Limited [2015 (39) STR 913 SC], composite contracts involving the transfer of property in goods were not liable to Service Tax prior to 1.6.2007. Thus, the Appellant was not liable to pay Service Tax during the relevant period (April 2005 to March 2007). The Tribunal upheld the Commissioner's finding that the Appellant was not liable to pay Service Tax during this period.2. Eligibility to Avail CENVAT Credit:Since the Appellant was not liable to pay Service Tax, they were not entitled to avail CENVAT Credit of the amount collected as Service Tax. The Tribunal referenced a similar case, Indu Eastern Province Project Ltd., and concluded that the Appellant must deposit the amount collected as Service Tax with the Government under Section 73A(2) of the Finance Act, 1994. The Tribunal confirmed the demand for the reversal of ineligible CENVAT Credit and treated the amount reversed as payment of Service Tax as a reversal.3. Demand of Service Tax under Reverse Charge Mechanism:The demand of Service Tax of Rs.17,85,000 on import of technical consultancy services during 2005-06 was set aside. The Tribunal relied on the Supreme Court's decision in the Indian National Shipowners case, which held that the liability to pay Service Tax under import of service was effective from 18.04.2006. Consequently, the demand of interest and penalty related to this issue was also set aside.4. Applicability of Section 11D of the Central Excise Act and Section 73A of the Finance Act:The Tribunal set aside the demand under Section 11D for the period up to 17.04.2006, as this section deals with the collection of an amount in excess of the tax liability, which was not applicable in this case. For the period after 18.04.2006, the demand under Section 73A(2) was upheld, as this section covers the collection of an amount as representing Service Tax when it was not required to be collected.5. Imposition of Interest and Penalties:The Tribunal set aside the demand of interest under Section 73B, as there was no statutory provision for the collection of interest in cases where the amount was collected as tax which was not required to be collected under Section 73A(2). The penalty of Rs.5000 imposed under Section 77(2) was also set aside due to the contentious nature of the issues and widespread confusion during the relevant period.Conclusion:A. The demand under Section 11D of the Central Excise Act for the period up to 17.04.2006 is set aside.B. The demand under Section 73A(2) for the period from 18.04.2006 is upheld.C. The demand of interest under Section 73B is set aside.D. The imposition of penalty under Section 77(2) is set aside.E. The demand towards ineligible credit is confirmed, and the amount reversed as payment of Service Tax will be treated as reversal.F. The demand of Service Tax of Rs.17,85,000 on import of service, along with interest and imposition of penalty, is set aside.The appeal is thus allowed in part as per the above terms.