2024 (4) TMI 472 - AT - Service Tax

Construction services to National Physical Laboratory deemed taxable as commercial concern despite government ownership

M/s. N.N. Buildcon Pvt. Ltd. Versus Commissioner of Service Tax, Delhi-I

CESTAT New Delhi held that construction services provided to NPL (National Physical Laboratory) constituted taxable CICS as NPL was deemed a commercial ... Recovery of service tax - declared service - commercial or industrial construction service [CICS] - construction of a Metrology Block for the National Physical Laboratory, New Delhi [NPL] - NPL, an institute under CSIR and an authonomous body registered under the Societies Act, 1860, can be considered as a commercial concern/government authority or not - demand raised on the appellant for period prior to merger (for the amount received by M/s. N.N. & Company, a proprietorship firm) can be excluded from computation of tax liability or not - exclusion of value of goods transacted on payment of VAT - Extended period of Limitation - levy of Penalty. Whether NPL, an institute under CSIR and an authonomous body registered under the Societies Act, 1860, can be considered as a commercial concern/government authority? - HELD THAT:- The Commissioner did not accept the contention of the appellant that construction of metrological building was for non commercial purposes. The Commissioner found that NPL was engaged in activities like measurement, calibration, testing of devices/instruments and equipments and scientific and technical consultancy services on payment basis. It was also registered with the service tax department for providing scientific and technical consultancy services. The Commissioner, therefore, found as a fact that NPL was a commercial concern/organization established by Council of Scientific and Industrial Research. Thus, the construction services provided by the appellant to NPL upto 30.06.2012 qualified as taxable service under CICS - the Commissioner held that NPL was not set up by an Act of Parliament or a State Legislature and, therefore, was not a ‘governmental authority’ under the Exemption Notification. Whether the demand raised on the appellant for period prior to merger (for the amount received by M/s. N.N. & Company, a proprietorship firm) can be excluded from computation of tax liability? - HELD THAT:- The Commissioner found that the amount of rent received from immovable property prior to merger of the appellant with M/s. N.N. and Company could not be assessed in the hands of the assessee - with regard to renting of immovable property for the period after merger the Commissioner held the overall values of services are more than Rs. 10 lacs and hence threshold exemption is not available to them under Notification No. 8/2008 dated 01.03.2008 and therefore I hold that they are liable to pay Service Tax amounting to Rs. 9,891/- Rs. 9,891/- Rs. 12,948/- Rs. 12,948/- and Rs. 12,948/- for the period 2010-11, 2011-12, 2012-13 and 2014-15 respectively on such taxable services of “Renting of Immovable Property” amounting to Rs. 96,030/- Rs. 96,030/- Rs. 1,04,760/- and Rs. 1,04,760/- for the said period. Whether value of goods transacted on payment of VAT needs to be excluded and benefit of the Exemption Notification can be extended? - HELD THAT:- It was held by Commissioner that though the assessee has failed to produce records to indicate that they had opted for the Compositin scheme before 30.11.2011, I observe taht the assessee cannot be denied a substantial right for procedural lapses. Accordingly, I allow benefit of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 as amended to the assessee. Thus, the assessee is liable to pay Service Tax on the taxable services provided by them @4.12% (including cesses) from October 2011 to March 2012 and @ 4.944% (including cesses) for the period April 2012 to June 2012. Whether the extended period was rightly invoked and whether, penalty could be imposed? - HELD THAT:- The Supreme Court in M/S CONTINENTAL FOUNDATION JOINT VENTURE SHOLDING, NATHPA HP VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-I [2007 (8) TMI 11 - SUPREME COURT] held that The expression “suppression” has been used in the proviso to Section 11A of the Act accompanied by very strong words as ‘fraud’ or “collusion” and, therefore, has to be construed strictly. Mere omission to give correct information is not suppression of facts unless it was deliberate to stop the payment of duty. Suppression means failure to disclose full information with the intent to evade payment of duty. When the facts are known to both the parties, omission by one party to do what he might have done would not render it suppression. When the Revenue invokes the extended period of limitation under Section 11-A the burden is cast upon it to prove suppression of fact. An incorrect statement cannot be equated with a willful misstatement. The latter implies making of an incorrect statement with the knowledge that the statement was not correct - The only relief that can be granted to the appellant is regarding the extended period of limitation under the proviso to section 73(1) of the Finance Act in so far as it relates to the first show cause notice dated 21.04.2014. The matter is, therefore, remitted to the assessing officer only to calculate the demand covered by the first show cause notice which falls in the extended period of limitation so that this demand can be excluded with consequential penalty from the total demand confirmed by the Commissioner. The rest of the demand confirmed by the Commissioner in the impugned order dated 28.02.2017 is confirmed - appeal allowed by way of remand. Issues Involved:1. Whether NPL can be considered as a commercial concern/government authority.2. Whether the demand raised on the appellant for the period prior to merger can be excluded from computation of tax liability.3. Whether the value of goods transacted on payment of VAT needs to be excluded and benefit of the Exemption Notification can be extended.4. Whether the extended period was rightly invoked and whether penalty could be imposed.Summary:1. Commercial Concern/Government Authority:The Commissioner found that NPL, engaged in activities like measurement, calibration, testing of devices/instruments, and scientific and technical consultancy services on a payment basis, is a commercial concern. NPL was registered with the service tax department for providing scientific and technical consultancy services. Thus, the construction services provided by the appellant to NPL up to 30.06.2012 qualified as taxable service under CICS. Post 01.07.2012, the service rendered by the appellant was a 'declared service' u/s 66E of the Finance Act. The Commissioner held that NPL was not a 'governmental authority' under the Exemption Notification as it was not set up by an Act of Parliament or a State Legislature.2. Demand Prior to Merger:The Commissioner found that the amount of rent received from immovable property prior to the merger of the appellant with M/s. N.N. and Company could not be assessed in the hands of the assessee. However, post-merger, the appellant was liable to pay service tax on renting of immovable property as the threshold exemption was not available.3. Exclusion of VAT Paid Goods:The Commissioner held that the benefit of Notification No. 12/2003-ST could not be extended to the appellant due to the lack of documentary evidence regarding the purchase of materials and VAT payment for the NPL project. However, the appellant was allowed the benefit of the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007, and was liable to pay service tax at specified rates for the relevant periods.4. Extended Period of Limitation and Penalty:The Commissioner invoked the extended period of limitation u/s 73(1) of the Finance Act, stating that the appellant had willfully and deliberately suppressed facts to evade tax. However, the Tribunal found that the necessary ingredients for invoking the extended period of limitation, namely willful suppression of facts with intent to evade payment of service tax, did not exist. The Tribunal cited various judgments, including those from the Supreme Court and Delhi High Court, to support this view. As a result, the extended period of limitation could not be invoked for the first show cause notice dated 21.04.2014.Conclusion:The Tribunal remitted the matter to the assessing officer to calculate the demand covered by the first show cause notice that falls within the extended period of limitation, excluding this demand and consequential penalty from the total demand confirmed by the Commissioner. The rest of the demand confirmed by the Commissioner was upheld. The appeal was allowed only to the extent indicated above.