2024 (9) TMI 1548 - AT - Service Tax

CESTAT sets aside Rs. 1.73 crore service tax demand on limitation grounds for amusement park operator

M/s Vinline Engineering Pvt. Ltd. Versus Commissioner of CGST & Central Excise, Howrah,

CESTAT Kolkata allowed the appeal, setting aside the total confirmed demand of Rs. 1,73,60,105/- on limitation grounds. The appellant operated motor ... CENVAT Credit - common input services - non-maintenance of separate records - period 1.10.2014 to 30.06.2017 - extended period of limitation - Short payment of Service Tax under the category of Repairs and Maintenance services - . CENVAT Credit - common input services - non-maintenance of separate records - period 1.10.2014 to 30.06.2017 - HELD THAT:- Admittedly, the appellant is providing two different services, one that of servicing of motor vehicles and another one is on account of running of Amusement park. These two services are being rendered from two different locations. As per the Agreement copies submitted by the appellant, the appellant is running the Amusement park since the year 2010. Prior to 1.7.2012, the services were exigible to Service Tax only when the particular Service was within the services defined under Section 65 of the Finance Act 1994. Admittedly, this service was not under the Service Tax bracket at that time. Subsequently, from 1.7.2012, all the services except those which are listed in the Negative List under Section 66D or those services, which are exempted under Notification No.25/2012 ST dated 20.6.2012, are taken as services on which Service Tax is required to be paid - in view of the service coming under Negative List even after 2012, the appellants were not paying the Service Tax. The Negative List after amendment with effect from 1.6.2015, omitted (j) of Section 66D. Therefore, from 1.6.2015, the Amusement park activity are no more covered under the Negative List, nor is it being claimed by the appellant that they are covered under the provisions of exemption Notification No.25/2012 ST dated 20.6.2012 as amended. It can be observed that this clause (a) of Section 66D provision is specifically applicable for the services rendered by the Government or local authority. In the present case, the Amusement park is not run by the Municipality. Though the appellant would have taken permission from the Municipal Corporation to operate the same, it cannot be by any stretch of imagination be taken as a service being rendered by the Govt. or Local authority. Without dispute, the Amusement park is being run by the appellant who is a commercial entity and not any Govt / local authority. Hence, it cannot be accepted that the arguments of the appellant on this count. Thus it is clear that after 1.6.2015, the appellants are neither covered under Negative List nor are they covered under any exemption Notification. Time limitation - HELD THAT:- There are no allegation of the Revenue that they are charging the Service Tax or collecting the same from the visitors to the Amusement park. Admittedly right from the beginning of their operations in 2010, they were enjoying complete exemption from payment of Service Tax, which became taxable only with effect from 1.6.2015. Generally, when any new service becomes eligible to Service Tax, or any prior exemption is withdrawn, it is for the Revenue to immediately undertake investigation and verification of providers of such service so as to ensure that such persons are made to pay the Service Tax - The fact that there is no allegation that they were collecting the Service Tax, would lend credence to the appellant’s submission about their bonafide belief that they are not required to pay the Service Tax. In the case of the appellant, they were already operating under the jurisdiction of Service Tax authorities and were filing their ST 3 Returns and their turnover as per the P&L accounts and Balance Sheet could have been checked for proper compliance. There is nothing to indicate that any scrutiny was being undertaken for the ST 3 Returns being filed. Short payment of Service Tax under the category of Repairs and Maintenance services - HELD THAT:- It is found that the data has been gathered by the Revenue from the Balance Sheet figures and after reconciliation with the ST- 3 Returns. Even here, without taking up any scrutiny of the Returns periodically, this demand has been raised and confirmed after 5 years. In respect of Manpower Supply, since the Service Tax payable would be eligible for cenvat to the appellant himself, it is found that this would result in a revenue neutral situation, wherein no suppression can be alleged - no case of suppression has been made out against the appellant - even in respect of the confirmed demand of Rs.19,32,214/- towards the Maintenance and Repairs Services and Rs.4,68,928/- towards the Manpower Services cannot be legally sustained on account of time bar. Relying on the ratio laid down by the Hon’ble High Courts of Telangana and Kolkata, wherein it is held that the Revenue cannot directly demand the reversal @ 6/8% of the exempted turnover, without asking the assessee to reverse the cenvat credit on proportionate basis, we set aside the confirmed demand of Rs.72,94,797/- on merits. As per observations in the earlier paragraphs that no case has been made out towards suppression, read with the cited case laws on limitation, it is held that the confirmed demand of Rs.72,94,797/- is not legally sustainable even on account of time bar. The total confirmed demand of Rs. 1,73,60,105/- is set aside on account of limitation - The confirmed demand of Rs.72,94,797/- on account of CENVAT availment is set aside both on account of merits and on account of limitation. Appeal allowed. Issues Involved:1. Demand for CENVAT Credit on common input services.2. Service Tax demand for running an Amusement Park.3. Short payment of Service Tax on Repairs and Maintenance of motor vehicles.4. Service Tax demand on Manpower services.5. Invocation of extended period for issuing Show Cause Notice.Detailed Analysis:1. Demand for CENVAT Credit on Common Input Services:The appellant was accused of taking CENVAT Credit for commonly used input services without maintaining separate accounts. A demand of Rs.72,94,797/- was made on this basis. The appellant argued that they maintained separate accounts for their vehicle repair and amusement park activities, which are located 100 km apart. They claimed they did not take CENVAT Credit for services used at the amusement park. The Tribunal found that the demand was calculated based on the total turnover of exempted services, which is not justified. Citing case laws, it was held that the department cannot directly demand reversal at a fixed percentage of exempted turnover without allowing proportionate reversal. The Tribunal set aside the demand both on merits and on account of time bar.2. Service Tax Demand for Running an Amusement Park:The appellant argued that the amusement park services were exempt under Section 66D(j) until 1.6.2015, and they believed they were still exempt under Section 66D(a) as services by the Government or a local authority. The Tribunal found that the amusement park was not run by a government or local authority but by a commercial entity. Hence, the service was taxable after 1.6.2015. However, the Tribunal accepted the appellant's argument on time bar, noting that the department did not raise any query for five years and there was no evidence of willful suppression. The demand of Rs.1,49,58,963/- was set aside on account of time bar.3. Short Payment of Service Tax on Repairs and Maintenance of Motor Vehicles:The appellant contended that they maintained proper records and the short payment of Rs.19,32,214/- was due to the inclusion of free services in their accounts. The Tribunal noted that the demand was raised after five years without periodic scrutiny of returns. It was held that no suppression could be alleged, and the demand was set aside on account of time bar.4. Service Tax Demand on Manpower Services:The appellant argued that the expenditure towards manpower supply was accounted for as labor charges, and the demand of Rs.4,68,928/- was erroneous. The Tribunal found that since the Service Tax payable would be eligible for CENVAT Credit, it resulted in a revenue-neutral situation. The demand was set aside on account of time bar.5. Invocation of Extended Period for Issuing Show Cause Notice:The appellant argued that the Show Cause Notice issued on 18.6.2020 for transactions between 1.6.2015 to 30.06.2017 was time-barred. The Tribunal found that the appellant had been regularly filing ST-3 returns and there was no evidence of willful suppression. Citing case laws, it was held that the extended period could not be invoked without evidence of deliberate intent to evade tax. The entire demand of Rs.1,73,60,105/- was set aside on account of limitation.Summary:(a) The total confirmed demand of Rs.1,73,60,105/- is set aside on account of limitation.(b) The confirmed demand of Rs.72,94,797/- on account of CENVAT availment is set aside both on account of merits and on account of limitation.The appellant is eligible for consequential relief as per law.