2024 (11) TMI 1344 - AT - Service Tax

Extended limitation under Section 73 rejected without proof of fraud or willful misstatement

The CESTAT Bangalore allowed the appeal partially. The tribunal held that extended limitation under Section 73 could not be invoked as no fraud, ... Classification of services - whether the works undertaken by the appellant are “original works” or “completion and finishing services”? Claim of abatement as per the Notification No.11/2014-S.T., dated 11-7-2014 during the relevant period - HELD THAT:- To invoke the proviso to Section 73 of the Finance Act, 1994, one of the ingredients such as fraud, collusion, wilful misstatement, suppression of facts or contravention of any of the provisions of this Chapter or the rules made thereunder with intent to evade payment of service tax, has to be established. In the instant case, there is nothing on record to establish that the appellant had suppressed any of the facts or there was any intention to evade payment of duty. In the case of Uniworth Textiles Ltd. [2013 (1) TMI 616 - SUPREME COURT] observed that unless there is positive evidence to prove that the appellant had suppressed the facts or contravened the provisions of the act, the extended provisions of limitation cannot be extended. Since, in the instant case, nothing is on record to prove the same, we are not inclined to confirm the demand beyond the normal period. Services rendered to the SEZ unit - the only objection taken by the Revenue is the Form A-2 which includes the specified services duly authorized is mentioned as “works contract services” but the specified services to be received by the SEZ unit are “Architect Services” - HELD THAT:- In the instant case, admittedly, the services were rendered to the SEZ unit by the appellant, the only objection raised was that the services rendered was ‘Works Contract Services’ while it is mentioned in the form as ‘Architect services’. The fact that services were rendered to the SEZ unit is not disputed and both the services are eligible for the benefit of exemption as per the letter dated 02.01.2018 issued by the Department of Commerce (SEZ Section), therefore, we do not find any reason to deny the exemption. Hence, the impugned order to this extent is set aside. The demand of Service Tax is confirmed for the normal period along with interest with regard to the ‘works contract services’ undertaken by the appellant in terms of Rule 2A(ii)(B)(ii) of Service Tax (Determination of Value) Rules, 2006. The demand is set aside for the services provided to the SEZ unit. Penalty under Section 78 of the Finance Act, 1994 is also set aside. The appeal is allowed by way of remand for redetermination of duty only for the normal period relating to ‘Works Contract Service’ rendered and for services meant for other than SEZ units. Issues Involved:1. Classification of services as 'Original Works' or 'Completion and Finishing Services.'2. Eligibility for exemption under Notification No. 12/2013-ST for services rendered to SEZ units.3. Allegations of suppression of facts and imposition of penalties.4. Incorrect turnover considered for certain financial periods.Issue-wise Detailed Analysis:1. Classification of Services:The primary issue was whether the services provided by the appellant fell under 'Original Works' or 'Completion and Finishing Services' as per Rule 2A(ii) of the Service Tax (Determination of Value) Rules, 2006. The appellant argued that their activities, which included civil, electrical, HVAC, and data networking works, were part of an indivisible contract and should be classified as 'Original Works,' attracting service tax at 40% of the total amount charged. They contended that these activities were related to new constructions and alterations, which should be considered 'Original Works' as per the CPWD manual and the Explanation to Section 66E of the Finance Act, 1994.The tribunal, however, upheld the impugned order, determining that the services provided were primarily 'Completion and Finishing Services,' which are taxed at 70% of the total amount charged. The tribunal noted that the services rendered did not constitute new constructions but rather involved activities like plastering, waterproofing, and installation of fixtures, aligning with the definition of 'Completion and Finishing Services.'2. Eligibility for SEZ Exemption:The appellant claimed exemption under Notification No. 12/2013-ST for services rendered to SEZ units, arguing that both 'Architect Services' and 'Works Contract Services' were authorized services for SEZ operations. They relied on a circular from the Ministry of Commerce, which listed both services as default authorized services for SEZs. The tribunal agreed with the appellant, noting that the services rendered were indeed to an SEZ unit and both services qualified for exemption. Consequently, the tribunal set aside the demand for service tax on services provided to SEZ units.3. Allegations of Suppression and Penalties:The tribunal examined whether the appellant had suppressed facts to evade tax, which would justify the imposition of penalties under Section 78 of the Finance Act, 1994. The appellant argued that they had regularly filed ST-3 returns and provided all necessary details, and the issue was merely one of legal interpretation rather than suppression. The tribunal found no evidence of suppression or intent to evade taxes, noting that the appellant had disclosed information in their returns. Therefore, the tribunal set aside the penalties imposed under Section 78.4. Incorrect Turnover Consideration:The appellant contended that the turnover considered for the financial year 2016-17 and April 2017 to June 2017 was incorrect. They provided a detailed reconciliation during the hearing. The tribunal did not explicitly address this issue in the judgment, focusing instead on the classification of services and the eligibility for SEZ exemption.Conclusion:The tribunal confirmed the demand for service tax for the normal period concerning 'Completion and Finishing Services' but set aside the demand for services provided to SEZ units. Penalties under Section 78 were also set aside. The appeal was allowed by way of remand for redetermination of duty for the normal period related to 'Works Contract Service' rendered to non-SEZ units.