2025 (5) TMI 1912 - AT - Service Tax

Revenue cannot file cross objections under Sections 84 and 85 but matter remanded following Eveready precedent

M/s. Arun Excello Foundation Pvt Ltd Versus Commissioner of GST and Central Excise, Chennai North Commissionerate

CESTAT Chennai rejected appellant's contentions and cross objections, ruling that Sections 84 and 85 of the Act did not empower filing such cross ... Rejection of appellant's contentions and cross objections on the ground that neither Section 84 nor Section 85 of the Act empowered the filing of such cross objections - HELD THAT:- A similar issue came up for consideration by the Tribunal as can be seen from its decision in Eveready Industries India Ltd v CCE, Meerut, [2011 (9) TMI 533 - CESTAT, NEW DELHI], where the matter was remanded to Commissioner (Appeals) for decision on merits. The decision taken by the Tribunal is in identical fact circumstances. There are no reason to adopt a different course of action. Matter remanded to the Learned Commissioner (Appeals) to consider the cross-objections filed by the appellant and to take a decision on its merits, duly adhering to the principles of natural justice - appeal allowed by way of remand. 1. ISSUES PRESENTED and CONSIDERED- Whether the appellant was entitled to file cross objections against the Revenue's appeal before the Commissioner of Service Tax (Appeals) under the provisions of the Finance Act, specifically Sections 84 and 85, despite the absence of explicit statutory empowerment for cross objections in these sections.- Whether the amount collected by the appellant as maintenance charges should be treated as part of the bundled works contract service taxable under the category of works contract service or as a separate 'management, maintenance or repair service' liable to tax at full rate.- Whether the extended period for demand of service tax invoked by the department was sustainable.- Whether the appellant was entitled to Cenvat credit as claimed in the cross objections, despite this issue being extraneous to the original order under appeal.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Maintainability of Cross Objections under Sections 84 and 85 of the Finance ActRelevant legal framework and precedents:Sections 84 and 85 of the Finance Act provide the procedural framework for appeals before the Commissioner (Appeals) in service tax matters. Unlike other statutes such as the Central Excise Act (Section 35 E(4)) or the Finance Act provisions for Central Excise (Section 86(4)), these sections do not explicitly provide for filing cross objections by a party who has not filed an appeal but wishes to challenge aspects of the impugned order when the other party has filed an appeal.The Tribunal referred to its earlier decision in Eveready Industries India Ltd v CCE, Meerut, where the issue of maintainability of cross objections before the Commissioner (Appeals) was considered. The Tribunal had remanded the matter for decision on merits, relying on a Karnataka High Court judgment (Southern Auto Products v. CCE) which held that cross objections filed at the direction of the Commissioner (Appeals) are maintainable.Court's interpretation and reasoning:The Tribunal noted that the appellant had filed cross objections as directed by the Commissioner (Appeals) and that the Commissioner (Appeals) had rejected these cross objections on the ground that Sections 84 and 85 did not empower such filing. The Tribunal found this approach unsustainable, especially in light of the precedent where cross objections were held maintainable to ensure fairness and adherence to natural justice.Application of law to facts:The Tribunal held that the appellant's right to have its cross objections considered on merits could not be negated by a narrow reading of Sections 84 and 85. The Tribunal emphasized that procedural provisions should be interpreted so as to advance justice and not defeat substantive rights. Accordingly, the Tribunal set aside the impugned order to the extent of rejection of cross objections and remanded the matter for fresh consideration on merits.Treatment of competing arguments:The Revenue contended that the statutory provisions did not permit cross objections and thus the rejection was justified. The appellant argued for a liberal and purposive interpretation of the provisions to allow cross objections, particularly when filed at the direction of the appellate authority. The Tribunal accepted the appellant's submissions and the supporting precedent.Conclusion:The Tribunal held that cross objections filed by the appellant before the Commissioner (Appeals) are maintainable and must be adjudicated on merits, thereby remanding the matter for fresh decision.Issue 2: Taxability of Maintenance Charges Collected by the AppellantRelevant legal framework and precedents:The appellant was engaged in construction of residential complexes and collected maintenance charges from customers. The appellant included these charges in the taxable value of the works contract service and discharged service tax accordingly. The department contended that these charges represented a separate 'management, maintenance or repair service' taxable at full rate, not forming part of the bundled works contract service.The appellant relied on Section 65A of the Finance Act, which defines 'bundled services' and allows for combined valuation of services that have essential characteristics of works contract.Court's interpretation and reasoning:The appellant argued that since the maintenance charges were collected prior to handing over the flats and were paid as part of the construction charges, these formed part of the bundled works contract service. Further, there was no separate service receiver for the alleged management service, indicating it was a self-service bundled within the works contract.Application of law to facts:The Tribunal noted that the appellant had discharged service tax on the entire value, including maintenance charges, under the works contract category. The department's demand for differential tax on the ground that maintenance charges constituted a separate taxable service was challenged by the appellant on the basis of the bundled services concept.Treatment of competing arguments:The department maintained that the maintenance charges were distinct and taxable separately. The appellant relied on judicial precedents and the statutory definition of bundled services to support its position. The Tribunal observed that this issue was raised in the cross objections but was not decided on merits by the Commissioner (Appeals) due to the rejection of cross objections.Conclusion:The Tribunal did not decide this issue finally but remanded the matter for fresh consideration, directing the Commissioner (Appeals) to consider the appellant's contentions on the taxability of maintenance charges on merits.Issue 3: Sustainability of Extended Period for Demand of Service TaxRelevant legal framework:The department invoked the extended period for demand of service tax for the period June to September 2009. The appellant contested the validity of this extended period invocation in its cross objections.Court's interpretation and reasoning:The issue was raised but was not considered on merits by the Commissioner (Appeals) due to the rejection of cross objections. The Tribunal found that the appellant's challenge to the extended period was a legitimate ground that deserved adjudication.Application of law to facts:The Tribunal directed that this issue also be considered afresh by the Commissioner (Appeals) along with other grounds raised by the appellant.Conclusion:The Tribunal remanded the issue for decision on merits.Issue 4: Entitlement to Cenvat Credit Raised in Cross ObjectionsRelevant legal framework:The appellant inadvertently raised entitlement to certain Cenvat credit in the cross objections, which was extraneous to the original order under appeal.Court's interpretation and reasoning:The Commissioner (Appeals) rejected the claim for restoring Cenvat credit on the ground that the provisions did not empower consideration of such a claim via cross objections. The Tribunal noted that this issue was extraneous and did not impact the merits of other grounds.Application of law to facts:The Tribunal did not expressly direct reconsideration of the Cenvat credit claim but remanded the entire matter for fresh adjudication, thereby implicitly allowing the Commissioner (Appeals) to consider all relevant issues in accordance with law.Conclusion:The Tribunal left the issue open for fresh consideration in the remand proceedings.3. SIGNIFICANT HOLDINGS'...neither Section 84 nor Section 85 of the Act which deals with 'appeals to the Commissioner of Central Excise (Appeals)', have provisions like Section 35 E(4) of the Central Excise Act or Section 86(4) of the Act empowering the other party to assail the impugned order by filing cross objection memorandum notwithstanding the fact that the other party may not have filed any appeal against the impugned order.''...the findings of the learned Commissioner Appeals in the impugned OIA to that extent is unsustainable and is liable to be set aside.''...the cross-objections filed by the appellants are maintainable in the light of the declaration of law by the Hon'ble High Court in the above referred judgment of the Southern Auto Products.''...We remand the matter to the Learned Commissioner (Appeals) to consider the cross-objections filed by the appellant and to take a decision on its merits, duly adhering to the principles of natural justice.'Core principles established:- Cross objections filed before the Commissioner (Appeals) in service tax appeals, even if not explicitly provided under Sections 84 and 85, are maintainable when filed at the direction of the appellate authority and must be adjudicated on merits.- Procedural provisions should be interpreted purposively to prevent denial of substantive rights and to uphold principles of natural justice.- The classification of charges collected as part of a bundled works contract service versus separate taxable services requires detailed factual and legal examination on merits.- Extended period demands and claims for Cenvat credit raised in cross objections must be considered on merits in appropriate proceedings.Final determinations:The Tribunal allowed the appeal by way of remand, setting aside the impugned order to the extent it rejected the appellant's cross objections and directing the Commissioner (Appeals) to decide all issues raised by the appellant on merits, including the taxability of maintenance charges, the validity of extended period invocation, and entitlement to Cenvat credit, while ensuring adherence to natural justice.