2025 (8) TMI 7 - AT - Service Tax

Appellant wins appeal; service tax demand, interest, and penalties quashed under Sections 76 and 78 for disclosed abatement

PYRAMID ENGINEERS Versus COMMISSIONER OF SERVICE TAX-SERVICE TAX - AHMEDABAD

The CESTAT Ahmedabad allowed the appellant's appeal, setting aside the demand for service tax, interest, and penalties. The tribunal held that the ... Benefit of N/N. 1/2006-ST dated 1st March, 2006 - appellant failed to include value of raw material supplied while rendering the services, in the gross value charged by them - suppression of facts or not - extended periof limitation - levy of penalty - HELD THAT:- The learned Commissioner (Appeals) has erred in upholding the Order-in-Original passed by the first Adjudicating Authority and rejecting the appeal. The stand of the appellant is that they have provided Erection / Construction Services under different contracts and no Cenvat Credit was taken in respect of those contracts, regarding which abatement has been claimed. This fact has not been challenged in the Show Cause Notice. The consultant of the appellant is agreed upon that the appellant has not availed Cenvat Credit regarding those contracts in respect of which, benefit of abatement was claimed and appellant has not availed Cenvat Credit and taken the benefit of abatement together regarding same contracts. It is also pertinent to note here that learned Commissioner and the first Adjudicating Authority have confirmed the demand on the assumption that once the assessee had taken Cenvat Credit for any contract no abatement can be allowed to that assessee for any other outward supply under any other contract. However, from the perusal of provisions incorporated in Notification No. 1/2006-ST, it is clear that Cenvat Credit is not allowed only for the inputs / input services which are used for providing such taxable services. Thus, this notification is ‘qua output service’ and not ‘qua supplier’. This notification in no way creates any restriction on availing Cenvat Credit for other inputs / input services used for providing other services on which abatement is not claimed. Invocation of extended period of limitation - HELD THAT:- It is agreed with the learned consultant for the appellant that demand for the month of September-2007, regarding which abatement of Rs. 4.35 lacs has been claimed, is barred by limitation as the appellant has clearly shown this abatement in their return ST-3 and there can be no suppression of facts with the intention to evade tax and therefore, extended period cannot be invoked, by the Revenue. Levy of penalty - HELD THAT:- No case for imposing penalty under Section 76 as well as under Section 78 is made out and the first Adjudicating Authority and the learned Commissioner should not have imposed penalty under both the Sections 76 and 78 simultaneously. The impugned order passed by the learned Commissioner dated 15th December, 2014 and Order-in-Original dated 27th November, 2013 passed by the Assistant Commissioner are set aside along with demand of service tax, interest and penalties as mentioned in the impugned orders - Appeal allowed. ISSUES: Whether the appellant was entitled to claim abatement under Notification No. 1/2006-ST dated 1st March, 2006 on 'Erection and Commissioning Services' and 'Construction of Commercial or Industrial Building Services' while availing Cenvat Credit on input services.Whether the value of goods and materials supplied or used by the service provider must be included in the gross amount charged for the purpose of claiming abatement under Notification No. 1/2006-ST.Whether the appellant can claim abatement on some contracts and simultaneously avail Cenvat Credit on other contracts without violating the provisions of Notification No. 1/2006-ST.Whether the demand of service tax for the month of September 2007 is barred by limitation in the absence of suppression or mis-statement of facts with intent to evade tax.Whether penalties under both Section 76 and Section 78 of the Finance Act, 1994 can be imposed simultaneously on the appellant. RULINGS / HOLDINGS: The appellant was not entitled to claim abatement under Notification No. 1/2006-ST if the value of goods and materials supplied or used was not included in the gross amount charged, as the notification 'stipulates that the gross amount charged shall include the value of the goods and material supplied or provided or used by the provider of the construction services.'The appellant's claim that abatement and Cenvat Credit were not availed simultaneously on the same contracts was accepted, and it was held that 'this notification is 'qua output service' and not 'qua supplier'' and does not restrict availing Cenvat Credit for other inputs/input services used for providing other services on which abatement is not claimed.The demand of service tax for the month of September 2007 was held to be barred by limitation because the abatement was clearly shown in the ST-3 return and there was no suppression or mis-statement of facts with intent to evade tax, thus 'extended period cannot be invoked.'Penalties under Section 76 and Section 78 cannot be imposed simultaneously, and 'no case for imposing penalty under Section 76 as well as under Section 78 is made out.'The appeal was allowed, the impugned orders setting demand of service tax, interest, and penalties were set aside, and any amounts already deposited were ordered to be refunded with applicable interest. RATIONALE: The Court applied the provisions of Notification No. 1/2006-ST dated 1st March, 2006, which governs the conditions for availing abatement on taxable services related to erection, commissioning, and construction, emphasizing that the gross amount charged must include the value of goods and materials supplied or used.The Court distinguished between the scope of the notification as being 'qua output service' rather than 'qua supplier,' clarifying that the restriction on availing Cenvat Credit applies only to inputs/input services used for the same taxable service on which abatement is claimed, allowing separate contracts to be treated independently.Regarding limitation, the Court relied on the principle that extended period of limitation cannot be invoked absent any suppression or intention to evade tax, supported by the appellant's disclosure in statutory returns.The Court recognized settled legal position that penalties under Section 76 and Section 78 of the Finance Act, 1994 are mutually exclusive and cannot be imposed simultaneously for the same cause of action.The decision reflects a doctrinal clarification on the interplay between abatement claims and Cenvat Credit availing, and proper application of limitation provisions and penalty imposition under service tax law.