2026 (2) TMI 600 - AT - Service Tax

Service tax on construction and plot sales: extended limitation, exclusions and abatement upheld; interest and penalties sustained.

Extended limitation under the proviso to Section 73(1) is attracted where the taxable provider willfully suppresses facts or wilfully withholds documents; ... Suppression of facts with intent to evade payment of service tax - extended period of limitation under proviso to Section 73(1) - taxable value for construction of residential complex after exclusion of sale of plots - abatement under Notification No. 26/2012 ST (as amended) - interest for non-payment of service tax u/s 75 - penalty equal to service tax u/s 78(1) - penalty for failure to file/assess (Sections 77(1) & 77(2)) - officer/agent/director liability u/s 78A - HELD THAT:- Nothing has been brought to our notice to establish that Shri Anil Kumar, Shri Sunil Kumar and Shri Anupam Sharma on whom penalties have been imposed under Section 78A have filed appeal against the impugned order. In absence of any appeal filed by the them we are not considering any submissions made challenging the penalties imposed upon them in this appeal filed by the appellant. From the above impugned order and the facts of the case we observe that entire demand has been made for the period 2012-13 to 2016-17. It is also well established from the facts that the appellant was through trying to evade the communications made by the department and the summons issued. They adopted a totally non cooperative attitude during the entire investigation. It is also on record that they had not produced the requisite documents at the time of audit and provide explanations to the queries raised during the audit in respect of the value of taxable services provided by them and declared in their ST-3 returns. This clearly indicate that appellant as not inclined to provide the relevant information to the revenue authorities to check the correctness of the returns filed by the appellant. It was only for the reason of non cooperation of the appellant with the audit, that matter was referred to Anti Evasion branch who undertook the investigation of the case. The conduct of appellant, the persons responsible to conduct the business of the appellant and chartered accountant / consultant of the appellant clearly show that appellant had willfully and knowingly suppressed the facts from the department with the intention of evade the payment of service tax. We do not find anything by which a conclusion in favour of appellant can be arrived. The conduct of the appellant and its functionaries is enough to establish the charge of suppression with intent to evade payment of service tax, leading to invocation of extended period of limitation as per proviso to Section 73 (1) of Finance Act, 1994 for making the demand. The penalties imposed under Section 78 ibid also are justified in view of the decision of the Hon’ble Supreme Court in case of Rajasthan Spinning and Weaving Mills Ltd. [2009 (5) TMI 15 - SUPREME COURT]. Thus we observe that the value of the taxable service has not been determined arbitrarily by taking 25% of the sale value of the flats etc., arbitrarily as claimed by the appellant, but has been done in accordance with the notification No 26/2012-ST dated 20.06.2012 as amended by the Notification No 2/2013_ST dated 01.03.2013. Thus we do not find any merits in the submissions made by the appellant to the effect that the taxable value has been determined arbitrarily without any justification. The determination of the taxable value has been done after allowing the abatement as per the above notification. Thus in view of the discussions as above we do not find any merits in the appeal filed by the appellant. We find that the demand was made by taking the figure from the balance sheet/ profit and loss account of the appellant that was collected from the office of registrar of company as appellant was not providing any documents to the investigating officers. We also observe that appellant has provided the information in respect of the value towards the sale of plot which has been taken into account while determining the taxable value. Further appellant has impugned order in para 11.4 specifically discusses the manner of determination of the taxable value in terms of Notification No 26/2012-ST dated 20.06.2012, by treating the entire amount that received by the appellant as per their balance sheet towards sale amount pertaining to construction of residential flats/ houses. The abatement of 25% and 30% as per the Notification No 26/2012-ST has been allowed. The basic determination is on the basis that these amounts were received prior to receipt of completion certificate. When the determination has been done under the said notification for the reason of non production of the completion certificate, revenue cannot be aggrieved to state that Commissioner has failed to take into account the completion certificate. We also observe that impugned order do not take the value of sale of plot as stated by the appellant but has only allowed deduction of the amount that could have been verified from the sale deed as towards the sale of plot, all the receipts have been taken towards the sale amount pertaining to construction of residential flats and houses. We do not find anything in the show cause notice or in the appeal filed by the revenue to show as to what amount was to e taxed under the category of site formation services. Apart from a bald submission that certain receipts were to be taxed under the category of site formation, nothing has been stated in the appeal providing the details of receipts which needs to be taxed under that category. Neither the show cause notice demanded any tax by treating any of receipts under this category. Thus we do not find any merits in this ground taken in the appeal filed by revenue. In view of the above we do not find anything in the appeal filed by the revenue substantiating the claims made. Both the appeals are dismissed. Issues: (i) Whether extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 could be invoked for demand of service tax for Oct 2012-Mar 2017 on the grounds of suppression of facts by M/s Gayatri; (ii) Whether amounts shown in company accounts attributable to sale of plots must be excluded and abatement under Notification No. 26/2012 ST applied in computing taxable value for construction services; (iii) Whether interest under Section 75 and penalties under Sections 77(1), 77(2), 78 and 78A of the Finance Act, 1994 are imposable.Issue (i): Whether extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 is attracted on facts.Analysis: The record shows repeated non cooperation, failure to produce customer ledgers, completion certificates and other documents despite multiple summonses and requests; director's statement promising but not producing documents; the adjudicating authority relied on balance sheets and Registrar of Companies records to reconstruct receipts. The Tribunal applied settled principles that willful suppression or non cooperation permitting inference of suppression justifies invoking the proviso to Section 73(1) to extend limitation.Conclusion: Extended period of limitation under proviso to Section 73(1) is rightly invoked; demand for the extended period is permissible (decision in favour of Revenue on this issue).Issue (ii): Whether amounts representing sale of developed plots must be excluded and abatement under Notification No. 26/2012 ST applied in computing taxable value.Analysis: The adjudicating authority examined sale deeds furnished by the party and excluded amounts verifiable as proceeds of plot sales from the balance sheet receipts. For receipts attributable to construction services (received before completion certificate), the authority applied the percentage abatement (25% for residential units subject to conditions; 30% for others) as per Notification No. 26/2012 ST (and its amendments). The Tribunal found no production of completion certificates and accepted the authority's approach of allowing abatement where conditions (including non inclusion of CENVAT credit) were satisfied on available material; revenue's contention that further proof was required was not substantiated.Conclusion: Sale of plots as evidenced by sale deeds is excluded from taxable service receipts and abatement under Notification No. 26/2012 ST as applied by the adjudicating authority is upheld (decision partly in favour of Assessee on exclusion and abatement; partly in favour of Revenue on taxable value determined after exclusions).Issue (iii): Whether interest under Section 75 and penalties under Sections 77(1), 77(2), 78 and 78A are imposable.Analysis: Given findings of short payment on taxable value determined and failure to deposit tax at prescribed intervals, interest under Section 75 is attracted. Willful suppression and contravention findings supported imposition of penalty under Section 78(1) equal to the short paid tax; failure to file/assess properly justified penalties under Sections 77(1) & 77(2). Evidence of directors' and CA's involvement and non cooperation supported penalties under Section 78A against specified persons.Conclusion: Interest under Section 75 and penalties under Sections 77(1), 77(2), 78(1) and 78A are imposable and were validly imposed (decision in favour of Revenue on imposition of interest and penalties).Final Conclusion: The adjudicating authority's order confirming service tax of Rs. 79,95,681 (after excluding verified plot sale receipts and allowing abatement as per Notification No. 26/2012 ST), and imposing interest and penalties, is upheld; the revenue's challenge to the exclusion/abatement is dismissed; both appeals before the Tribunal are dismissed.Ratio Decidendi: Where a taxable provider willfully suppresses material facts and fails to produce requisite documents, the extended limitation under proviso to Section 73(1) Finance Act, 1994 can be invoked; amounts attributable to sale of immovable plots evidenced by sale deeds are excludible from service taxable value, and abatement under Notification No. 26/2012 ST applies to construction services received prior to issuance of completion certificate provided the notification's conditions are met.