AI Drafter 
TaxTMI 
TaxTMI 
2018 (4) TMI 1166
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....id under VCES by the applicant. The applicant is registered with Service Tax vide Registration No AAHPU5129MST001 for providing taxable services namely, Erection, Commissioning & Installation Service, Maintenance or Repair Service and Business Auxiliary Service. 1.2 During the course of verification of records of the applicant by the -survey Intelligence and Research Section of the Chennai Il Service Tax Commissionerate, it was notice that the applicant had filed VCES I (Revised) declaration declaring Service Tax liability of Rs. 1,86,280/- comprising of Rs. 1,01,104/- in respect of Erection, Commissioning and Installation service for Dec 2012 and Rs. 85,176/- for Renting of Immovable Property services for the period from October, 2007 to December, 2012. Perusal of Income Tax returns/balance sheets revealed that the applicant had shown rental income as "Income from Other sources and Sales, Labour Charges/ Services, AMC as detailed below: (in Rupees) Period Income as per Balance sheet Sales Income Labour Charges AMC charges Rental income 2007-08 23974534 21187013 2787521 0 144000 2008-09 26370667 23516824 2853843 0 16....
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....013, subsequently revised vide VCES-I (revised) on 30-12-2013 declaring Service Tax liability in respect of Rental income as Rs. 85,176/- and in respect of Erection, Commissioning and Installation Services As Rs. 1,01,104/- totalling Rs. 1,86,280/- for the period from 10/2007 to 12/2012.the applicant also paid the first instalment of 50% liability on 28-12-2013 and the 2^nd instalment on 15-7-2014. On comparing the Service Tax liability for the same period, it appeared that the VCES-I filed by the applicant was substantially false as the applicant had not fully declared the Service Tax liability for the period from 10/2007 to 12/2012 in respect of the services provided by them. The applicant by suppressing substantial tax liability in the VCES-I application filed it appeared are not eligible for immunity from penalty and interest under VCES, 2013. 11.5 Hence, the applicant was issued with the aforementioned cause Show Notice SCN No. 40/2014, dated 26-12-2014 (C.NO. IV /09/23/2014- STC 11Adjn) by the Commissioner of Service Tax, Service Tax Commissionerate, Chennai II asking them to explain as to why * (i) Service Tax of Rs. 20,01,441/- should not be demanded from ....
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....S.T., dated 22-5-2007. • Both sale of goods and service is involved in the "labour charges' mentioned in the balance sheet apart from Sale of Goods which is exclusively mentioned in the balance sheet. • The applicant has calculated the Service Tax on the total value on the basis of works contract and for the years 2007-08 to 2011-12, the applicant has paid excess Service Tax over and above the tax payable and there is short payment of Service Tax of Rs. 4,29,880/- for the period 2012-13 (upto Dec 2012) which is admitted and paid. • The applicant filed S.T.3 returns for the period from October 2007 to December 2012 belatedly and could not pay the late fees due to extreme financial trouble • The applicant prayed for waiver of late fee and requested the Bench to condone non-filing of returns as required under Proviso to Sec 32E (1) of the Central Excise Act, 1944 and as the maximum penalty for non-filing is only Rs. 10000/- in terms of Section 77 of the Finance Act, 1994 the application may be allowed condoning the non filing of S.T. 3 returns. 2.3 The applicant being first generation service provider was not aware of th....
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....ng Service Tax at full rate on a portion of labour charges without any abatement under Notification No. 12/2003-S.T. The applicant has also not shown sale value separately in the invoices. • The contention of the applicant is not acceptable as the condition of prior intimation is mandatory and not a technical deviation. • The applicant, being a provider of Erection & Commissioning service of Air conditioners, are in a position to account for the material cost and labour charges separately in the Balance sheet and whereas works contract is applicable only when the applicant is not able to segregate the material portion and service portion of contract. • The contention of the applicant that they had paid Service Tax of Rs. 4,29,880/-and interest of IQs. 3,34,397/- for Works contract for the period April, 2012 to December, 2012 is not acceptable as they had not filed ST-3 returns for the relevant period to substantiate the same. • The applicant has not produced any reconciliation statement toshow that the income shown as Labour/Service charges in Balance sheet are inclusive of Material/ spare value and labour charges and the claim be....
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.... 1-6-2017, only yesterday, prayed for two weeks' time for filing their detailed comments on the same. 4.4 The learned departmental representative reiterated the contents of the Commissioner's said report dated 1-6-2017, and stated that the applicant had earlier declared the services under 'Erection, Commissioning or Installation Service' and as an after thought now they are trying to re-classify the services under 'Works Contract Service' and also seeking deduction of certain amount from the invoice value claiming that the same represents sale of material to their clients; that though the applicant have claimed that they paid Service Tax on labour charges, they have not produced any reconciliation statement for the period from 10/2007 to 12/2012 during the course of investigation; that the applicant is required to exercise their option to pay Service Tax under composition scheme before payment of Service Tax and the applicant have not exercised such option that instead they chose to pay Service Tax under Erection and Commissioning and Maintenance and Repair Service on a portion of labour charges as taxable value and paid Service Tax at full rate wit....
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....cular • In view of the positive compliance and co-operation by the applicant, the case may be settled by the Bench and they may be granted total immunity from penalty and prosecution. 5.2 In response to the above submissions of the applicant, the Jurisdictional Commissioner vide C. No. V/15/39/2017 Ch N Adj., dated -9-2017, made re following further submissions; • The main contention between the department and the applicant is whether the exercise of option of works contract service during the mid-contract/provision of services without opting before the start of the contract or payment of first Service Tax on such contracts. • The applicant has cited two cases in support of their claim that such lapses construed as technical in nature and liable to be condoned. • The cases cited by the applicant cannot be considered as similar in facts and cannot be taken as valid case law. • The applicant has admitted that he has provided Erection, Commissioning or Installation Services as evident from the ST-3 returns taking portion of income shown in Balance sheet declaring the same as labour charges and paid full tax on s....
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....07-S.T., dated 22-5-2007. The Bench finds that the applicant had filed VCES-I declaration disclosing their Service Tax liability upto December, 2012 and paid Service Tax at full rate on "Erection, Commission and Installation Services" and "Renting of Immovable Property" in two installments by declaring the labour charges, Gross value in the ST-3 returns filed. However, verification carried out by the Officers revealed that the applicant has not correctly declared the value in the VCES declaration resulting in difference in the taxable value of Rs. 1,71,27,564/- for the period from 7/2007 to 12/2012. 6.3 Perusal of the application revealed that the applicant has sought reassessment of Service Tax liability in respect of Erection, Commissioning or installation services under the Works Contract (Composition Scheme for payment of Service Tax) Rules, 2007 for the period upto 30-6-2012. The applicant by claiming a lesser rate of tax at 2%/4%/4.8% on the same Taxable value for the period 10/2007 to 6/2012 in the Settlement application has indirectly claimed excess payment of tax by them under VCES and as per their self assessed returns rely upon the C.B.E. & C.'S clarificatio....
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....ion the wide difference in tax liability as worked out in the impugned SCN End the liability admitted by the applicant, the Bench considered it fit and allowed the applicant to make further submissions and produce additional documentary evidences, if any, to the jurisdictional Commissioner. Accordingly ordered so. While the applicant has furnished only a reconciliation statement for the years 2010-11 and 2011-12 without any documentary proof and further stated that the documents were washed away in floods the jurisdictional Commissioner in response to the applicant's claim pointed out that acceptance to pay tax on the Services by the applicant under Works Contract Service under Composition Scheme would lead to interpretation seeking re-classification of services for which no application could be made before the Commission in terms of Proviso to Section 32E (1) of the Central Excise Act, 1944 made applicable to Service Tax matters vide Section 83 of the Finance Act, 1994. 6.7 The Bench observes that though the applicant has not challenged the classification of services rendered, per se, it is apparent that the applicant having paid Service Tax under particular category ....
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.... is not an adjudicating proceedings where it is for the other side to prove its case. In settlement proceedings, a party seeks to end the dispute and is meant for a person who is sorry about his conduct and wants to make amends. It is not an alternative adjudicating forum. A person approaching the Settlement Commission must show utmost good faith." 6.10 In the Dharampal Satyapal case [2013 (298) E.L.T. 653], the Delhi High Court lucidly stated the scope of Settlement Commission, when the Hon'ble Court observed: "49. The other principle which has been set down in several judgments of this Court is that the Settlement Commission is not a substitute for adjudication proceedings before the Central Excise authorities and where complex issues of fact and law are involved for which a detailed inquiry is necessary, settlement proceedings cannot act as a proper substitute for the adjudication proceedings" 6.11 In Picasso Overseas and Others v. Director General of Revenue (Intelligence) and Another [W.P.(C) No. 1495 of 2007 and W.P.(C) No. 4401 of 2007] decided on 3-8-2009 the issue posed before the Hon'ble High Court of Delhi was as under: ".....c....
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...., particularly regarding a disputed question of fact and law as the applicability of the provisions of law like the one in hand where in the issue centres around the of whether Section 4 or Section 4A of the Central Excise Act. Though the assessee has admitted the short levy on dough and paid the duty thereof since he is raking up the plea that he is eligible to claim benefits under section4A instead of Section 4, that point goes out of the jurisdiction of the settlement Commission, since it has not been vested with the power to decide such a question of direct assessment. By such an act, the Settlement commission has usurped the jurisdiction of the adjudicating authorities and as had been rightly commented on the part of the Revenue, by the impugned order, the Settlement Commission has set a bad precedent." 6.14 In the case of M/S. Fairy Footwear v. Union of India [2015 (323) E.L.T. 469 (Bom)], the Hon'ble High Court of Bombay held that: "Revenue was keen on supporting allegation and based on which the show cause notice came to be issued. Whereas the applicant - petitioner before us was not ready and willing to accept the same. If there was no settlement poss....