TaxTMI 
TaxTMI 
2022 (12) TMI 1142
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....sions of Section 73(2) of the Finance Act, 1994; 20.2. I confirm Service Tax demand of Rs. 3,10,33,081/- (Rupees Three Crores Ten Lakhs Thirty Three Thousand Eighty One only) and determine the same as Service Tax payable on Works Contract services provided by M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, for the period 0.0022047 to 30.06.2010, under the provisions of Section 73(2) of the Finance Act, 1994; 20.3.I confirm Service Tax demand of Rs. 13,78,709/- (Rupees Thirteen Lakhs Seventy Eight thousand Five Hundred Nine only) and determine the same as Service Tax payable on Renting of Immovable Property services provided by M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, for the period June 2007 to September 2009, under the provisions of Section 73(2) of the Finance Act, 30.4. I confirm Service Tax demand of Rs. 14,24,939/- (Rupees Fourteen Lakhs Twenty Four Thousand Nine Hundred Thirty Nine only) and determine the same as Service Tax payable on 1 Business Support services provided by M/s. Sankalpan Infrastructure Pvt. Ltd., Mumbai, for the period October 2006 to September 2009, under the provisions of Section 73(2) of the Finance Act, 1994; ....
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....e from M/s Adventity BPO, they had failed to deposit the said amount in the government account. Further it was also revealed that they had billed Service Tax @2%, @4% to the clients and collected the said tax from them but failed to deposit the said amount also in the government treasury, iii) the said failure amounted not only suppression of fact about the taxable services having been rendered and taxable value having been collected but also amounted to violation of provisions of sections 66, 67, 68, 69.70 and 73A /FA, 1994, read with rules 4,6 and 7 of STR, 1994; iv) The appellant vide letter dated 10.02.2011 informed that they had deposited an amount of Rs. 2,42,57,514 - (Rs. 2,40,42,308/- + Rs. 1,95.7891- + Rs. 19,4177-) towards their Service Tax liability and produced the copies of TR-6 challans. 2.3 Accordingly revenue opined that appellant contravened the provisions of Sections 66, 67, 68, 69, 70 and 73A of the FA, 1994 and Rules 6, 7 of the STR, 1994 in as much as they- (i) failed to include the Business Support services in the Service tax registration as required under Section 69 of FA, 1994, read with Rule 4 of STR. 1994; (ii) failed....
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....hem under proviso to Section 73(1 )/F A, 1994; c. Service Tax amounting to Rs. 13,78,709/- (Rupees Thirteen lakhs seventy eight thousand seven hundred and nine only) payable on Renting of Immovable Property services during the period 01.06.2007 to 30.09.2009 should not be demanded and recovered from them under proviso to Section 73( 1 )/F A. 1994: d. Service Tax amounting to Rs. 14.24,9397- (Rupees Fourteen lakhs twenty four thousand nine hundred thirty nine only) payable on Business Support service during 16.10.2006 to 30.09.2009 should not be demanded and recovered from them under section 73(1)/F A, 1994, read with the proviso thereto; e. The amount of Rs. 2,42,57,514/- deposited by the Noticee under various challans should not be appropriated at the Service Tax payable; f. Interest at applicable rates should not be charged and recovered from them under Section 75 of the Finance Act, 1994; g. Penalty should not be imposed on them under the provisions of Section 76 and 78 of the Finance Act, 1994; and h. Penalty should not be imposed on them under Rule 7C of Service Tax Rules, 1994 and Section 77 of the Finance Act, 1994. 2.....
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....evant financial years. It is further submitted that submission of Cenvat credit register is for the subsequent period i.e., where they have discharged service tax under Works Contract Composition Scheme and not by taking abatement under notification 1/2006. Hence, the cenvat credit availed for the subsequent period which is not the subject matter of dispute for extending benefit of abatement notification 1/2006 during the period March, 2006 to May, 2007 is totally ignored by the Ld. Commissioner. The appellants submit that if the cenvat credit was actually availed and utilized, then it would have been reflected in their books of accounts, but since they have not availed any cenvat credit they have not accounted for in books The appellants has discharged entire service tax liability for March, 2006 in cash only and there was no availment/ utilization of cenvat credit during March, 2006. The appellants have relied upon judgment of Hon'ble Supreme court in the case of M/s Chandarpur Magnet Wires Pvt. Ltd. Vs. CCE, Nagpur (1996) 81 ELT 3. The appellants have also relied upon the judgment of Hon'ble Ahmadabad CESTAT in the case of CCE, Vadodara Vs Ram Krishna Travels....
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....s on vacating the premises by the Licensee, is to be treated as consideration towards the services to be provided. There is nothing on record that licensee, M/s Adventity BPO, had objected or appealed against the said forfeiture, which indicates that they had honoured their promise to pay towards the services be provided. The same is "consideration" as per the section 2(d) of the Contract Act, which provides that when at the desire of the promisor, the promisee or any other person has done or abstained from doing or promises to do or to abstain from doing something, such an act or abstinence or promise is called as consideration for the promise. The appellants humbly submit that they had entered into an agreement dated16.10.2006 with M/s Adventity BPO Pvt Ltd. for letting out their premises along with furniture and fixtures vide two separate agreements. The said rent income received by the appellant is liable for service tax under "Renting of Immovable property services" w.e.f. 01.06.2007. Tenure of the agreement was October 2006 to September 2009 The licensee, or terminated the agreement in the month of December, 2008. No service of "Renting of Immovable Property" were rendered....
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....o September 2009 13,78,709 4 Business Support Services October 2006 to June 2007 14,24,939 4.3 In respect of the demand made at Sl No 1, we are of the view that Commissioner has himself held that the services provided by the appellant under this category of services are along with the transfer of material. In para 11.2 of the impugned order following has been observed: "11.1 Service tax demand of Rs 7,22,68,684/- on Commercial or Industrial Construction Services and Erection, Commissioning or installation services: ....... 11.2 The Noticee contends that they undertake only Turnkey contracts and supply material required for execution of any job as the same is part of their contract. Thus, there is no dispute on the fact of rendering the impugned services under a contract, which involved rendering of service as well as supply of material required for rendering the impugned service." 4.4 Hon'ble Supreme Court has in the case of Larsen & Toubro Ltd. [2015 (39) STR 913 (SC)] has observed as follows: "9. We have heard learned counsel for the parties. Before examining the contentions made on the both sides, it will be necessary to set out th....
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....zb), (zzc), (zzd), (zze), (zzf), (zzg), (zzh), (zzi), (zzj), (zzk), (zzl), (zzm), (zzn), (zzo), (zzp), (zzq), (zzr), (zzs), (zzt), (zzu), (zzv), (zzw), (zzx), and (zzy) of clause (105) of section 65 and collected in such manner as may be prescribed. Section 67. Valuation of taxable services for charging service tax. - For the purposes of this Chapter, the value of any taxable service shall be the gross amount charged by the service provider for such service rendered by him. Explanation. 1 - For the removal of doubts, it is hereby declared that the value of a taxable service, as the case may be, includes,- (a) the aggregate of commission or brokerage charged by a broker on the sale or purchase of securities including the commission or brokerage paid by the stock-broker to any subbroker; (b) the adjustments made by the telegraph authority from any deposits made by the subscriber at the time of application for telephone connection or pager or facsimile or telegraph or telex or for leased circuit; (c) the amount of premium charged by the insurer from the policy holder; (d) the commission received by the air travel agent from the air....
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.... Such contract is for the purposes of carrying out, - (a) Erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or (b) Construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or (c) Construction of a new residential complex or a part thereof; or (d) Completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or (e) Turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;" 12. Section 67 of the Finance Act, 1994 was amended to read as follows :- "Valuation of taxable services for charging Service ....
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....rvices; (c) where value added tax or sales tax has been paid or payable on the actual value of property in goods transferred in the execution of the works contract, then, such value adopted for the purposes of payment of value added tax or sales tax, shall be taken as the value of property in goods transferred in the execution of the said works contract for determination of the value of service portion in the execution of works contract under this clause. (ii) Where the value has not been determined under clause (i), the person liable to pay tax on the service portion involved in the execution of the works contract shall determine the service tax payable in the following manner, namely :- (A) in case of works contracts entered into for execution of original works, service tax shall be payable on forty per cent of the total amount charged for the works contract; (B) in case of works contract entered into for maintenance or repair or reconditioning or restoration or servicing of any goods, service tax shall be payable on seventy per cent of the total amount charged for the works contract; (C) in case of other works contracts, not covered u....
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.... subparas (f), (g) and (h). Under each of these paras, a bifurcation has to be made by the charging Section itself so that the cost of establishment of the contractor is bifurcated into what is relatable to supply of labour and services. Similarly, all other expenses have also to be bifurcated insofar as they are relatable to supply of labour and services, and the same goes for the profit that is earned by the contractor. These deductions are ordinarily to be made from the contractor's accounts. However, if it is found that contractors have not maintained proper accounts, or their accounts are found to be not worthy of credence, it is left to the legislature to prescribe a formula on the basis of a fixed percentage of the value of the entire works contract as relatable to the labour and service element of it. This judgment, therefore, clearly and unmistakably holds that unless the splitting of an indivisible works contract is done taking into account the eight heads of deduction, the charge to tax that would be made would otherwise contain, apart from other things, the entire cost of establishment, other expenses, and profit earned by the contractor and would transgress into forbid....
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.... transaction and the sale is distinctly discernible in the transaction. This does not however allow the State to entrench upon the Union List and tax services by including the cost of such service in the value of the goods. Even in those composite contracts which are by legal fiction deemed to be divisible under Article 366(29-A), the value of the goods involved in the execution of the whole transaction cannot be assessed to sales tax. As was said in Larsen & Toubro v. Union of India [(1993) 1 SCC 364] : (SCC p. 395, para 47) :- "The cost of establishment of the contractor which is relatable to supply of labour and services cannot be included in the value of the goods involved in the execution of a contract and the cost of establishment which is relatable to supply of material involved in the execution of the works contract only can be included in the value of the goods." For the same reason the Centre cannot include the value of the SIM cards, if they are found ultimately to be goods, in the cost of the service. As was held by us in Gujarat Ambuja Cements Ltd. v. Union of India [(2005) 4 SCC 214], SCC at p. 228, para 23 :- "This mutual exclusivity which ....
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....al used in construction belongs to the manufacturer, is not correct, as the subsequent discussion would show; and second, the Notification dated 17-5-2010 issued by the Government of Haryana, Excise and Taxation Department, whereby certain rules of the Haryana Value Added Tax Rules, 2003 have been amended and a table has been annexed providing for "Percentages for Works Contract and Job Works" under the heading "Labour, service and other like charges as percentage of total value of the contract" specifying 15% for fabrication and installation of elevators (lifts) and escalators, is selfcontradictory, for once it is treated as a composite contract invoking labour and service, as a natural corollary, it would be works contract and not a contract for sale. To elaborate, the submission that the element of labour and service can be deducted from the total contract value without treating the composite contract as a works contract is absolutely fallacious. In fact, it is an innovative subterfuge. We are inclined to think so as it would be frustrating the constitutional provision and, accordingly, we unhesitatingly repel the same." (at para 60) 19. In Larsen & Toubro Ltd.....
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....connection is whether sub-section (1) of Section 127-A and the proviso to sub-section (2)(b) should be construed together and the annual letting values of all the buildings owned by a person to be taken together for determining the amount to be paid as tax in respect of each building. In our considered view this position cannot be accepted. The intention of the legislature in a taxation statute is to be gathered from the language of the provisions particularly where the language is plain and unambiguous. In a taxing Act it is not possible to assume any intention or governing purpose of the statute more than what is stated in the plain language. It is not the economic results sought to be obtained by making the provision which is relevant in interpreting a fiscal statute. Equally impermissible is an interpretation which does not follow from the plain, unambiguous language of the statute. Words cannot be added to or substituted so as to give a meaning to the statute which will serve the spirit and intention of the legislature. The statute should clearly and unambiguously convey the three components of the tax law i.e. the subject of the tax, the person who is liable to pay the tax an....
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....ovided". All the services referred to in the said sub-clauses are service contracts simpliciter without any other element in them, such as for example, a service contract which is a commissioning and installation, or erection, commissioning and installation contract. Further, under Section 67, as has been pointed out above, the value of a taxable service is the gross amount charged by the service provider for such service rendered by him. This would unmistakably show that what is referred to in the charging provision is the taxation of service contracts simpliciter and not composite works contracts, such as are contained on the facts of the present cases. It will also be noticed that no attempt to remove the non-service elements from the composite works contracts has been made by any of the aforesaid Sections by deducting from the gross value of the works contract the value of property in goods transferred in the execution of a works contract. 25. In fact, by way of contrast, Section 67 post amendment (by the Finance Act, 2006) for the first time prescribes, in cases like the present, where the provision of service is for a consideration which is not ascertainable, to be t....
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....t percentages ranging from 2 to 4 of the gross value of the works contract. 29. It is interesting to note that while introducing the concept of service tax on indivisible works contracts various exclusions are also made such as works contracts in respect of roads, airports, airways transport, bridges, tunnels, and dams. These infrastructure projects have been excluded and continue to be excluded presumably because they are conceived in the national interest. If learned counsel for the revenue were right, each of these excluded works contracts could be taxed under the five sub-heads of Section 65(105) contained in the Finance Act, 1994. For example, a works contract involving the construction of a bridge or dam or tunnel would presumably fall within Section 65(105)(zzd) as a contract which relates to erection, commissioning or installation. It is clear that such contracts were never intended to be the subject matter of service tax. Yet, if learned counsel for the revenue is right, such contracts, not being exempt under the Finance Act, 1994, would fall within its tentacles, which was never the intention of Parliament. .... 42. It remains to consider the ar....
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....t was not within the competence of the State to impose Sales Tax on the supply of materials used in the execution of Works Contract treating it as a sale. It is pertinent to mention that such agreements are neither a contract to sell the material used in construction, nor does property pass therein as movables. The materials are passed to the owner only as an accretion to the property, A contract for the sale of materials cannot be implied from such an agreement. Thus, where the contract is indivisible, it cannot be split up. The artificial division of the indivisible contract and consequent splitting of value without having any relation or nexus with the real transaction, for the purpose of payment of Service Tax, is completely contrary to the nature and explicit terms of the contract. In view of this position, it has to be held that for determining the taxable value for the purpose of payment of Service Tax, gross value of the contract/agreement, including the material/goods consumed for providing the output service would be the basis for computing the Service Tax payable on the services provided under such contracts/agreements. Service Tax is chargeable on the services rendered.....
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....od 2007-08 to 2010-11 in support. The value of contracts executed, other than trading sales as per the Financial Statements, as certified by the said Chartered Accountant, is as under - (Amt in Rs.) 2007-08 2008-09 2009-10 2010-11 58,10,90,551/- 12,45,64,561/- 35,52,34,869/- 29,54,47,048/- 12.14. As per the details of the Sales Register for the year 2007-08 provided by the Noticee vide their letter dated 02.11.2015, the value of contracts executed, other than trading sales, for the months of April 2007 and May 2007, is Rs. 11,49,34,068/-. The value of contracts executed during the month of March 2008 is Rs. 5,43,37,5147- and that for the period 01.04.2010 to 30.06.2010 is Rs. 1,31,83,665/-. Thus, the value of contracts executed for the period 01.06.2007 to 31.03.2008 is Rs. 46,61,56,483/-. The amount of Service Tax payable on the Works Contract services for the period 01.06.2007 to 31.03.2011 has to be computed on the basis of the value certified by the Chartered Accountant, which is based on the Sales Register and Financial Statements of the Noticee duly certified by the Statutory Auditor, as the same are legally acceptable. Based on the values ....
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....partment about the outstanding debit notes due to them. There is no dispute about this fact about the appellants not having received the services amounts including the tax from their customers and they had reflected these amounts under the heading sundry debtors. Section 68 of the Finance Act, 1994 and Rule 6 of the Service Tax Rules does not permit recovery of the tax unless the payments are received. Both the Section 68 and Rule 6 (1) are reproduced herein below:- "Section 68 : Payment of service tax - (1) Every person providing taxable service to any person shall pay service tax at the rate specified in Section 66 in such manner and within such period as may be prescribed. (2) Notwithstanding anything contained in sub-section (1), in respect of any taxable service notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the Service Tax in relation to such service." "RULE 6 (1) Payment of Service Tax. - The service tax....
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.... manner as provided under Rule 6 of Service Tax Rules, 1994 there cannot be another confirmation of demand against them on the accrual basis. For the purpose of factual verification of the payment of service tax in respect of these services the matter is remanded to the original authority. 4.10 In respect of the demand made at Sl No 3 & 4 Commissioner has in para 13.1 to 13.4 of the impugned order observed as follows: 13.1 RENTING OF IMMOVABLE PROPERTY AND BUSINESS SUPPORT SERVICES: The allegation in the Show Cause Notice is that the Noticee had rented out the premises to M/s. Adventity BPO on Lease Rent and Fit-out Rent for the period 16.10.2006 to 30.09.2009. The Noticee had entered into an agreement dated 16.10.2006 with M/s. Adventity BPO for renting 27774 sq. ft. of the premises along with interior fit-outs (18600 sq.ft. from 16.10.2006 to 31.03.2007 and thereafter additional 9174 sq.ft.) @ Rs. 18/- per sq. ft. The licencee had deposited Rs. 60,00,000/- as Security Deposit, which was forfeited by the Noticee for vacating the premises in December 2008, i.e. before the Agreement period ending 30.09.2009. In the Show Cause Notice the aforesaid amount has been apportio....
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....ation is towards the services to be provided. As per Section 2(d) of the Contract Act, when, at the desire of the promisor, the promisee or any other also has done or abstained from doing, or does or abstain from doing or promises to do or to abstain from doing something, such an act or abstinence or promise is called as a consideration for the promise. Consideration is an act of forbearance or the promise thereof, which is offered by one party to an agreement and accepted by other, as inducement to the other's act or promise. There is nothing on record to show that M/s. Adventity had objected or appealed against the said forfeiture, which indicates that they had honoured their promise to pay towards the services provided or to be provided. As such, the amount of Rs. 60,00,000/- is a consideration received by the Noticee towards services to be provided under the category of Renting of Immovable Property services and Business Support services (rent on fit-outs) and therefore, the same is part of the taxable value, as envisaged in Section 67(1) of the Finance Act, 1994, on which Service Tax is payable by the Noticee. 4.11 From the impugned order, para 13.4, it is evident that ....