TaxTMI 
TaxTMI 
2024 (12) TMI 741
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....oviso to Section 73 of the Finance Act, 1994 along with interest under Section 75 of the Finance Act, 1994, ii. I also confirm the demand of Service Tax to the tune of Rs.8,76,770/- (Rs. Eight Lakhs Seventy Six Thousand Seven Hundred and Seventy Only) not paid or short paid by the party during 2012-13 from them under proviso to Section 73 of the Finance Act, 1994 along with interest under Section 75 of the Finance Act, 1994; iii. I also impose penalty of Rs.42,58,748/ (Rs. Forty two Lacs Fifty Eight thousand Seven Hundred Forty Eight only) under Section 78 of the Finance Act, 1994 upon them for contravention of the provisions under proviso to Section 73 of the Finance Act, 1944." 2.1 Appellant is engaged in providing taxable services under the category of Security Agency, Interior Decorators, Cleaning Service and Outdoor Catering services. 2.2 On re-conciliation of the figures of gross receipts against the services rendered appearing in balance sheet for the period 2008-09 to 2011-12 with the gross receipts of services shown in ST-3 returns for the concern period audit observed discrepancy. Therefore, matter was taken up for further inquiry/investigation. ....
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....the appellant that the figures in the balance sheet were higher than those in the ST-3 returns during this period also. On the same lines they have short paid service tax to the tune of Rs.8,66,770/-. 2.8 Another show cause notice dated 13.05.2014 was issued to the appellant asking them to show cause as to why:- i. "the amount of Service Tax not paid /short paid by them to the tune of Rs.8,76,770/- (Rs. Eight Lakhs Seventy Six Thousand Seven Hundred and Seventy Only) should not be demanded and recovered from them under proviso to Section 73 of the Finance Act. 1994 along with interest under Section 75 of the Finance Act, 1994, ii. penalty under Section 78 of the Finance Act. 1994 should not be imposed upon them for contravention of the provisions under proviso to Section 73 of the Finance Act, 1944." 2.9 Both the show cause notices were adjudicated as per the Order-in-Original referred in para-1 above. 2.10 Aggrieved appellant have filed appeal before the Commissioner (Appeals), which has been dismissed by the impugned order. 2.11 Aggrieved appellant have filed this appeal. 3.1 We have heard Shri Atul Gupta learned Counsel appearing for the appellan....
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....ax under 'interior decorator service' for the entire relevant period • The appellant is eligible to avail the benefits of Notification No. 12/2003- st • That the extended period is not invocable, thus demand up to September 2011 (in SCN dated 24.10.2013) is time barred. • No penalty and interest is imposable. 3.3 Learned Authorized Representative reiterates the findings recorded in the orders of the lower authorities. 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 For holding against the appellant, impugned order records as follows:- "3. I have considered the records of the case and submissions made by the appellant. The dispute involved has three limbs, (i) whether service tax was payable on consideration claimed to be received for supply of grass, plants, pesticides, other materials, etc., (ii) whether receipts shown as 'miscellaneous income' were liable to be included in taxable value for levy of service tax and (iii) whether certain receipts were for taxable cleaning service. I proceed to deal with the three limbs of the dispute in the sa....
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....hall be released at the end, provides for "Liquidated Damages at the rate of 1.25% of Contract Value per week of delay", stipulates that "the entire onus of safety lies with you (the appellant)", stipulates that "all materials shall be provided by the contractor (the appellant)", all statutory liabilities" rests on the appellant, that the "contractor (the appellant) shall not sublet or assign this contract or any part thereof"; (iii) work order dated 06.08.2011 for site: 'Mahagun PARK INN HOTEL' at CBD Sahadra, Delhi, placed by Ms. Mahagun Hotel Pvt Ltd.,- is for "Landscape work on pathways", scope of work lays down that work "including of any material & accessories required to make the work complete in all respects payment terms indicate "upto 25% of contract value may be paid as mobilization advance 5% of contract value shall be deducted from each running bill as Security Deposit which shall be released at the end", provides for "Liquidated Damages at the rate of 1,25% of Contract Value per week of delay", stipulates that "the entire onus of safety lies with you (the appellant)", stipulates that "all materials shall be supplied by the contractor (the appellant)",....
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....rvice tax levy under the category of interior decorator's services. The acts of showing sale of plants, grass, etc. under separate invoices would not alter the character of services rendered by the appellant. The activity of supply of material is intrinsic part of the activity of landscaping as revealed in the texts of the contracts. In the given facts, the acts of issuing sales invoices is in the nature of creating a subterfuge or camouflage to obfuscate true character of services rendered to escape service tax liability on whole of consideration. The application of extended period of limitation and penal provisions gets sufficient support in the facts of the case. On consideration of the material available on record, appellants submissions and relevant statutory provisions, I uphold the original order as far as it relates to determination of service tax demand of Rs.27,65,633/- + Rs.8,76,770/- for interior decoratores service (landscaping) and imposition of equal penalty for the act of non-payment of such tax amount. (b) The original authority has determined service tax liability of Rs.5,91,994/- on account of difference in the value of service shown in the balance s....
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..... In view of the aforesaid factual background, a moot question before the Learned Authorities below was: as to whether the appellant-assessee was entitled to the benefit of Notification No. 12/2003-S.T., dated 20-6-2003. In order to appreciate the said controversy, it would be expedient to reproduce the relevant portion of the circular, which reads as under :- "Notification No. 12/2003-S.T., dated 20-6-2003. - In exercise of the powers conferred by Section 93 of the Finance Act, 1994 (32 of 1994), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts so much of the value of all the taxable services, as is equal to the value of goods and materials sold by the service provider to the recipient of service, from the service tax leviable thereon under Section 66 of the said Act, subject to condition that there is documentary proof specifically indicating the value of the said goods and materials. Provided that the said exemption shall apply only in such cases where - (a) no credit of duty paid on such goods and materials sold, has been taken under the provisions of the Cenvat Credit Rules, 2004; or ....
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....arties to sell paper, consumable or chemical in providing photography service there is no room left to plead [fiction of Article 366(29A)(b) of the Constitution] in absence of any such sale of these commodities as goods. It further rejected the contention and held that the word "sale" in Notification would not cover "deemed sale" under Article 366(29A) of the Constitution and it is of no relevance inasmuch as Notification does not override statutory provision. The Larger Bench was in agreement with the said view when it held that expression "sold" in the Notification would not include "deemed sale" of goods and material consumed by the service provider while generating and providing service, unless an assessee has discharged burden of proof adducing evidence showing value of goods and material actually sold and satisfied the conditions of Notification. However, the Larger Bench opined that value of taxable service of photography depends on the facts and circumstances of each case as the Finance Act does not intend taxation of goods and materials sold in the course of providing all the taxable services. 12. There is no dispute to the proposition that the Notification does n....
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.... any transfer of the possession of goods by one person to another in the ordinary course of trade or business for cash or deferred payment or other valuable consideration;" 14. According to the Learned Counsel for the appellants, the material and consumables are embedded in the photograph when it is transferred to the customers. The Larger Bench of the Tribunal erroneously held that the consumables and chemicals used for providing such service disappear when the photograph emerges and concluded that value of photography service includes all elements which bring that to the deliverable stage. As noticed earlier, the stand of the appellants is that under sub-clause (b) of Clause (29A) of Article 366 of the Constitution, in execution of works contract, the tax which is paid on the sale or purchase of goods should be on the transfer of property in goods only. The photograph is completed through developing and printing process by using the consumables and chemicals, which are the essential ingredients without which the photography cannot be completed. Therefore, when value of photography paper upon which an image is printed and certain consumables and material with which the ph....
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....ted Cement Companies Ltd. v. Commissioner of Customs, (2001) 4 SCC 593, (ACC Ltd. case) did not over-rule Rainbow Colour Lab's case (supra) is, therefore, clearly misconceived. In fact, we are not saying so for the first time as a three-member Bench of this Court in M/s. Larsen and Toubro and Another v. State of Karnataka and another (2014) 1 SCC 708 has already stated that ACC Ltd. had expressly over-ruled Rainbow Colour Lab while holding that dominant intention test was no longer good test after 46th Constitutional Amendment. We may point out that Learned Counsel for the respondent assessees took courage to advance such an argument emboldened by certain observations made by two-member Bench in the case of C.K. Jidheesh v. Union of India, wherein the Court has remarked that the observations in ACC Ltd. were merely obiter. In Jidheesh, however, the Court did not notice that this very argument had been rejected earlier in Bharat Sanchar Nigam Ltd. v. Union of India (2006) 3 SCC 1. Following discussion in Bharat Sanchar is amply demonstrative of the same : "46. This conclusion was doubted in Associated Cement Companies Ltd. v. Commissioner of Customs, (2001) 4 SCC 593 saying....
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....iated Cement. 65. Although, in Bharat Sanchar, the Court was concerned with sub-clause (d) of Clause (29A) of Article 366 but while dealing with the question as to whether the nature of transaction by which mobile phone connections are enjoyed is a sale or service or both, the three-Judge Bench did consider the scope of definition in Clause (29A) of Article 366. With reference to sub-clause (b) it said : "Sub-clause (b) covers cases relating to works contract. This was the particular fact situation which the Court was faced with in Gannon Dunkerley-I (State of Madras v. Gannon Dunkerley & Co., AIR 1958 SC 560) and which the Court had held was not a sale. The effect in law of a transfer of property in goods involved in the execution of the works contract was by this amendment deemed to be a sale. To that extent the decision in Gannon Dunkerley-I was directly overcome". It then went on to say that all the sub-clauses of Article 366(29A) serve to bring transactions where essential ingredients of a 'sale' as defined in the Sale of Goods Act, 1930 are absent, within the ambit of purchase or sale for the purposes of levy of sales tax. 66. It then clarified that Gannon D....
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.... (iii) in view of sub-clause (b) of Clause (29A) of Article 366, the State legislatures are competent to impose tax on the transfer of property in goods involved in the execution of works contract. Under Article 286(3)(b), Parliament has been empowered to make a law specifying restrictions and conditions in regard to the system of levy, rates or incidents of such tax. This does not mean that the legislative power of the State cannot be exercised till the enactment of the law under Article 286(3)(b) by the Parliament. It only means that in the event of law having been made by Parliament under Article 286(3)(b), the exercise of the legislative power of the State under Entry 54 in List II to impose tax of the nature referred to in sub-clauses (b), (c) and (d) of Clause (29A) of Article 366 would be subject to restrictions and conditions in regard to the system of levy, rates and other incidents of tax contained in the said law; (iv) while enacting law imposing a tax on sale or purchase of goods under Entry 54 of the State List read with Article 366(29A)(b), it is permissible for the State legislature to make a law imposing tax on such a deemed sale which constitutes a sale in the cour....
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....aking goods component of the contract exigible to sales tax. Further, while going into this exercise of divisibility, dominant intention behind such a contract, namely, whether it was for sale of goods or for services, is rendered otiose or immaterial. It follows, as a sequitur, that by virtue of clause (29A) of Article 366, the State Legislature is now empowered to segregate the goods part of the Works Contract and impose sales tax thereupon. It may be noted that Entry 54, List II of the Constitution of India empowers the State Legislature to enact a law taxing sale of goods. Sales tax, being a subject-matter into the State List, the State Legislature has the competency to legislate over the subject. 22. Keeping in mind the aforesaid principle of law, the obvious conclusion would be that Entry 25 of Schedule VI to the Act which makes that part of processing and supplying of photographs, photo prints and photo negatives, which have "goods" component exigible to sales tax is constitutionally valid. Mr. Patil and Mr. Salman Khurshid, Learned Senior Counsel who argued for these assessees/respondents, made vehement plea to the effect that the processing of photographs etc. was....
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....nswer to the issue at hand. On the contrary, legal position stands settled by the Constitution Bench of this Court in Kone Elevator India Pvt. Ltd. v. State of Tamil Nadu and Ors. (2014) 7 SCC 1. Following observations in that case are apt for this purpose : "On the basis of the aforesaid elucidation, it has been deduced that a transfer of property in goods under Clause (29A)(b) of Article 366 is deemed to be a sale of goods involved in the execution of a Works Contract by the person making the transfer and the purchase of those goods by the person to whom such transfer is made. One thing is significant to note that in Larsen and Toubro (supra), it has been stated that after the constitutional amendment, the narrow meaning given to the term "works contract" in Gannon Dunkerley-I (supra) no longer survives at present. It has been observed in the said case that even if in a contract, besides the obligations of supply of goods and materials and performance of labour and services, some additional obligations are imposed, such contract does not cease to be works contract, for the additional obligations in the contract would not alter the nature of the contract so long as the co....
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....he Commissioner and demand of service tax was confirmed on the assessee along with interest and penalty. The appeal preferred by the assessee was considered and decided by a three-member Special Bench of the Tribunal reported as Safety Retreading Company (P) Ltd. v. Commissioner of Central Excise, Salem, (2012) 34 STT 64 (Chennai) = 2012 (26) S.T.R. 225 (Tribunal), wherein coupled with the Notification No. 12/2003-S.T., dated 20-6-2003 a similar issue was considered by the Larger Bench of the Tribunal: "whether in a contract for retreading of tyres, service tax is leviable on the total amount charged for retreading including the value of the materials/goods that have been used and sold in the execution of the contract or exemption to material component therein can be granted". The question was whether maintenance and repair service can be treated as service under "works contract" for service tax purposes. The Appellate Tribunal by majority view, upheld the demand, inter alia, on the ground that 'maintenance and repair service' being a specific service is to be treated as service under "works contract" for service tax purposes. On appeal, the Apex Court set aside the said majority v....
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....nue. 20. Having answered the substantial question of law No. 1 in favour of the assessee, the substantial question of law No. 2, which already stands concluded while dealing with the question of law No. 1, is also answered in favour of the assessee and it is held that the term 'sale' appearing in exemption Notification No. 12/2003-S.T., dated 20-6-2003 would also include "deemed sale" as defined by Article 366(29A)(b) of the Constitution." The crux of the above decision is that value of the material supplied while providing the taxable services cannot be included in the value of taxable services, even if the material is consumed for providing the taxable service. Hence we do not find any merits in the demand made on this account. 4.4 In respect of other two demands the only difference which is observed between the value of taxable services as per ST-3 returns and the figures in the Financial Accounts has been explained by the appellant to be for the reason that the books of account was maintained on accrual basis whereas service tax was paid on receipt basis. Commissioner (Appeals) have in absence of any evidence to substantiate the same held that in favour of the de....
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....he case of the assessee, before us, was that such interest was not leviable under Section 11AB of the Act, particularly in view of the fact that prices indicated in the purchase orders were final during the period of supply of goods. According to the assessee, in the present case, the Department has accepted the position that the prices in the purchase orders were final. Further, according to the assessee herein, there was no price variation clause in the purchase orders, therefore, there was no scope for increase in prices subsequently and that too, retrospectively. In short, according to the assessee, prices indicated in the purchase orders were final and not liable to change at the time of removal of goods. It was submitted that, in the circumstances, the present case was not a case of short-levy or non-levy of the goods removed by the assessee calling for recovery under Section 11A of the Act, hence, this was not a case for charging of interest under Section 11AB of the Act. Learned counsel appearing on behalf of the assessee submitted that this case is squarely covered by the judgement of three learned Judges of this Court in the case of M.R.F. Limited v. Collector of Central ....
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....B) is reiterated in section 11AB that states where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person who has paid the duty under sub-section (2B) of section 11A, shall, in addition to the duty, be liable to pay interest...... It is thus to be seen that unlike penalty that is attracted to the category of cases in which the non-payment or short payment etc. of duty is "by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duty", under the scheme of the four sections (11A, 11AA, 11AB & 11AC) interest is leviable on delayed or deferred payment of duty for whatever reasons. 11. The payment of differential duty by the assessee at the time of issuance of supplementary invoices to the customers demanding the balance of the revised prices clearly falls under the provision of sub-section (2B) of section 11A of the Act. 12. The Bombay High Court, Aurangabad Bench, in its decision in The Commissioner of Central Excise, Aurangabad v. M/s Rucha Engineering Pvt. Ltd., ....
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.... that section vide Act 14 of 2001 [with effect from 11th May, 2001] and Act 32 of 2003 [with effect from 14th May, 2003]. It needs to be mentioned that simultaneously Act 14 of 2001 also made changes to Section 11AB of the Act. In the case of S.K.F. India Limited [supra], it has been, inter alia, held, as can be seen from the above-quoted paragraphs, that sub-section 2(B) of Section 11A provides that the assessee in default may make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and, in that event, such assessee in default would not be served with the Demand Notice under Section 11A(1) of the Act. However, Explanation (2) to the sub-section makes it clear that such payment would not be exempt from interest chargeable under Section 11AB of the Act. What is stated in Explanation (2) to sub-section 2(B) is reiterated in Section 11AB of the Act, which deals with interest on delayed payment of duty. From the Scheme of Section 11A(2B) and Section 11AB of the Act, it becomes clear that interest is levied for loss of revenue on any count. In the present case, one fact remains undisputed, namely, accrual of price differential. ....