TaxTMI 
TaxTMI 
2025 (8) TMI 408
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...., 2017. B. In respect of Para 2: - (I) I determine and confirm the amount of interest of Rs.1,22,937/- (Rupees One Lakh Twenty Two Thousands Nine Hundreds Thirty Seven Only) on late payment of service tax and order for its recovery from the Noticee under Section 75 of the Finance Act, 1994 read with Section 174 of CGST Act, 2017. C. In respect of Para 3: - (I) I determine and confirm the amount of Service tax of Rs.4,12,960/- (Rupees Four Lakhs Twelve Thousands Nine Hundred Sixty Only) on royalty amount, for the period 04/2016 to 06/2017 and order for its recovery from the Noticee under Section 73(2) of the Finance Act,1994 read with Section 174 of CGST Act, 2017. (II) I order recovery of interest, at appropriate rate, on demand of Service tax of Rs.4,12,960/- from the Noticee under Section 75 of the Finance Act, 1994 read with Section 174 of CGST Act, 2017. (III) impose penalty of Rs.4,12,960/- (Rupees Four Lakhs Twelve Thousands Nine Hundred Sixty Only) under Section 78(1) of the Finance Act,1994 read with Section 174 of CGST Act. 2017. However, the Noticee is given an option to pay only 25% of this penalty amount subject to c....
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....017 and order for itsits recovery from the Noticee under Section 73(2) of the Finance Act,1994 read with Section 174 of CGST Act, 2017. (II) I order recovery of interest, at appropriate rate, on demand of Rs.1,17,09,035/- the Noticee under Section 75 of the Finance Act, 1994 read with Section 174 of CGST Act, 2017 (III) I impose penalty of Rs.1,17,09,035/- (Rupees One Crore Seventeen Lakhs Nine Hundred Thirty Five Only) under Section 78(1) of the Finance Act,1994 read with and Section 174 of CGST Act, 2017. However, the Noticee is given an option to pay only 25% of this penalty amount subject to condition that entire amount of Service tax and interest along with 25% penalty under Section 78(1) are paid within thirty days of communication of this order. 21. The Show Cause Notice No. 01/Commr/ST/Audit/2019-20 dated 31.07.2019 is disposed of, in the above terms." 2.1 Appellant is holding Service Tax Registration No. "AACCTO370RSD001", and is engaged in construction of roads & other civil constructions and providing taxable service i.e. "works contract service" as defined under Section 65B(54) of Chapter V of the Finance Act, 1994. On the GTA and Security ....
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....) The amount of interest of Rs.1,22,937/- on late payment of service tax should not be demanded and recovered from them under Section 75 of the Act. C. In respect of Para 3 of the Final Audit Report: - (I) Service tax amounting to Rs.4,12,960/- for the period 04/2016 to 06/2017, should not be demanded and recovered from them under proviso to sub-section (1) of Section 73 of the Act. (II) Interest at appropriate rate should not be recovered from them under Section 75 of the Act, on the service tax so demanded. (III) Penalty should not be imposed upon them under Section 78 of the Act, for non- payment/ short payment of service tax in violation of the provisions of the Act and the rules framed there under with intention to evade payment of service tax. D. In respect of Para 4 of the Final Audit Report: - (I) Capital Goods credit amounting to Rs.93,59,799/- for the period 04/2016 to 06/2017, should not be disallowed and recovered from them under Rule 14(1)(i) of the CENVAT Credit Rules, 2004 read with proviso to Sub-Section (1) of Section 73 of Finance Act, 1994. (II) Interest at appropriate rate should not be recovered fro....
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.... barred and is an exercise of excessive use of delegated power. • Invocation of extended period of limitation not justified s essential elements do not exist. • Issue of taxability of royalty is no longer res-integra and covered by the decision in the case of S R Traders. • Cenvat Credit of Rs 93,59,799/- on capital goods cannot be denied or varied for the reason that these capital goods have been use for providing taxable and non taxable services. • As the appellant has provided both taxable and non taxable services demand made in terms of Rule 6 for recovery of the Cenvat Credit of Rs 29,55,763/- on input services cannot be justified. • The services classified under the work contract service are exempt as per the mega exemption notification. • No interest and penalty is imposable as the demands do not survive. 3.3 Authorized representative reiterated the findings recorded in the impugned order. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. From the submissions made before us it is evident that appellant in this appeal is pre....
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....cted in such manner as may be prescribed (v) Section 67(1)(i) ibid; mandates that where Service tax is chargeable on any taxable service with reference to its value, then such value shall, in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him. (vi) Section 67(3) ibid; mandates that the gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after the provision of such service. (vii) Therefore, with effect from 01.04.2016, the services of 'assignment of right to use a natural resource' rendered by the Government to category of person other than farmer stands declared as taxable, because it does not fall in the "Negative List of Services" as prescribed under Section 66D ibid. (viii) A fact that fortifies the taxability of such services rendered by the Government is that services provided prior to 01,04,2016 were specifically exempted vide Notification No.22/2016-ST dated 13.04.2016 and by way of the insertion of clause 61 in Mega Notification No.25/201....
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....ant before us is that undisputedly the appellant was quarrying stones from the designated mines allocated to them by Assignment Order No 414/ Mineral/2008/Sub Leas/ Umaria dated 17.06.2008, granting them the mining right for 10 years and another mining lease agreement for the period of 10 years from 04.12.2007 was executed and registered on 27.02.2008. As both the mining lease agreements were registered prior to 01.04.2016, the royalty charges paid in terms of these agreements will be exempted even if these amounts are paid after 01.04.2016 as has been held by the CESTAT. 4.2.3 We find that CESTAT has in case of S R Traders (Final Order No 50660/2023 in Service Tax Appeal No 54002 of 2018 held as follows: 3. Section 66D of the Finance Act, 19942 which contains the list of negative services, includes services by Government and local authority excluding services mentioned in clauses (i), (ii), (iii) and (iv). It needs to be noted that prior to April 01, 2016, under clause (iv) only „support service‟, other than services covered under clauses (i) to (iii) provided to business entities was mentioned, but "support service‟ from April 01, 2016 was substitute....
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.... in the taxable territory by one person to another and collected in such manner as may be prescribed." 16. Thus, for the purpose of levying service tax, the taxable event is construed as the time when the service is provided or agreed to be provided. Thus, in order to determine whether levy of tax is applicable on a particular activity, it is necessary to determine the point of time when such activity is provided or agreed to be provided. In the present case, the agreement between the appellant and State Government for grant of mining rights was executed on 02.01.2016 and on this date, the transactions involving assignment of right to use natural resource was not taxable. 17. In this connection section 66D of the Finance Act, as it existed prior to 01.04.2016, can be referred to and it is as follows: "66D The negative list shall comprise of the following services, namely:- (a) services by Government or a local authority excluding the following services to the extent they are not covered elsewhere- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services provided to a person oth....
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....construction of public roads. It was alleged that the Noticee had utilized the Cenvat credit of Rs.27,13,774/- towards payment of their service tax liability during he said period and the remaining amount of Cenvat credit of Rs.66,46,025/- wa scarried forwarded to TRAN-1 during transitional period of GST. 11.1 I find that the Noticee in their defence submission has not disputed the availment and utilization of said amount of Cenvat credit on aforesaid capital goods during the period under consideration and therefore the details of computation of Cenvat credit on capital goods during the period under consideration are not reiterated here. However, they they inter-alia primarily contended that they are into provision of integrated construction services consisting of various taxable as well as exempted services; that the capital goods are not used solely in the provision of exempt services, but also for providing taxable services; that when capital goods have been utilized in the provision of exempted as well as non-the exempted services, no violation of Rule 6(4) of the Credit Rules can be found against Noticee. They therefore contended that the said amount of Cenvat credit ....
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.... of two years from the date of commencement of the commercial production or provision of services'. The Noticee had availed and utilized Cenvat credit on capital goods before the period of two years stipulated in sub-rule (4) of Rule 6 of the Cenvat Credit Rules, 2004 as amended by Finance Bill, 2016. It therefore indicates that the Cenvat credit of Rs.89,29,890/- is not admissible to the Noticee, as they have availed Cenvat credit on road construction machineries which are used exclusively in providing the exempted services for construction of public roads and other exempted civil structures 11.6 In this regard, it has also been alleged in the impugned show cause notice the Noticee have shown availment of Cenvat credit on capital goods in their ST-3 returns filed for the period 04/2016 to 06/2017 before the issuance date of invoices and the same is inadmissible in terms of Rule 4 of the Cenvat Credit Rules, 2004, which is reproduced hereinbelow: "4. Conditions for allowing CENVAT credit - (1) The CENVAT credit in respect of inputs maybe taken immediately on receipt of the inputs in the factory of the manufacturer or in the premises of the provider of output s....
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....e decision of Mumbai Bench in case of Finolex Industries Ltd [FINAL ORDER NO. A/85393-85395/2022 dated 02.03.2022 in Excise Appeal No. 1214 to 1216 of 2012]. 4.3.3 The second ground for denial as per the impugned order is that appellant could not have availed the said credit prior to expiry of two years of usage of the said capital goods as per the provisions contained in CENVAT Credit rules, as they existed at the relevant time. We do not find any merits in the said submission for the reason that the said condition is not qua the availment of the credit, but qua the use of capital goods for providing both taxable and exempted services. In terms of the said condition the credit could not have been denied or varied if after the expiry of usage of the capital goods for providing both taxable and exempted services, the capital goods were put to use exclusively for providing the exempted services. The said condition is not applicable if the goods are being used for providing the taxable and exempted services. 4.3.4 The last ground, for denial of this credit is that the appellant had taken the credit even before the date of the invoice. We are not able to make any sense of the sai....
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.... non-exempted services, there is no violation of Rule 6 of the Credit Rules and the said amount of Cenvat credit on input services are admissible to them. 12.2 Rule 6 of the Cenvat Credit Rules, 2004 is relevant here to decide the instant issue. Rule 6 is reproduced hereinbelow: 12.3 Further, the following are the judicial rulings which have bearing on the issue involving the reversal of Cenvat credit availed on inputs/ input services which are used in providing exempted services in terms of Rule-6(3A) ibid or payment of an amount equivalent to seven percent of the value of exempted services. i. ........ 12.4 I find that though the Noticee has claimed that the capital goods/ input services were not used solely in the provision of exempt services, but also for providing taxable services and that when the capital goods/ input services have been utilized in the provision of exempted as well as non-exempted services, the provisions of Rule 6 of the Cenvat Credit Rules, 2004 are not applicable, but has produced any material evidence in support of their contention. They have also not given the details of taxable and non-taxable projects/services u....
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....ith Section 174 of CGST Act, 2017. Held accordingly." 4.4.2 We have already observed that in the case of the capital goods the only thing that is required to be shown is that the same has been used for providing the taxable service or have been used for the manufacture of dutiable finished goods. If the usage of the capital goods is for providing the taxable service or have been used for the manufacture of dutiable finished goods then in that case the credit taken in respect of the capital goods cannot be denied or varied for the reason that the same have also been used for providing non taxable service or used for manufacture of the exempt goods. 4.4.3 In case of input and input services, the law is quite clear that no credit would be admissible in respect of input and input services which have been solely used for providing non-taxable/ exempt services or used for manufacture of non-dutiable/ exempt goods. Similarly credit taken in respect of input and input services which have been used for providing taxable services or used in manufacture of excisable goods the credit cannot be denied or varied. 4.4.4 In case of the common inputs and input services which are used for p....
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....uted to exempted service. Therefore, the demand is not sustainable...." 4.4.6 In view of the above discussions the appellant has either to pay back the entire credit availed in respect of the common input services availed by them during the period or the amount that can be determined on the proportionate basis. The impugned order fails to determine the said amount in correct perspective and have compared the amount of credit taken in respect of the input services with amount determined on the basis of the seven percent of the value of exempted services, and asked for reversal of entire amount of credit taken in respect of the input services. For determination of the correct amount that needs to be reversed in terms of the above observations the matter needs to be remanded back to the original authority. Para 06: Non-payment of service tax of Rs.1,17,09,035/- on Works Contract Service: 4.5.1 For confirming the demand made in respect of work contract services, impugned order observes as follows: "13. It has been alleged in the impugned show cause notice that on scrutiny of ST-3returns and financial documents viz. i.e. Balance Sheet, Profit & Loss A/c, Income ledger ....
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.... In clause 4., it is mentioned that "the arrangement of all materials, tools and plants etc. required for the work will be the responsibility of the Noticee." In clause 5, it is mentioned-that "compaction of formation and paving materials is to be done with the help of vibratory roller only as per latest MORT&HMOST specifications.The bitumen pavement work has to be done by using hotmix plant and paver finisher, asper latest MORT&HMOST specifications for road& bridges works."In clause 9., it is mentioned that "The service tax will be applicable for the work as per norms of the company. The amount towards service tax will be reimbursed to the contractor from the Area, subject to submission of documentary evidence with supporting documents to the concerned department in regard to actual payment made on that account. During evaluation, component of service tax has been calculated @ 4.944% of the quoted value amounting to Rs, 5,43,977.11 (Rs. Five Lakhs Forty-Three Thousand Nine Hundred Seventy-Seven and Paise Eleven) only. The total offer value including service tax is Rs. 1,15,46,750.45 (Rs. One Crore Fifteen Lakhs Forty-Six Thousand Seven Hundred Fifty and Paise Forty-Fiveonly)". ....
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....movable property or for carrying out any other similar activity or a part thereof in relation to such property." It is evident that following conditions must be satisfied cumulatively in order to consider the service as works contract: (a) There should be transfer of property in goods involved in the execution of contract. which is leviable to tax as sale of goods The words 'leviable to tax' refer to charging section of VAT Act and would cover a situation where the tax is leviable on transfer of property but is exempt by any notification. This iS S because exemption by any notification does not mean that the tax is not leviable Thus. it is not necessary that VAT has been actually paid on the transfer of property involved in such contract. It is enough if transfer of property is leviable to tax as sale of goods for determining whether such contract is a works contract or not. (b) Such contract is for the purpose of carrying out construction, erection, commissioning., installation, completion, fitting out, repair, maintenance, renovation, alteration and carrying out any other similar activity or a part thereof, or in relation to, any movable or immovable pro....
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....aforesaid two work orders are not concerned with any construction of road or dam. I do not agree with the submission of the Noticee that they constitute a bonafide belief and in good faith that they are not liable for service tax for the reason that it has been specifically mentioned in the work orders that the value of the work is inclusive of service tax, which the Noticee has already recovered from M/s. SECL, Sohagpur and M/s. MPPCGL, Sarni through their running bills. It is thus reasonably accepted that the Noticee was aware of the terms and conditions of the aforesaid work orders specifically that the work to be undertaken by them was taxable under the Finance Act, 1994 and that they were required to pay service tax on the same as also the service receivers were ready to accept the works as taxable under the Finance Act,1994 and accordingly they not only computed the value of works but also paid the same tothe Noticee. I find that these facts have not been disputed by the Noticee. 15.1 I also find that the Noticee in support of their contention has submitted the copy of work order ref. no. GM(C)/SECL/BSP/WO/SGP/2013/12 dated 23.01.2015 of M/s. SECL, which was for prep....
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....a) of said notification that the exemption is available-only when a civil structure or any other original works meant predominantly for use other than for commerce, industry or any other business or profession. In theinstant case, the construction services viz. construction of RCC Bridge and Ash Bundhave been provided by the Noticee to M/S. South Eastern Coalfield Limited and M/S.M.P.Power Generating Company Limited which are meant predominantly for use for commerce/ industry/ business. M/s SECL is engaged in production/ mining of coal which is sold for a consideration. Whereas, M/s. MPPGCL is engaged in generation of electricity which is sold for a consideration and therefore, it would not be out of place to conclude that M/s. SECL and M/s. MPPGCL are commercial and profit oriented company. Hence, the exemption is not available to them under serial number 12(a) of said notification. The Noticee has also claimed exemption under serial number 12(d) of said notification, which grants exemption to construction of canal, dam or other irrigation works. In the instant case, it is undisputed that accordingly to the aforesaid two work orders, the Noticee has constructed RCC Bridge....
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....ks contract and an amount of Rs.20,25,57,300/- received by the Noticee from M/s South Eastern Coalfield Limited (SECL), Sohagpur Area and M/s M.P. Power Generating Company Limited (STPS) (MPPGCL), Sarni, is taxable under the provisions of the Finance Act, 1994 and the rules made thereunder. It is also held that the Noticee is legally required to pay Service tax of Rs.1,17,09,035/- (Service Tax-Rs.1,10,07,933/- EdCess-Rs.40,233/- SHEC Cess- Rs.20,117/- SB Cess- Rs.3,21,296/- KK Cess- Rs. 3,19,457/-)under the taxable category of works contract sub-section (1) of Section 73 and 75 of the service' and the same is recoverable from them along with interest in terms of proviso to Act read with Section 174 of CGST Act, 2017. Held accordingly." 4.5.2 From the above findings recorded in the impugned order it is evident that the demand is made in respect of two specific work order which were for construction of R C C Bridge over the Baishaha Nala in the mining area of SECL and was not in respect of the approach road to KhairakhaU G Mine Project of Sohagpur District. The claim made by the appellant that the demand has been made in respect of this road which is a public road cannot be su....
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.... the work order of M/s MPPCGL is without any merits and needs to be rejected. 4.5.4 Thus we find that impugned order has rightly concluded the service tax is required to be confirmed against the said two work order. Extended period of Limitation: 4.6.1 On issue of invoking extended period of limitation, impugned order observes as follows: "17. I find that in the impugned show cause notice, the extended period of limitation as provided under proviso to Section 73(1) of the Finance Act, 1994 has been invoked for the dis-allowance and recovery of Cenvat credits and also for the demand and recovery of service tax, involved therein. 17.1 The Noticee in their defence has stated that the show cause proceeding initiated is illegal and as Internal First Audit under EA 2000 was conducted on 21.04.2017 for theperiod 04/2014 to 03/2017, whatever the demand was created same has been paid and again second audit was conducted on 21/22.02.2019 on the same issues involving the same period which is illegal. The Additional Commissioner (Audit), Central GST & Central Excise, Bhopal, was therefore requested vide letter F.No. V(ST)15-88/Audit-BPL/TBC/ Adj-I/JBP/2019-20/16363 d....
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....or conducting Audit and not provided the documents properly for conduction of Audit. Thus, the Audit was conducted on the basis of records made available to safeguard the Govt. Revenue, which was going to be time-barred on passage of time and accordingly DAR No. 01/ST/JBP/Gr-1/2017-18 dated 01.05.2017 was issued. 5. Again, the Audit for the further period April-June, 2017 was conducted and Balance Sheet based reconciliation was started with comparison to the taxable value declared in ST-3 Returns. On the basis of the same, new facts were noticed by the Audit Team while conducting Audit, which was suppressed (not disclosed) by the Assessee during the previous Audit. Accordingly, the direction has been given by the Hon'ble Commissioner (Audit) for re-audit for previous period 6. In view of the above, the suppression of facts invoked in the Show Cause Notice issued to the Assessee appears legal and proper.' 17.2 To follow the principle of natural justice, the submission of the Audit was communicated to the Noticee vide letter F.No. V(ST)15-88/AUDIT-BPL/TBC/ADJ-I/2019/ 76967 dated 07.02.2020 and they were requested to submit their comments on the same The Noti....
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....on of the Noticee that the show cause notice proceedings is illegal is not correct and hence is not acceptable to me. 17.4 ....... It is also on record and proven facts that during the period under consideration they had availed huge amount of Cenvat credit on input services which were used for both exempted and taxable output services and failed either to reverse the proportionate cenvat credit or to pay an amount equal to seven percent of thevalue of exempted service, as per provisions of Cenvat Credit Rules, 2004 discussed supra. Further, though they have claimed to have used the input services for providing both exempted and taxable services but failed to substantiate their claim by production of affirmative material evidences, including the maintenance of separate account of input and input services used for exempted and dutiable output services It is also on record that during the period under consideration they had 'works contract service' to M/s. SECL and Ms. MPPGCL by constructing RCC Bridge and Ash Bund within their business premises exclusively for their own use for consideration and which is held to a taxable service in the fo....
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....f extended period of limitation. We do not find any merits in the said ground as it is evident from the impugned order that appellant had not filed the ST-3 returns for the period of dispute at the time of first audit and have not produced all the records before audit officers. Even otherwise it is not the case of second audit but a case of re-audit of the records of the appellant after taking note of the fact that the appellant had not cooperated at the time of first audit and have not provided all the records to the audit officers for the relevant period. The factum of not providing the records for audit itself amounts to suppression of the facts with intent to evade payment of service tax. 4.6.3 It is settled law that no one should be allowed to take the benefit of his on wrongs. Appellant who had not produced the records for audit in first instance cannot argue against the re-audit of the records subsequently. Hon'ble Supreme Court has in the case of Municipal Committee Katra [Order dated 09.05.2024 in CIVIL APPEAL NO(S). 14970-71 OF 2017] held as follows: "17. We have considered the submissions advanced at bar and have perused the material available on record and h....