TaxTMI 
TaxTMI 
2025 (10) TMI 1130
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.... service tax short/not paid on preferential location charges during 2015-16 to 2016-17. C. Confirmed the demand of Rs.19,65,925/- towards service tax short/not paid under reverse charge mechanism for the year 2014-15 to 2016-17. D. Confirmed the demand of Rs.15,57,043/- towards service tax short/not paid on the commission/consulting services during 2015-16 to 2016-17. E. Demanded interest under Section 75 of Finance Act, 1994. F. Imposed penalty of Rs.2,20,69,448/- under Section 78 of Finance Act, 1994 for suppression of facts with intent to evade payment of service tax. G. Imposed penalty of Rs.10,000/- under Section 77 for contravention of provisions of Section 70 of Finance Act, 1994 read with Rule 7 of Service Tax Rules, 1994. H. Imposed penalty of Rs.1,00,000/- each upon Shri Shadab Khan and Shri Obaid Tanveer, Director of M/s Earthcon Construction Pvt. Ltd and Shri Subhash Kumar Bansal, CFO under Section 78A of Finance Act, 1994 for their Act of omission and commission. I. Imposed penalty of Rs.10,000/- each upon Shri Shadab Khan and Shri Obaid Tanveer, Directors of M/s Earthcon Construction Pvt. Ltd and Shri Subh....
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....d Rs.65 lakhs towards their entire liability of Rs.52,99,353/- for the period 01-07-10 to 31-03-2012 and additional amount of Rs.1,20,0647/- is a part deposit for the F/Y 2012-13 onwards. On the basis of scrutiny of audited Balance Sheet for the year 2012-13 to 2016-17, it was alleged that M/s ECPL has short paid service tax Rs.1,47,57,013/-. It was alleged that they had received sum of Rs.139,65,98,300/- as value of services on construction of residential complex from their customers during the period 2012-13 to 2016-17; that they were liable for payment of service tax Rs.4,70,32,340/- but paid Rs.3,22,75,327/- resulting in short payment of service tax Rs.1,47,57,013/-. It was also alleged that Appellants had short paid service tax Rs.37,89,467/- on amount received by them from customers under the head preferential location charges (PLC). The investigating officers observed that Appellants had included the amount of Rs.3,71,45,452/- received by M/s ECPL on account of PLC charges in the gross amount of taxable services and accordingly paid service tax on abated value. It was alleged that M/s ECPL was not eligible for abatement of 70% or 75% and were liable for payment of service ta....
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....15,57,043/- during 2015-16 and 2016-17 on commission/consultancy income received (Issue No.3). D. Whether service tax Rs.19,65,925/- is demandable from M/s ECPL on account of service tax short paid on reverse charge basis (Issue No.4). E. Whether demand of service tax Rs.52,99,353/- for the period 01-07-2010 to 31-03-2012 is beyond the extended period of limitation of 5 years and therefore not maintainable (Issue No.5). F. Whether even otherwise extended period of limitation could not have been invoked for demanding service tax from M/s ECPL (Issued No.6). G. Whether interest and penalty is demandable from M/s ECPL as confirmed in the impugned order and whether interest and penalty is also demandable on Rs.52,99,353/- from M/s ECPL in terms of the departmental appeal No. ST/70467/2019 (Issue No.7). H. Whether penalties of Rs.1,10,000/- each are sustainable on Shadab Khan and Obaid Tanveer (Issued No.8). Whether M/s ECPL has short paid service tax Rs.1,47,57,013/- during 01-04-2012 to 31-03-2017 (Issue No. 1) (i) Table 3 of SCN proposed to demand service tax Rs.1,47,57,013/- as per details given below :- Year Total value....
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....od of accounting, revenue is recognized on the basis of percentage of actual cost incurred to the total cost of project. It has been submitted that during the relevant period, they have recognized additional amount of Rs.25.25 crores in addition to the actual amount received from customers. Their submission is that amount of Rs.25.25 crores has been recognized in Profit & Loss Account without actual receipt from customers and the same is liable to be reduced from gross revenue for the purpose of computing taxable receipt during 2012-13 to 2016-17. The learned Chartered Accountant drew attention to Schedule XIII of the Annual Accounts, which is relating to Significant Accounting Policies and Notes to Account. Relevant portion related to revenue recognition reads as under:- "Revenue Recognition Real Estate and construction contracts Revenue from real estate projects and construction contracts is recognized on the percentage of Completion Method (POC) of accounting. Revenue under POC method is recognized on the basis of percentage of actual costs incurred, including land, construction and development cost of projects under execution. The stage of completion under the....
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....L. 209. In the said case, the assessee had been following percentage of completion method which is prescribed for accounting of revenue in Profit & Loss Account by the construction industries. On the basis of percentage of completion method, the assessment orders were passed on the basis of income so recognized in Profit & Loss Account. The Hon'ble High Court held that the foundation of the assessment is flawed and that the reporting of income in the Profit & Loss Account cannot be the basis of assessment, it being irrelevant for the purpose of determination of service tax payable. Relevant portion of the Hon'ble High Court's order is as under :- "15. AS 7 thus provides for a detailed methodology for the reporting and determination of the percentage of income from the contract over the term of the project and sets out the mode of computation for arriving at the same. The basis of such recognition and reporting is the apportionment of the income earned and expenditure incurred over the tenure of the project. This is entirely different and distinct from the scope, object and application of the Point of Taxation Rules that seeks to set out a methodology for determination of w....
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....ase, no invoice is said to have been raised. However, the petitioner confirms that it has, in fact, received lump sum advances corresponding to several initial landmarks in the contract, even prior to the achievement of such landmarks. As per the provisions of Rule 3(b), the entire sum received thus becomes taxable upon receipt and according to Mr. Prabhakar, has been offered to tax. 25. Instead of such determination by application of the provisions of Rule 3, the respondent relies upon the P and L accounts to conclude that the amounts reflected therein have not been offered for service tax. The reporting of income in the P and L being irrelevant for the purposes of determination of service tax payable, the basis of the impugned assessment is erroneous". 10. Respectfully following the aforesaid judgement of Hon'ble Madras High Court, we hold that appellants were not liable for payment of service tax on amount of Rs.25,25,55,003/- which has been recognized as additional revenue in Profit & Loss Account on the basis of percentage of completion method. Its impact on service tax demanded has been computed later. Sale of property at Jasola, New Delhi - Gross amount Rs.70.....
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....Associates, certifying that amount of Rs.376.06 lakhs had been booked on account of cessation of liability under Section 41(1) of Income Tax Act, 1961 for the year F. Y. 2013-14 as per Board's resolution dated 18-07-2014 and the same has been shown as income as per provisions of Income Tax Act, 1961, under the Profit & Loss Account as revenue from operation during the F/Y 2013-14. The learned Chartered Accountant further drew our attention to details of amount received from various persons during 2009-10 to 2013-14 which had been received as loan but is found to be no longer payable. The learned Chartered Accountant submits that the recognition of aforesaid amount of Rs.376.06 lakhs in Profit & Loss Account is not towards any service. It had been recognized as revenue as per the provisions of Income Tax Act. Therefore, it has been claimed that service tax was not payable on amount of Rs.376.06 lakhs and is liable to be reduced from the gross revenue of the Appellants. From the perusal of details of loan written off and also the Chartered Accountant's certificate, we find that the aforesaid amount of loan had been received by appellants in earlier years and the same has been transfe....
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....L. Therefore, it was written off during 2018-19. We find that the said amount of Rs.51.72 lakhs was never received by M/s ECPL. They accounted for the amount of Rs.51,72,800/- for the purpose of Income Tax only. Subsequently, in the year 2018-19, M/s ECPL has written off the said amount. In support, ledger account of Mr. Irfan, Yaseen Khan and Ayaz Mobin had been submitted. We therefore, hold that M/s ECPL were not liable for payment of service tax on amount of Rs.51.72 lakhs. Its impact on service tax demanded has been computed later. Booking amount received after completion - Gross amount Rs.591.67 Lakhs. 14. It has been submitted that M/s ECPL has been engaged in construction and sale of residential units under various projects. The completion certificate for its Yuvraj Residential Project was received on 24-03-2014 and JT Residency project was completed on 30-06-2013. In support, they submitted "Completion Certificate" issued by the Development Authority. It has further been submitted that Appellants received Rs.591.67 lakhs from Customers (first booking) after receipt of completion certificate. It has been submitted that as per Section 66E (b) of Finance Act, 1994, they ....
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.... (POCM) Rs.25,25,55,003/- (i) Sale of property Rs.70,00,000/- (j) Unsecured loan transferred to P&L Account Rs.3,76,06,111/- (k) Write back of provisions for expenses. Rs.95,05,639/- (l) Other income due to TDS deducted Rs.51,72,800/- (m) Booking amount received after completion Rs.5,91,67,926/- (n) Total Rs.37,10,07,479/- 16. Therefore, M/s ECPL would be liable for payment of service tax on Construction of Complex Services on amount of Rs.1,39,65,98,300/- - Rs.37,10,07,479/- = Rs.1,02,55,90,821/. The Appellants have submitted that the liability for payment of service tax on amount of Rs.1,02,55,90,623/- would be Rs.3,34,30,933/-. The said computation has been certified by SKMR & Associates, Chartered Accountant. We therefore hold that Appellants were liable for payment of service tax Rs.3,34,30,933/- for the period 01-04-2012 to 31-03-2017 on construction of complex service. As per table 3 of Order-in-Original, ECPL had already paid service tax Rs.3,22,75,327/-. Therefore, there is short payment of service tax Rs.3,34,30,933/- - Rs.3,22,75,327/- = Rs.11,55,606/- on construction of complex service. The issue relating to invocation of extend....
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....f such service are not naturally bundled in the ordinary course of business, it shall be treated as provision of the single service which results in highest liability of service tax. Explanation - for the purposes of subsection (3), the expression 'bundled service' means a bundle of provision of various services wherein an element of provision of one service is combined with an element or elements of provision of any other service or services. 18. The learned Chartered Accountant submitted that the amount received towards Prime location charges etc is naturally bundled with their construction activity in the ordinary course of business and that in series of cases, it has been held that preferential location charges towards garden view, road location, car parking, club, membership, electric sub-station charges etc is a bundled service. It is to be taxed at same rate as that of main service i.e. construction service. Entire consideration received is eligible for abatement. Reliance has been placed on following decisions :- ⮚ Shreno Ltd. Vs. CCE reported in 2021 (54) GSTL 187 (Tri. - Ahmd.) ⮚ Logix Infrastructure (P) Ltd Vs CCE reported in 2....
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....er income, the learned Chartered Accountant fairly conceded that Appellants were liable for payment of service tax on the said amount of Rs.1,05,78,745/-. He however submits that the Appellants had not charged service tax on the same and therefore this amount is to treated as cum tax price. He further submits that the said amount had been received during 2015-16 and 2016-17. It falls within the normal period of limitation. Accepting the Appellants submission, we recompute the liability as under :- Year Rate of tax Gross amount (Rs) Assessable value (Rs.) Service Tax payable (Rs.) 2015-16 14% 6495791 5698062 797728 2015-16 14.5% 3982954 3478562 504391 2016-17 15% 100000 86956 13044 Total 10578745 9263580 1315163 In view of above, we confirm the demand of service tax Rs.13,15,163/-. The issue relating to imposition of penalty and demand of interest on this account shall be dealt with separately. 3. Whether service tax Rs.19,65,925/- is demandable from M/s ECPL on account of service tax short paid on reverse charge basis (Issue No. 4). 22. The SCN alleged that M/s ECPL have made considerable pay....
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....il - September) had been filed on 19-01-2013 and 08-02-2013. Para 21.3 of SCN alleged that since ST-3 return for 2010-11 (i.e. the first year) was filed on 19-01-2013. Relevant date in the instant case is determined as 19-01-2013 in terms of Section 73(6)(i)(a) of Finance Act 1994, wherein it is stipulated that in the case of taxable service in respect of which service tax has not been levied or paid or has been short levied or short paid, where under the Rules made under this chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed. After making above allegations, the SCN in para 24(a) proposed to demand service tax Rs.2,00,56,366/- for the period July, 2010 to March, 2017 under proviso to sub section 1 of Section 73 of the Finance Act, 1994, which includes Rs.52,99,353/- for the period 01-072010 to 31-03-2012. The learned Commissioner observed that the party has not disputed the service tax liability in any written as well as oral submission and requested to appropriate the amount deposited against their service tax liability. Accordingly, he f....
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.... Section 73 (6) (i) (b) of the Finance Act, 1994 and contends that in the cases where assessee does not file his ST-3 returns, the limitation for issue of SCN commences from the due date of filing of ST-3 returns. He submits that in the present case limitation for issuing SCN had already started w.e.f. 25-10-2010 (for the period from July to September 2010), 25-04-2011 (for the period from October 2010 to March 2011), 25-10-2011 (for the period from April 2011 to September 2011) and 25-04-2012 (for the period from 01-10-2011 to 31-03-2012). He submits that once the limitation had already started from the due date of filing of the return, there cannot be any other date for computation of limitation period of 30 months or 5 years. The learned Chartered Accountant further submits that in terms of clause 'a' of Section 73(6)(i), the limitation for computing time limit of 30 months or 5 years is from the date of filing of the said return. He submits that in case of delayed filing of ST-3 returns, the clause 'b' already stands invoked and therefore clause 'a' cannot be invoked further. He therefore pleaded that clause 'a' of Section 73(6)(i) can be invoked only in the cases where ST-3 re....
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.... from M/s ECPL (Issued No. 6). 27. In respect of demand of Rs.52,99,353/- for the period 0107-2010 to 31-03-2012, Appellants alternative submission is that they filed their returns on 19-01-2013/08-02-2013 for the period July 2010 to March 2012. It has been contended that after having filed the returns, extended period of limitation cannot be invoked. They mainly referred to Hon'ble Delhi High Court decision in case of Suresh Kumar Bansal. Further out of the demand of Rs.1,47,57,013/-, relating to construction of complex service, the demand of Rs.11,55,606/- has only been found to be the short payment. The said demand has been raised by invoking the extended period of limitation. The issue of invoking extended period of limitation had come up for consideration in the case of G. D. Goenka Pvt. Ltd. vide Final Order No.51088/2023 dated 21-08-2023 particularly when the Appellants assessee filed its ST-3 returns. Para 25 of the said order reads as under :- "To sum up: a) The Appellant assessee was required to file the ST 3 Returns which it did. Unless the Central Excise officer calls for documents, etc., it is not required to provide them or disclose anything else.....
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.... and that neither Service Tax (Valuation) Rules, 2006 nor Finance Act, 1994 have provisions to determine value of services covered under Section 65 (105) (zzzh). The said decision was for the period prior to 3006-2012 and has been followed by Delhi High Court in following cases also:- (a) Ruchi Goyal Vs NBCC (India) Ltd reported in 2019 (29) GSTL392(Del). (b) Vaani Kapoor Vs CCE reported in 2019 (25) GSTL 534 (Del). 29. The Hon'ble Telengana High Court in the case of Vasudha Bommireddy Vs. AC of Hyderabad reported in 2020 (35) GST 52 (Telangana) has held that the ratio of law laid down in the case of Suresh Kumar Bansal (Supra) is applicable even for the period after 01-07-2012. We are of the view that when two High Courts have held that levy on construction of complex service itself would fail, when there is no mechanism to compute the liability, the extended period of limitation could not have been invoked even for demand of service tax Rs.11,55,606/-. Therefore, even the said demand is set aside on the ground of limitation. Demands on issue No.2 and 4 are related to demand of service tax on preferential location charges and service tax payable on reverse cha....