TaxTMI 
TaxTMI 
2025 (11) TMI 124
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....mand of Rs 87,23,331/-. 2.1 Brief facts from the Appeal records are that the Appellant, is a proprietary concern engaged in the construction of CIVIL structures for Karunya Institute of Technology and Science, Coimbatore an Educational Institution, and had not obtained service tax registration nor discharged their service tax liability nor filed ST-3 Returns. They had obtained Service Tax registration only after the Department conducted Investigation in March 2014 on the intelligence that the Appellant was engaged in providing taxable construction services without obtaining the requisite registration or discharging the applicable service tax liabilities. Thereafter the appellant was issued with a SCN No 43/2014 dated 17.10.2014 whereby service Tax of Rs 87,23,331/- was proposed to be demanded along with appropriate interest and to impose penalty under Section 76, 77, 78 of Finance Act, 1994 invoking extended period under Proviso to Section 73(1) of FA 1994 for the period from 01.04.20109 to 31.03.2014. 2.2 After due process of the law, the Adjudicating Authority vide the impugned Order-in-Original No. 02/2016-Commr. dated 27.01.2016 (hereinafter referred to as 'impugned order....
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.... are not taxable, being non-commercial in nature. In the present case also, the admitted fact is that buildings were constructed for Educational Institutions viz., Karunya Educational Institution, used for non-commercial purpose. Hence the same will not be liable to service tax. 4.6 The Ld. Adjudicating Authority deducted the material value and demanded service tax on the net value for the years 2010-2011 to 2012-2013 under Rule 2A of Service (Determination of Value) Rules, 2006. However, he has taken entire amount received by the appellant as taxable value in 2009-2010 and 2013-2014 for the reason that appellant failed to submit Profit and Loss Account for these two years. The dispute here is with regard to valuation in the years 2009-2010 and in 2013-2014. 4.7 They are not liable to pay service tax on the construction services rendered to Karunya up to 30.06.2012 and from 01.07.2012 onwards the actual tax liability is only Rs.17,98,870/-, out of which appellant already paid Rs.17,09,791/-. The balance demand of Rs.89,079 is also not payable on account of limitation. 4.8 Without prejudice appellant prayed that the in case of demand if any on him, cum service tax benefit m....
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....uipment 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; 8.2 We also notice that in Section 65B, inserted by the Finance Act 2012, with effect from 01.07.2012, under sub-section (54), works contract has been defined as under: - "65B(54) "works contract" means a contract wherein transfer of property in goods involved in....
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....lant under Works Contract Service (WCS) as alleged by Revenue. The service was introduced and leviable to Service Tax with effect from 01.06.2007. 9.6 It is not disputed by the parties that what was involved was civil construction works for 'Educational Institutions'. The appellant's contention is that the activity cannot be said to be primarily for the purpose of commerce or industry as stated at (b) in the definition above and hence will not come under the levy during the relevant time. 9.7 We find that the dispute pertains to the phrase 'primarily for the purposes of commerce or industry'. The Hon'ble U.S. Supreme Court in its judgment in Malat v. Riddell [383 U.S. 569 (1966)] held that, "primarily" means "of first importance" or "principally". We shall examine the matter accordingly. 9.8 At the outset. as a general principle of interpretation, where the words of a statutory provision are plain, and unambiguous, the intention of the Legislature is to be gathered from the language of the provision itself. The term 'commerce or industry' are commonly understood terms and do not require the aid of another definition from the statute to gather its intention. Commercial acti....
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....tial burden in establishing chargeability of the service falling under WCS. Merely because the institutions are collecting a fee will not make the institution primarily for the purposes of commerce or industry. On this fact alone, we hold that the demand must hence fail. 9.10 It was also held in the impugned order that the appellant has not produced any evidence to show that the educational institutions constructed by it are run without profit motive and rejected the appellant's contention to this effect. For the period from 01-07-2012 it was held that there is no requirement under the service portion in the execution of a works contract is a declared service under Section 66E and that under the new definition of service there is no requirement that the construction should be for commercial or industrial and all types of constructions are taxable at the rates specified in Section 66B of the Act and therefore constructions carried out for schools and colleges from 01-07-2012 are liable to be charged to service tax. 9.11 We find that the Adjudicating Authority has misdirected himself in rendering the finding that it is for the appellant to show that educational institutions con....
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.... a belief that it does not come within the ambit of a definition of taxable service indicated in the statute, it only needs to be shown wherefrom such a belief emanates and in this case demonstrably, the appellant has indicated that such a belief was premised on the Board's Circular No. 80/10/2004-S.T., dated 17-9-2004 issued soon after The Finance (No. 2) Bill, 2004 had been enacted on 10.09.2004. 9.16 Therefore, when the instructions issued by CBEC, stipulate "Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature.", it is sufficient for the appellant to harbour a belief that the buildings, the works contract of construction of which have been entrusted to it and such entrustment being made by a charitable trust established for the purposes enumerated supra, are not taxable as such constructions are found by CBEC to be non-commercial in nature. Further we find that the recipient is governed by a Charitable Trust registered under Section 12 AA of Income Tax Act. We are ....
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....ct to educational institutions for the period up-to 01.07.2012 cannot sustain and is liable to be set aside. 9.20 Therefore, in view of our discussions supra, we hold that the demand of service tax on the works contract services rendered by the appellant to educational institutions up-to 01.07.2012, which is part of the demand on works contract services rendered by the appellant that the construction of educational institutions, being construction not primarily for the purposes of commerce or industry, are therefore not exigible to service tax, will no doubt, support their case only up-to 01.07.2012. 9.21.1 However, we are of the view that such reliance placed on these decisions as well as the reliance placed on the Circular will not carry their case beyond 01-07-2012 in view of the changes brought about in the Finance Act, 1994 by virtue of the new definition of "works contract" in Section 65B (54) as reproduced supra. 9.21.2 We also note that the exemption given in the Mega Exemption Notification No. 25/2012-ST dated 20.06.a2012, was also confined only to, inter-alia, construction of a structure meant predominantly for use as an educational establishment only for service....
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....L 397 (Tri. Del.)]. 10.3.3 This issue is no longer res integra as it is settled by plethora of decisions including the above decisions. Therefore, cost of the materials supplied by Karunya need not be added for determining the tax liability under Works Contract Services provided. 10.3.4 The Appellant calculated his liability for the disputed years 2009-10 and 2003-14 as follows: - Therefore, tax liability if any for the year 2009-10 it can be only, as detailed below. Amount Received (Rs.) Tax payable@ 4% 47,10,744 1,88,430/- 10.3.5 On the same analogy the tax payable for the year 2013-14 was also calculated to be as follows: - Gross amount received Rs 2,13,99,050 40% of the gross amount Rs 85,59,620 Service Tax @12.36% 10,57,960 And prayed that the difference in Tax demand of Rs.15,86,954 [Rs.26,44,923 - Rs.10,57,969] may kindly be set aside. 10.4 We find that Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007 contain only 3 rules and Rule 3 of the said Rules primarily deal with such composition scheme. Rule 3 of the said rules starts with non-obstante clause i.e., "Notwithstanding anything contained in section 67....
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....e and follows principles of natural justice, providing the taxpayer an opportunity to be heard. The officer must use reasonable judgment, not arbitrary attitude, and is required to issue a written order. The burden of proof lies with the taxpayer to provide necessary information. While involving some estimation, the assessment must be grounded in evidence beyond mere suspicion. Instead, the LAA has taken the value as NIL, and this has been contested by the Appellant. 10.6 The Appellant has given their workings based on decision in the case of Bayana Builders 2018(10) GSTL 118 (SC) and as per the Appellant's own calculations, this will result in excess payment. We are unable to verify this aspect as sufficient material is not placed before us. We have already held in the foregoing paras that Service Tax is not payable for the period up-to 1.7.2012, and the liability will arise thereafter. Therefore, we have to remand this issue back to the LAA for the limited purpose of calculating the actual tax payable for the period 1.7.2012, to 31.3.2014 and we remit it back to the original Authority to complete this exercise after following the principles of natural justice and the entire ex....
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....of any tax. Hence, the finding by the adjudicating authority regarding the absence of "cum-duty" documentation contradicts the evidence on record. 11.3 We find that "Cum-tax benefit" refers to a method of determining the actual service tax liability when a service provider has not separately specified the tax component in the price charged to a customer. Since service tax was an indirect tax, it was legally the consumer's responsibility, and the total amount collected from the customer was presumed to be inclusive of the service tax. Section 67(2) provides that where the gross amount charged by the service provider for the taxable services provided or to be provided is inclusive of service tax payable, the value of taxable service in such case shall be the amount as with the addition of service tax payable, is equal to the gross amount charged, i.e., value shall be considered as inclusive of service tax. We find that there is no evidence on record to prove that the Appellant has billed and collected Service Tax from their customers. The case Law cited in the impugned order is not applicable in the present case as we note that when the Appellant was contesting the Taxabilty a....
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....arried on taxable construction activity continuously for several years; * had not obtained service-tax registration; * had not filed any returns; and, * had not paid service tax until investigation initiated. 12.4 The statutory obligation to register under Rule 4(1) of the Service Tax Rules is basic and mandatory. The failure for multiple years indicates deliberate indifference or conscious disregard, and could not be termed as mere inadvertence. 12.5 The plea of ignorance cannot be accepted in view of the settled law that ignorantia juris non excusat. In Neminath Fabrics Pvt. Ltd. v. CCE [2010 (256) ELT 369 (Guj.)], the Gujarat High Court held that such conduct "clearly evidences wilful suppression and intent to evade." 12.6 We find that in contrast, cases such as Chemphar Drugs and Rajasthan Spinning apply only where the assessee was registered and facts were disclosed, which is not the case here. 12.7 There are a plethora of decisions favouring the Respondent in similar situations and we do not wish to reproduce here in this order to avoid burdening it for the sake of prolixity. 13.1 Penalty under Section 78 Once suppression with inte....