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TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1441
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.... the confirmed demand of Rs 5,72,02,687/- 2. The facts of the case are that the appellant, M/s. Rahee Infratech Ltd., is registered with the Service Tax Department and provided taxable services of Business Auxiliary Service, Renting of Immovable Property Service, Management or Business Consultants Service, Rent-a-cab operator's service, manpower supply service, supply of tangible goods service, works contract service and commercial or industrial construction service. They received taxable services, including road transportation of goods, manpower supply agency services, rent-a-cab operators' services, scientific or technical services, and legal consultancy services. 2.1. Officers of the DGCEI developed intelligence that the appellant had been evading Service Tax by suppressing the facts about services provided and received by them, in their periodic ST-3 returns. Accordingly, they conducted searches at the office and other related premises of the appellant and recorded a statement from Shri Rajesh Goenka, the appellant's General Manager (Finance & Accounts). Investigators found that the appellant had not discharged their Service Tax liability since 2011-12, ....
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....I's investigation. These amounts had been deemed 'payment made after initiation of investigation' and were proposed to be appropriated against the gross service tax liability of the Appellant. 2.5. The said Notice was adjudicated by the Ld. Commissioner vide impugned Order-in-Original No 30/COMMR/ST-II/KOL/2016-17 dated 28.06.2016, wherein the Ld. Adjudicating Authority has confirmed the demand of Service Tax amounting to Rs. 5,72,02,687/-, including Education Cess and SHE Cess, along with interest. He has appropriated the amount of Rs. 71,33,015/- paid by the appellant during investigation. He also imposed a penalty of Rs. 5,72,02,687/- in terms of Section 78 of the Finance Act, 1994, as amended. He, however, dropped the proposal for imposition of penalty under Section 76 of the Finance Act 1994. 2.6. After issue of the Show cause notice and before passing of the Order-in-Original No 30/COMMR/STII/KOL/2016-17 dated 28.06.2016, the appellant had paid an amount of Rs. 44,66,029/-. However, this amount was neither brought on record or appropriated in the Order-in-Original. 2.7. Aggrieved against the confirmation of the demands of Service Tax, along with interest ....
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....bad in law. The Appellant also invites attention to the following decisions wherein it has been observed and held that the activity of flash butt welding is not liable to service tax: * CCE vs. The India thermit Corporation Limited [2018(2) TMI 228-Tri Allahabad] * Krishna Construction Co. vs. CCE [2022 (8) TMI 644 - Tri- Ahm] ▪ Applicability of exemption of Service Tax on Works Contract Services provided in connection with Railways (Disputed Demand - 61,03,885/-) (i) The appellant submits that that the reason for confirmation of demand is very vague and unclear and therefore it is not in a position to comment on it. On the merits of the case, it is humbly submitted that the work has been undertaken for construction of railway bridges which is specially exempted from the purview of service tax. In this regard, attention is invited to Section 65(105)(zzzza) of the Finance Act, 1994, which excludes "excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams" from the purview of taxable services. (ii) The aforesaid exemption continued even under the negative list regime of services....
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.... tax on staff deputation and equipment hire charges recovered from Joint Venture [Disputed demand of Rs. 17,64,393/- on recovery of staff deputation charges and Rs. 6,47,209/- on equipment hire charges] (i) The appellant submits that they have entered into a Joint Venture Agreement with GPT Infra projects Limited/ GPT Infrastructures Pvt. Limited, for executing railways infrastructure work from time to time. In terms of the arrangement between the parties, the profit and loss arising out of the contract was to be shared equally in the ratio of 50% each (or as agreed between the parties from time to time based on nature of work undertaken). (ii) Principal-client relationship which is the basic tenet for applicability of service tax was not existing between the Assessee and the JV. (iii) No income has been earned and the amount received is purely reimbursement of expenses for undertaking the work of the JV. Further, reimbursement of expenses not liable to tax before 14.05.2015 (iv) The relation between the Assessee and the JV was not that of a service provider and service recipient. The work undertake was towards self-service in a joint venture. ....
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.... decision of Hon'ble Supreme Court in the case of Pushpam Pharmaceuticals Company vs. CCE [1995 (78) ELT 401 (SC)], wherein it has been held that extended period of 5 years would not be applicable just for any omission of assessee unless it is deliberate to escape from payment of duty. Further it is a settled principle that in order to invoke the extended period of limitation, it is necessary to establish that there has been intent to evade payment of duty which has occasioned through fraud, collusion etc. These ingredients postulate a positive act of fraud or collusion or wilful misstatement or suppression of facts. However, in the instant case there was no suppression of the material fact and allegation of the department is not enough to invoke the extended period of limitation. 3.1. In view of the aforesaid submissions, the Ld. Counsel for the appellant prays for setting aside the captioned Order and drop the proceedings initiated thereunder, being legally unsustainable. 4. On the other hand, the Ld. Special Counsel representing the Revenue has inter alia raised the following grounds in the written submissions filed during the course of arguments: - (a) The appell....
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....eiver, are identifiable. Under the erstwhile Service Tax law in India, services provided by a member to its joint venture (JV) were taxable if rendered for consideration. Therefore, the Adjudicating Authority has correctly rejected the appellant's argument while holding them liable for payment of service tax. (e) The Adjudicating Authority correctly did not accept the contention of the Appellant regarding receipt of commission against export of services and receipt in convertible currency in the absence of proper documentary evidence. (f) The services provided by the Appellant are squarely classifiable under Works Contract Service and Commercial/Industrial Construction. These are taxable services under Section 65(105)(zzzza)/(zzq) of the Finance Act, 1994. The plea that the contracts related to "railway projects" and hence are exempt, is misconceived because- (i) the services were rendered to private entities (Kalpataru, L&T, TISCO), not to Indian Railways; (ii) exemption for "construction of railways" applies only when service is directly provided to Railways; and (iii) Sub-contractors providing works to private companies for commer....
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.... Tax of Rs. 3,49,07,819/- on Commercial or Industrial construction services provided to Indian Railways, we observe that the appellant had undertaken the work of "Flash Butt Welding of Rail Joints in connection with construction of roadbed". Flash Butt Welding was done by them to join sections of the mainline rail together to create Long Welded Rail (LWR) or continuous welded rail. This smoother rail reduces the wear on the rails themselves, effectively reducing the frequency of inspections & maintenance. Continuous welded rail is particularly used on highspeed rail lines because of the smoothness of the rail head. The appellant's stand is that the said job of construction of Railway Lines using mobile flash butt Welding machine, is in the nature of "original works" provided to the Railways is exempted from service tax under both negative and positive list regime of service. They also contend that for the period post 01.07.2012, the said services were exempted by Serial No. 14 of Notification No. 25/2012-S.T.dated 20.6.2012, which specifically exempts construction service rendered to Railways. For ready reference, the said entry 14(a) of the Notification No. 25/2012S.T.dated 20.06.....
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....ically excluded from the levy of Service Tax in the definition itself. As the services rendered to Indian Railways are specifically exempted from Service Tax, we hold that the services of 'flash butt welding' rendered by the appellant to the Indian Railways are not liable to Service Tax. 7.3. From the above discussions, it is clear that the work of "Flash Butt Welding" provided to the Railways falls within the purview of "original works", which is exempted from levy of Service Tax under the Negative as well as Positive / Pre-Negative list regime of service. We also find that similar views have taken by the Tribunal in the cases of CCE vs. The India Thermit Corporation Limited [2018 (2) TMI 228 - CESTAT Allahabad] and Krishna Construction Co. vs. CCE [2022 (8) TMI 644 - CESTAT Ahmedabad] 7.4. Thus, in view of the foregoing, we hold that the demand of Service Tax confirmed in the impugned order on this issue is not sustainable and hence we set aside the same. Issue 2 - Applicability of exemption of Service Tax on Works Contract Services provided in connection with Railways (Disputed Demand - 61,03,885/-) 8. Regarding the demand of Service tax of Rs.61,03,885/- on Works Co....
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....]. The relevant part of the said decision is reproduced below for ease of reference: "5.1 The definition of 'Commercial and Industrial Construction Service' as provided in Section 65(25b) excludes such activities relating to roads, ports, railways, dams, bridges, tunnels etc. There is no distinction between a monorail or metro rail or any other kind of rail and, therefore, the term 'railways' used therein has to be given its widest meaning to include all types of railways and all types of railway lines. Therefore, the distinction sought to be made by the adjudicating authority is not sustainable in law. 5.2 Secondly, we do not find any basis for the conclusion drawn by the learned adjudicating authority by referring to some decision of the Government while examining the scope of the terms 'railways' in the context of certain tax exemptions. There is no evidence before us to show that the Government examined the matter and came to such a conclusion nor is there any circular or notification issued by the Government in this regard. In the absence of any such decision which is in the public domain, we are unable to accept the contention raised by the Revenue in this r....
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....ays, excluding monorail and metro....... applied to this receipt by holding that the said sidings are nothing but material handling system for private purpose and, therefore, not covered by "(31) "railway" means a railway, or any portion of a railway, for the public carriage of passengers or goods, and includes- (a) all lands within the fences or other boundary marks indicating the limits of the fand appurtenant to a railway. (b) all lines of rails, sidings or yards, or branches used for the purposes of, or in connection with, a railway (c) all electric traction equipment's, power supply and distribution installations used for the purposes of, or in connection with, a railway. in section 2 of The Railways Act, 1989 though the benefit of exclusion of the 'goods component in composite contracts provided for in rule 2(a)(ii)(A) of Service Tax (Determination of Value) Rules 2006 was extended to them. The liability was computed by applying the tax rate on 40% of the amount so received. 3. According to Learned Counsel appearing for the appellant, the issue stands settled by several decisions of the Tribunal commencing wit....
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....nistry of Railways is part of the Government of India and not on commercial basis. Therefore, Indian Railways cannot be compared or equated with MMO/DMRC, a Company formed under the Companies Act and is committed to run purely on commercial lines even if it is fully owned by the Government.... "Railway" in the Indian Context is popularly known as "Indian Railways and is more appropriately understood as Railways operated under the Indian Railways Act especially for the purpose of any special dispensations such as tax exemptions. 6. We find no authority for these sweeping statements on the intent of Finance Act, 1994, the scope of the taxable service under which the levy has been confirmed or the status of railway operations in the country. In the context of the claim of the appellants, limited to the exclusion from the taxability otherwise attached to commercial or industrial construction service", we are not required to define the scope of the taxable service, the test of commercial imperative of the impugned activity is not in dispute. All that we are required to ascertain is the conformity of the operation of the recipients of the service to the excluded aspect of the ta....
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....contrived to suit tax administration, neither can the definition in another statute be drawn upon for the purported purpose of illumination. The Railways Act, 1989 was enacted to authorize Government of India to operate the railway network of the country; it also affords a framework for administration of the railway services and jurisdictional monopoly The taxable service' in Finance Act, 1994 excluding 'railways' from the ambit of the service did not place any restriction on benefit going to private railways. The statute, too, did not consider it necessary to fall back on the definition of railways in another statute for determination of taxability and it is not open to the adjudicating authority to arrogate that privilege in an executive capacity. The intent of exclusion prior to 1st July 2012, and exemption for the period, thereafter, is abundantly clear. 10. Consequently, following the decisions of the Tribunal that have consistently interpreted the legislative intent of the exemption, we set aside the impugned order and allow the appeal." 8.5. In view of the above findings, we hold that the demand of Service tax of Rs.61,03,885/-confirmed in the impugne....
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....ire charges recovered from Joint Venture, we observe that the demands of Service Tax under this head have been confirmed on the premise that a Joint Venture (JV) formed under any agreement is a separate legal entity from its constituent member, in which two separate entities i.e. service provider and service receiver are identifiable, and therefore, the Revenue has fastened these Service Tax liabilities on the appellant. In this regard, we have considered the fact that the appellant have entered into a Joint Venture Agreement with GPT Infra projects Limited/ GPT Infrastructures Pvt. Limited, for executing railways infrastructure work from time to time. In terms of the arrangement between the parties, the profit and loss arising out of the contract was to be shared equally in the ratio of 50% each (or as agreed between the parties from time to time based on nature of work undertaken). Further, the joint venture provides as under: - all rights, interest, liabilities, obligations, working experience and risk and profit and loss after income tax arising out of the said contract shall be shared and borne by the parties in the said share / ratio. - Each of the parties h....
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....e (partnership) cannot be said to be a service rendered by such coventurer (partner) to the Joint Venture (Partnership). There is neither an intention to render a service to the other partners nor is there any consideration fixed as a quid pro quo for any particular service of a partner. All the resources and contribution of a partner enter into a common pool of resource required for running the joint enterprise and if such an enterprise is successful the partners become entitled to profits as a reward for the risks taken by them for investing their resources in the venture. A contractor-contractee or the principal-client relationship which is an essential element of any taxable service is absent in the relationship amongst the partners/co-venturers or between the co-venturers and joint venture. In such an arrangement of joint venture/partnership, the element of consideration i.e. the quid pro quo for services, which is a necessary ingredient of any taxable service, is absent. 10.3. In support of the above view, we rely upon the decision in the case of Mormugao Port Trust vs. Commissioner of Cus., C.Ex. and S.T., Goa [2017 (48) S.T.R. 69 (Tri-Mum)], wherein the demand of Service....
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....nsideration that forms the basis for computation of service tax. However, existence of consideration cannot be presumed in every money flow. ... The factual matrix of the existence of a monetary flow combined with convergence of two entities for such flow cannot be moulded by tax authorities into a taxable event without identifying the specific activity that links the provider to the recipient. 12. ... Unless the existence of provision of a service can be established, the question of taxing an attendant monetary transaction will not arise. Contributions for the discharge of liabilities or for meeting common expenses of a group of persons aggregating for identified common objectives will not meet the criteria of taxation under Finance Act, 1994 in the absence of identifiable service that benefits an identified individual or individuals who make the contribution in return for the benefit so derived. 13. ... Neither can monetary contribution of the individuals that is not attributable to an identifiable activity be deemed to be a consideration that is liable to be taxed merely because a "club or association" is the recipient of that contribution. 14....
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....s the partner agrees to receive only a share of profit which is contingent upon the firm earning profits in the first place. If the venture fails and the firm does not earn any profit, the partner may not receive anything in return for the contribution made by him. On the other hand, if the firm's venture is successful, the partner may earn profit which may be much more than the normal rent that he would have earned by simply leasing out the office to the firm for a fixed rent. The profits which the partner will earn in such circumstances is a reward due to an entrepreneur for the risk that he takes and cannot be regarded as a consideration for the renting of the office to the firm." ......... What the partner/co-venturer does is for his own benefit cannot ipso facto be considered as a service rendered to the partnership (joint venture). The mere fact that the partnership (joint venture) may also benefit from the same is irrelevant as there is no contract of service agreed upon or performed by the partner (co-venturer) to the partnership (joint venture). Additionally, there is no consideration agreed upon or provided. In the absence of there being a quid pro quo t....