TaxTMI 
TaxTMI 
2026 (7) TMI 455
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....s to the period from April, 2013 to March, 2018 and was confirmed by invoking the extended period of limitation on allegations of suppression and wilful non-payment of Service Tax in respect of various activities undertaken by the appellant during the period under dispute. 2. The facts of the case are that the appellant is a private limited company incorporated under the Companies Act, 1956 having its registered office at 2C/2D, Vardhaman Apartment, Near Jain Mandir, Janaki Path, Guwahati - 781 001 and principal place of business at Anil Plaza (3rd Floor), ABC, G.S. Road, Near IDBI Bank, Guwahati - 781005. The appellant is registered with the Service Tax Department under Registration No. AAHCS5437PSD001 for providing taxable services under the category of "works contract service". The appellant has been regularly filing their statutory ST-3 Returns and maintaining books of account, which are subject to audit under the provisions of the Companies Act, 1956, besides regularly filing returns under the Income Tax Act, 1961. 3. During the relevant period, the appellant executed various construction projects for Government departments, Government agencies and other authorities. The....
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.... of Service Tax amounting to Rs. 5,16,70,590/- under the provisions of the Finance Act, 1994 on the allegation that the appellant had failed to discharge appropriate Service Tax liability in respect of Works Contract services provided by it during the period from 01.04.2013 to 30.06.2017 and had thereby contravened the provisions of Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994. Interest and penalty were also proposed by invoking the extended period of limitation. 6.1. The appellant contested the allegations and claimed that the services rendered by it in respect of the projects in question were exempt from payment of Service Tax in terms of various entries contained in Notification No. 25/2012-ST dated 20.06.2012, as amended. 6.2. However, the Ld. Principal Commissioner of C.G.S.T. and Central Excise, Guwahati, vide his Order-in-Original No. 01/Commr./ST/GHY/2020-21 dated 04.05.2020, confirmed the demand of Service Tax totally amounting to Rs. 5,16,70,590/- along with interest under Section 75 of the Finance Act, 1994 and imposed an equal amount of penalty under Section 78 ibid. 6.3. Aggrieved by the said Order-in-Original dated 04.05....
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....uilding for College of Agriculture, at Kyrdemkulai, Ri-Bhoi District, Meghalaya, by Central Agriculture University, Imphal, Tender Document No. B&R/HO/CAU/BUILDING/5104245/CW/01 dated 24.10.2016- Construction of Administrative Building and Academic Block, Boys' and Girls' Hostel, Guest House for Faculty and Roads and Wmployees' Quarters etc. Period of Dispute - 13th Feb, 2017 to 23rd February, 2017.Contract Value Rs.35,56,00,780 /- Rs.88,90,020 Mobilisation Advance Received from M/s. Bridge & Co. India Ltd. Taxable Service Rs. 35,56,008/- Rs. 5,33,401 Not taxable - Beyond the scope of Rule 3 of the point of Taxation Rules, 2011. (V) Work Contract - Construction of Boundary Wall at Ministry of Textiles Premises, executed through NBCC, Contract No, NBCC/GM/MOT/Assam/BW/2015/1 435 dated 02.11.2015, contract Value Rs. 76,84,106/- Rs. 8,05,297 Rs. 1,16,768 Exempted Service Exempted Service Entry No. 12A, clause-a of Mega Exemption Notification No. 25/2012-ST, dated 20.06.2012. (VI) Work Contract - Construction of Ground Tank and Firefighting work at Boragaon for Apparel and Garment manufacturing unit of Ministry of Textiles, executed through NBCCL on beh....
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..../2016-ST dated 13.04.2016. Hence, the demand raised on this count is liable to be set aside. (iii) Further, that the amount paid towards Trade Licence Fees is specifically exempted under Entry No. 58 of Notification No. 25/2012-ST dated 20.06.2012 and, therefore, no Service Tax can be levied on the same. (iv) It is submitted that the demand of Service Tax under the category of Goods Transport Agency (GTA) service under reverse charge mechanism is wholly revenue neutral. According to the Learned Counsel, any Service Tax payable under reverse charge would have been available to the appellant as CENVAT credit and, therefore, no intention to evade payment of tax can be attributed to the appellant and the demand on this count is not sustainable. (v) It is further submitted that the appellant was throughout under a bona fide belief that the services rendered under the various Government contracts awarded to it were covered by the Mega Exemption Notification No. 25/2012-ST dated 20.06.2012; that their records were subjected to statutory audit under the Companies Act and the Income Tax Act. Thus, according to the Learned Counsel, there was neither suppression of ....
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.... establish the existence of fraud, collusion, wilful misstatement, suppression of facts or contravention of statutory provisions with intent to evade payment of tax for invocation of the extended period of limitation. 10.2. In the facts of the present case, we find that the contracts in question pertained to various public projects awarded by the Government of India as well as the State Governments of Assam and Meghalaya. Such projects were awarded pursuant to tender processes and the work orders issued thereunder were matters available in the public domain. The appellant has consistently maintained that it was under a bona fide belief that the services rendered by it were covered by the exemption available under Notification No. 25/2012-ST dated 20.06.2012. We find no material on record to indicate that the appellant had deliberately withheld any information from the Department or had acted with an intention to evade payment of Service Tax. 10.3. We further find that the dispute involved in the present proceedings is essentially one relating to the interpretation and applicability of the Mega Exemption Notification No. 25/2012-ST dated 20.06.2012 to the various contracts exe....
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....ce" under Section 65B(5) of the Finance Act, 1994, the benefit of exemption under Entry No. 14(d) of Notification No. 25/2012-ST dated 20.06.2012 would not be available. It is not in dispute that the work in question pertained to construction of food grain godowns and allied works for the Food Corporation of India (FCI), a statutory corporation established under the Food Corporations Act, 1964 by an Act of Parliament. Thus, we observe that there is no dispute that the construction of food grain godowns was rendered by the appellant to a Governmental Authority within the meaning of clause 2(s) of Notification No. 25/2012-ST, as amended vide Notification No. 2/2014-ST dated 30.01.2014. The contract itself was awarded through NBCC on behalf of FCI for creation of warehousing infrastructure intended for storage and preservation of food grains and allied purposes. 12.1. We find that the predominant object and purpose of the project was to create public warehousing infrastructure for FCI in discharge of its statutory functions connected with procurement, storage and distribution of food grains. Such activity cannot be viewed as one undertaken for commerce, industry or any business or ....
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....ntended for preservation and distribution of food grains procured after harvest, would, in our considered view, squarely answer the description of post-harvest storage infrastructure contemplated under the exemption entry. 12.6. In the aforesaid circumstances, we are unable to subscribe to the view adopted in the impugned order. Accordingly, we hold that the benefit of exemption under Notification No. 25/2012-ST cannot be denied in respect of the construction of the 50,000 MT capacity food grain godown and allied works executed for the Food Corporation of India. Consequently, the demand confirmed on this count is unsustainable and liable to be set aside. (B) Construction of Integrated Farmers' Market Complex at Ampati, West Garo Hills, Meghalaya 13. We now proceed to examine the demand confirmed in respect of the "Construction of the Integrated Farmers' Market Complex at Ampati, West Garo Hills, Meghalaya". Upon consideration of the rival submissions and the records available before us, we find that the ld. adjudicating authority has proceeded to reject the appellant's plea for exemption under Notification No. 25/2012-ST dated 20.06.2012 on the ground that the proj....
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.... has been brought on record by the Revenue to establish that the structure was intended predominantly for commerce, industry or any other business or profession. 13.4. Besides, it is a fact on record that the facilities created under the project were integrally connected with agricultural activities and marketing infrastructure for agricultural produce. The project envisaged provision of facilities for storage, warehousing, exhibition, dissemination of information and training to farmers and thus bore a direct nexus with agricultural development. The approach adopted in the impugned order, in treating the entire project as a commercial complex merely on account of the existence of a revenue-sharing arrangement, does not accord with the true nature and purpose of the project. 13.5. In view of the foregoing discussion, we are unable to subscribe to the findings recorded in the impugned order. We thus hold that the benefit of exemption under Notification No. 25/2012-ST could not have been denied in respect of the construction of the Integrated Farmers' Market Complex at Ampati, West Garo Hills, Meghalaya. Consequently, the demand confirmed on this count is unsustainable and ....
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....ties. 14.3. In the facts of the present case, we find considerable force in the submission that the issuance of the work order prior to 01.03.2015 cannot be completely ignored while determining the eligibility of the exemption. The project admittedly pertains to a Government educational institution; the award of work had already been finalized before the cut-off date; and the subsequent execution of the formal agreement on 02.03.2015 appears, prima facie, to be a continuation of the contractual arrangement already set in motion by the work order dated 20.02.2015. In such circumstances, a hyper-technical interpretation of the exemption entry, detached from the substance of the transaction, would not be justified. 14.4. We are of the view that exemption notifications concerning Government and public welfare infrastructure projects are required to be interpreted in a manner that advances the object sought to be achieved, particularly where the essential conditions stand substantially fulfilled and there is no dispute regarding the nature of the recipient or the character of the work executed. Viewed in that light, the denial of exemption solely on account of the formal agreement....
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....rest, was backed by a bank guarantee and was recoverable from subsequent running bills. These features distinguish such payment from an ordinary advance received as consideration for services rendered. The essence of the transaction appears to be the provision of temporary financial assistance to enable commencement and execution of the project, rather than payment towards any identified stage of completed service. 15.3. The decisions relied upon by the appellant also recognize that mobilization advances, depending upon the terms governing their release and recovery, possess characteristics akin to a recoverable financial accommodation and cannot automatically be equated with consideration for taxable services merely because the expression "advance" is employed in the contract. 15.4. In the facts of the present case, we find that the Revenue has proceeded solely on the nomenclature of the payment without examining the true nature, purpose and recoverability of the amount under the contractual terms. In our considered view, such a recoverable and interest-bearing mobilization advance, secured by a bank guarantee and adjustable against future running bills, cannot be brought to....
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....contracts was never concealed from the Department and the relevant transactions were duly reflected in the books of account maintained by the appellant. The entire case of the Revenue proceeds on a different interpretation of the exemption notification and not on the discovery of any positive act of fraud, collusion, wilful misstatement or suppression of facts with intent to evade payment of Service Tax. 16.3. The Show Cause Notice dated 20.04.2019 seeks to demand Service Tax for the period March 2016 to June 2017 for the aforesaid works by invoking the extended period under the proviso to Section 73(1) of the Finance Act, 1994. In the absence of any tangible material establishing the ingredients necessary for invocation of the extended period, we are unable to sustain such invocation merely because the appellant entertained an erroneous understanding regarding the scope of the exemption notification. A bona fide interpretational dispute, by itself, cannot justify invocation of the extended period of limitation. 16.4. Accordingly, while we find that the appellant is not entitled to the exemption claimed under Notification No. 25/2012-ST in respect of the aforesaid two contrac....
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....n is reproduced below: - "9. We find that the main contention of the Appellant in the present case is regarding revenue neutrality. Service tax on all four services, namely 'legal services', 'rent-a-cab service', 'clouding service' and 'purchasing licence use of Geneva brand product', relevant to this case was payable under reverse charge mechanism. Legal services and rent-a-cab services were specified services under Notification No.30/12-ST dated 20.06.12 on which service tax was payable by the service recipient under reverse charge mechanism. Clouding services and Authorisation for use of Geneva product were provided by entities located abroad, i.e., non-taxable area. So, service tax on said services was payable by service recipient under reverse charge mechanism. We further find that the Appellant was a registered person under service tax and was eligible for taking Cenvat credit paid on input services. It is a fact that all said services were input services for the Appellant. Whatever tax was paid on said services, the Appellant would have taken back as Cenvat credit. Thus there was no gain to the government exchequer in that case. It is....
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.... The principal contention of the appellant is that Royalty constitutes a tax and, therefore, levy of Service Tax thereon would amount to impermissible taxation of a tax. However, the said contention no longer holds the field in view of the Constitution Bench judgement of the Hon'ble Supreme Court in Mineral Area Development Authority v. Steel Authority of India Ltd., reported in (2024) 21 Centax 378 (SC), wherein the Hon'ble Supreme Court has categorically held that Royalty payable under the Mines and Minerals (Development and Regulation) Act, 1957 is not a tax. Consequently, the appellant's plea that Service Tax could not be levied on Royalty on the ground that Royalty itself is a tax cannot be accepted. 18.2. Nevertheless, it is observed that the impugned demand pertains to the period April 2016 to June 2017, whereas the Show Cause Notice came to be issued only on 20.04.2019 by invoking the extended period of limitation. The issue involved relates to the taxability of Royalty under the category of "assignment of right to use natural resources service", a matter which had been the subject matter of considerable judicial debate and conflicting views before various ju....
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....ellant is intrinsically connected with statutory registration/licensing requirements prescribed under the municipal law. Therefore, even viewed from the standpoint of the exemption notification, the activity is entitled to the benefit of the said entry. 19.3. In these circumstances, we hold that the demand of Service Tax confirmed on trade licence fees paid to the Guwahati Municipal Corporation is not sustainable and is liable to be set aside. 20. Lastly, coming to the issue of imposition of penalty under Section 78 of the Finance Act, 1994, we find that the impugned order has imposed penalty on the allegation that the appellant had wilfully suppressed material facts with intent to evade payment of Service Tax. However, upon examination of the records and the issues involved in the present proceedings, we find no sufficient material has been brought on record for sustaining such allegation. 20.1. It is observed that the disputes involved in the present case principally relate to the interpretation of exemption notifications and other legal issues requiring interpretation of the statutory provisions. The relevant facts concerning the contracts executed by the appellant, rec....