TaxTMI 
TaxTMI 
2026 (8) TMI 1071
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.... 53,52,961/- under Rule 6(3) of the CENVAT Credit Rules, 2004 [CCR] and ordered its recovery. He further imposed penalties on the appellant under sections 77 and 78of the Act and late fee under Rule 7C of the Service Tax Rules, 1994 [Service Tax Rules] read with section 70 of the Act. 2. The appellant was registered with the service tax department and was rendering "Construction services other than residential complex, including commercial/industrial buildings or civil structures". It had, however, not filed any Service Tax Returns for FY 2016-2017 and FY 2017-2018. 3. The anti-evasion wing of the Commissionerate initiated investigation and found that the appellant had rendered services of "repair and maintenance" as works contracts and had paid duty after taking an abatement of 65% instead of 30% abatement which it was entitled to. 4. The investigation also revealed that the appellant had rendered both taxable and exempted services during the relevant period and had not maintained separate records for the inputs and input services for the two types of services. Therefore, the appellant was liable to reverse wrongly availed and utilised CENVAT credit amounting to Rs. 53,52....
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....VAT credit taken instead of ordering proportionate reversal of CENVAT credit attributable to the exempted services. (xi) On a query from the bench, learned counsel submitted that the appellant had not reversed proportionate amount of CENVAT credit at all but expressed its willingness to reverse if this bench orders so. Submissions of the Revenue 7. Learned authorised representative for the Revenue vehemently supported the impugned order and asserted that it calls for no interference. He submitted as follows: (i) The undisputed fact is that the appellant had rendered works contract service for repair and maintenance under a contract with DIAL. (ii) The appellant had not filed any ST-3 returns for the entire FY 2016-17 and for FY 2017-18( upto June 2017). The period of demand in this case covers April 2015 to June 2017 after which service tax was replaced by GST. (iii) The department was completely in the dark. The antievasion branch of the Commissionerate acted on specific information and initiated investigation. The appellant's premises were searched on 25.6.2018 which revealed that the appellant had been providing works contract services a....
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....then be issued only on the points of dispute. The SCN is not an order but is a notice. The appellant got full opportunity to present its case after the SCN was issued. There is no provision to issue an order on the pre-SCN consultations. Clearly, the department cannot pass an order even before the SCN was issued. This submission of the appellant has no force and hence deserves to be rejected. 11. The next issue is which is the relevant rule to determine the value of the services in works contracts. Rule 2A of the Service Tax (Determination of Value) Rules, 2006 reads as follows: "2A. Determination of value of service portion in the execution of a works contract.- Subject to the provisions of section 67, the value of service portion in the execution of a works contract, referred to in clause (h) of section 66E of the Act, shall be determined in the following manner, namely:- (i) Value of service portion in the execution of a works contract shall be equivalent to the gross amount charged for the works contract less the value of property in goods transferred in the execution of the said works contract. Explanation.- For the purposes of this claus....
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....r the works contract; Explanation 1. - For the purposes of this rule,- (a) "original works" means- (i) all new constructions; (ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; (iii) erection, commissioning or installation of plant, machinery or equipment or structures, whether pre-fabricated or otherwise; (d) "total amount" means the sum total of the gross amount charged for the works contract and the fair market value of all goods and services supplied in or in relation to the execution of the works contract, whether or not supplied under the same contract or any other contract, after deducting- (i) the amount charged for such goods or services, if any; and (ii) the value added tax or sales tax, if any, levied thereon: Provided that the fair market value of goods and services so supplied may be determined in accordance with the generally accepted accounting principles. Explanation 2.--For the removal of doubts, it is clarified that the provider of taxable service shall not take CENVAT credit of duties or cess paid o....
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....elow: Delhi International Airport (P) Ltd. GMR Registered office: New Udaan Bhawan, Opposite T-3, IGI Airport, New Delhi 110037 PURCHASE ORDER To C P Arora Enginners Contractors P Ltd. MIG Flats 175, Prasad Nagar Central Delhi 110005 Phone: 9717995603 Our Order No. 4800127410 Dated: 28.3.2016 TIN (DVAT) 07130318415 Service Tax No. AACCD3570FST001 Corp. Ident. No. U63022DL2006PTC146936 Vendor Code: 114976 Contact person: Tel No. Your Ref No.: Contact Person: Phone No: Email: Board No. 011-25661000 Description: Work Order for various Repair works on Runway 09/27 at IGI Airport, New Delhi Sir, This has reference to your dtd. In pursuance thereto we are pleased to issue this Purchase Order for Work Order for Various R....
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....ltiplied by approx. average cost of material purchased. Material used in the above project certified by engineer and management. Cost calculations are based on the drawings/plans made available to management for the project under reference and the Schedule of items and quantity for the entire work as calculated and certified by DIAL Management and the fair assumption of the cost of material, labour and other inputs made by Management. The major material and consumables are rumblers, Spring Bollards, Cat Eyes, Solar Cat Eye, Strip Seal Expansion Joints, Paver Block, GSB, WMM, Emulsion, Emulsion for Micro, Kerb Stone, Aggregate, FA, Polythene, Bitumen VG-40, Bitumen PMB, LDO, Cement, Additive for Micro, Admixture, Steel, Diesel, sand, Brick, Paint and Water Filled Barrier. Overhead have been classified as construction overhead, administrative overhead and selling and distribution. The construction overhead is allocated directly to the project. Administrative overhead and selling & Distribution overhead are charged to products in the ratio of sales. 2. We have obtained all the explanations and information as certified by management, which to best of our knowledge and beliefs ....
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....ls of the goods transferred, their quantities and values are not there either in the purchase orders or in the invoices or even in the certificate of the Cost Accountant. 20. This leads us to Rule 2A(ii) under which the level of abatement will depend on whether it is original work or repair and maintenance. The appellant's work was undisputedly in the latter category for which abatement of only 30% is available. The appellant had wrongly claimed 65% abatement and short paid duty. 21. Learned counsel also argued that the appellant paid service tax as per the agreement with DIAL and the purchase orders issued by it. This argument deserves to be rejected. The charge of any tax or duty stems from the charging section of the statute and not from any agreement between parties. Otherwise, any two parties can always agree that they shall not pay any tax (although it is payable as per the law). 22. Learned counsel also argued on the question of limitation. It is his submission that extended period of limitation can be invoked only if the nonpayment or short payment of tax is by reason of any fraud or collusion or wilful misstatement or suppression of fact or violation of the Act or....
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....2AA of the Central Excise Rules, 2002, on the ground that the said inputs are used in the manufacture of goods cleared without payment of duty under the provisions of that rule. Explanation 1. - For the purposes of this rule, exempted goods or final products as defined in clauses (d) and (h) of rule 2 shall include non-excisable goods cleared for a consideration from the factory. Explanation 2. - Value of non-excisable goods for the purposes of this rule, shall be the invoice value and where such invoice value is not available, such value shall be determined by using reasonable means consistent with the principles of valuation contained in the Excise Act and the rules made there under. Explanation 3. For the purposes of this rule, exempted services as defined in clause (e) of rule 2 shall include an activity, which is not a service' as defined in section 65B(44) of the Finance Act, 1994. Explanation 4. Value of such an activity as specified above in Explanation 3, shall be the invoice/agreement/contract value and where such value is not available, such value shall be determined by using reasonable means consistent with the principles of valua....
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....nt did not fulfil the obligations under any of the options given under Rule 6 of CCR and this fact is not in dispute. Such being the case, the only course available to the Revenue is to deny the wrongly availed CENVAT credit under Rule 14. This issue was discussed by the Hon'ble High Court of Telangana in Tiara Advertising vs UOI [2019 (30) G.S.T.L. 474 (Telangana)] and the relevant portions of this judgment are reproduced below: "7. Rule 6 of the Cenvat Credit Rules, 2004 deals with the obligations of a provider of taxable and exempted services. Rule 6(1) states that Cenvat Credit shall not be allowed on inputs/input services exclusively used for providing exempted services. Rule 6(2) provides that if inputs or input services are used for provision of output services which are chargeable to duty or tax as well as exempted services, then separate accounts are to be maintained for receipt, consumption and inventory of inputs and receipt and use of input services and the provider shall take credit only on inputs used for dutiable output services. Rule 6(3) of the Cenvat Credit Rules, 2004 is relevant for the purpose of this case and states to the effect that a provider of ou....
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....le to duty/tax as well as exempted services. If such options are not exercised by the service provider, the provision does not contemplate that the Service Tax authorities can choose one of the options on behalf of the service provider. As rightly pointed out by Sri S. Ravi, Learned Senior Counsel, if the petitioner did not abide by the provisions of Rule 6(3) of the Cenvat Credit Rules, 2004, it was open to the authorities to reject its claim as regards the disputed Cenvat Credit of Rs. 17,15,489/-. 15. We may also note that in the event the petitioner was found to have availed Cenvat Credit wrongly, Rule 14 of the Cenvat Credit Rules, 2004 empowered the authorities to recover such credit which had been taken or utilised wrongly along with interest. However, the second respondent did not choose to exercise power under this Rule but relied upon Rule 6(3)(i) and made the choice of the option thereunder for the petitioner, viz., to pay 5%/6% of the value of the exempted services. The statutory scheme did not vest the second respondent with the power of making such a choice on behalf of the petitioner. The Order-in-Original, to the extent that it proceeded on these lines, the....