F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
Brief Facts of the Case:M/s P P Patel, 2/5 Gold Coin Complex, Jodhpur Char Rasta, Ahmedabad is
engaged in providing Commercial or Industrial Construction Service, taxable under
Section 65(105) (zzq) [with effect from 10.09.2004] , Site Preparation Service, taxable
with effect from 16.05.2005 under section 65(105) (zzza) and Mining Service, taxable
with effect from 01.06.2007 under section 65(105) (zzzy) of the Finance Act,1994.
They are having service tax Registration No. AGXPP1574BST001, dated 24.2.2005
issued from the department. However, the service of Commercial or Industrial
Construction Service, taxable under Section 65(105) (zzq), is not got added in the
Service tax Registration. The assessee is also availing Cenvat credit on capital goods
namely, on dumper, tipper, excavators, Bulldozers, grader etc., under Cenvat Credit
Rules, 2004.
1.1
The assessee is providing their service for construction of Canal, Bridges, Roads,
etc., to government authorities. The said services, being excluded from the definition
of Commercial or Industrial Construction Service, they are not discharging service tax.
1.2.
They are rendering Site Preparation/formation/Mining Services mainly to
Mahanandi Coal Fields Ltd. (Basundhara), Mahanandi Coal Fields Ltd. (Lingraj), Shah
Jitendra Mulchanddas, South Eastern Coal Fields, Ltd, Amagon, South Eastern Coal
Fields Ltd Amera, Western Coalfields Ltd, Kolarpimpri, Western Coals Field Ltd,
Ballapur. The services rendered to these entities are taxable and they are paying
service tax on the same. The EA 2000 Audit of the said assessee for the records
maintained for the period 2008-09 to 2011-12 was carried out by the officers of service
tax, and FAR No. 196/2013-14 dated 22.10.2013 incorporating the various
observations was issued. The same are discussed as under.
2.
Reconciliation of Receipt/Income recorded in Financial accounts vis-à-vis
declared in ST-3 returns.
2.1
During the course of audit of the records maintained for the period 2008-09 to
2011-12, reconciliation of the taxable Income shown in the Profit and Loss account
with that declared in ST-3 have been carried out. The reconciliation statement is
enclosed as Annexure A to this show cause notice. As per the said reconciliation the
summary is as under.
Page | 1
F.No. STC/4-52/O&A/13-14
Sr.
No.
1
OIO NO: AHM-SVTAX-000-COM-013-14-15
Particulars
2008-09
2009-10
2010-11
Total Income inclusive of
service tax as per Profit
and Loss Account-B/S of
the respective year.
261825293
369379248
2011-12
Remarks
441993794 389243560 Exhibit A-1
Addition
2
Opening Debtors related
to Taxable Service
0
7129425
11425635
27742130 Exhibit A-2
3
Retention money receipt
0
0
0
6583648 Exhibit A-3
4
Total Addition (2+3)
0
7129425
11425635
7129425
11425635
27742130
1388338 Exhibit A-4
241869606
206943378
118762313
60383738 Exhibit-A-5
34325778
Deductions
6
Closing debtors related
to Taxable service
7
Non taxable service
8
9
10
11
12
13
Retention money related
to
service
tax
not
991284
4688582
10749460
0 Exhibit A-6
received
Total
Deduction
249990315 223057595 157253903 61772076
(6+7+8)
Total
Taxable
value
inclusive of service tax
11834978 153451078 296165526 361797262
as per P& L- B/s [1+4-9]
Taxable value inclusive
10700663 157907773 282116382 354164697 Exhibit A-7
of Service tax as per ST-3
Difference in Taxable
value inclusive of Service
1134315
-4456695
14049144
7632565
tax [10-11]
Service tax not paid on
the difference as worked
124779
-416174
1311933
712742
out in 12
2.2
As the assessee had maintained their books of account on accrual basis, the
aforesaid reconciliation is carried out for the year 2008-09 to 2010-11 to convert the
Invoice value i.e. income recorded in accrual basis into receipt basis. In the year 201112, with effect from 01.07.2011, the assessee had opted to pay service tax on Invoice
basis, i.e. on accrual basis, the closing debtors for the year 2011-12 is taken as
Rs.13,88,338/-
as outstanding being the amount pertaining to the period up to
30.06.2011 not received by the assessee.
2.3
As derived in the aforesaid table, the assessee had short paid service tax during
the period 2008-09 to 2011-12 as under.
Year
2008-09
2009-10
2010-11
2011-12
Grand Total
Differential
value inclusive
of service tax
1134315
0
14049144
7632565
2,28,16,024
Rate of
Service
tax
12.36%
10.3%
10.3%
10.3%
Service tax including E.Cess/SHE.cess)
short paid calculated by considering cum
tax benefit
124779
0
1311933
712742
21,49,454
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F.No. STC/4-52/O&A/13-14
2.4
OIO NO: AHM-SVTAX-000-COM-013-14-15
The aforesaid differential value of Rs. 2,28,16,024/- though the same was part
of taxable value in terms of Section 67 of the Finance Act,1994 read with Rule 6 of
Service Tax, Rules,1994 appeared to have been short declared in the ST-3 returns of
the respective year filed by the assessee in the year 2008-09 to 2011-12 when
compared with their Financial Accounts maintained. As the said receipt/Income was
inclusive of service tax, the differential service tax is calculated by considering cum tax
value. Accordingly total service tax short paid is Rs. 21,49,454/- which is required to
be recovered along with Interest under
proviso to
section 73(1) of the Finance
Act,1994.
3.
Cenvat Credit on Capital Goods:-
3.1
During the course of audit, it was further noticed that the assessee was availing
Cenvat credit on capital goods viz. on various motor vehicles purchased by them and
used for providing site preparation service, mining services. The said Cenvat credit is
availed by the assessee under the provisions of Cenvat Credit Rules, 2004. The
records maintained and ST-3 returns for the period 2008-09 to 2011-12, was
scrutinized by the officers and it was revealed that the assessee have availed Cenvat
credit on Motor vehicle viz. Dumpers, Excavators, Bulldozers and Tipper during the
year 2008-09 to 2011-12 under capital goods. The said motor vehicle equipments are
used for mining and site formation activities carried out by the assessee at various
locations. However, critical examination of Cenvat credit Rules, 2004, revealed that,
in view of definition of Capital goods defined under Rule 2(a) of Cenvat Credit
Rules,2004 as existed at the material time for the period 2008-09 to 2011-12, Cenvat
credit on Dumper and Tipper was admissible only with effect from 22.06.2010 and
onwards as
capital goods.
Prior to that, no Cenvat was available on Dumper or
Tipper, either as capital goods or as Inputs.
3.2
Similarly, the assessee had availed Cenvat credit on Excavator, Bulldozers and
Graders under capital goods, which are used in mining/site formation activities;
however the Cenvat credit availed on these equipments are also not available to them
even after 22.06.2010. The relevant provisions in this regard are reproduced as
under:Up to 22.06.2010, the definition of Capital goods available in Cenvat Credit Rules,
2004 was as under.
Rule 2. Definition: - In these rules, unless the context otherwise requires,(a) "capital goods" means:(A)
the following goods, namely:(i)
all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
90, heading No. 68.05 grinding wheels and the like, and parts thereof
falling under heading 6804 of the First Schedule to the Excise Tariff
Act;
(ii)
pollution control equipment;
(iii)
components, spares and accessories of the goods specified at (i) and
(ii);
(iv)
moulds and dies, jigs and fixtures;
(v)
refractory and refractory materials;
(vi)
tubes and pipes and fittings thereof; and
(vii) storage tank, used(1) in the factory of the manufacturer of the final products, but does
not include any equipment or
appliance used in an office; or
(2) for providing output service;
(B) motor vehicle registered in the name of provider of output service for
providing taxable service as specified in sub-clauses (f), (n), (o), (zr),
(zzp), (zzt) and (zzw) of clause (105) of section 65 of the Finance Act;
3.3
Thus, in the definition of Capital Goods, provided in Rule 2(B) of Cenvat Credit
Rules,2004, credit of motor vehicles are restricted for the service providers classifiable
under sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105) of section
65 of the Finance Act,1994. Therefore, the Cenvat Credit on the motor vehicle used
for providing Commercial or Industrial Construction Service, taxable under Section
65(105) (zzq) taxable with effect from 10.09.2004, Site preparation service, taxable
with effect from 16.05.2005 under section 65(105) (zzza) and Mining service, taxable
with effect from 01.06.2007 under section 65(105) (zzzy) of the Finance Act, 1994,
was not available to the said assessee.
The definition of input as defined under Rule 2(k) of Cenvat Credit Rules, 2004
as on 22.06.2010 was as under.
2(k)
"input" means(i)
all goods, except light diesel oil, high speed diesel oil and motor
spirit, commonly known as petrol, used in or in relation to the
manufacture of final products whether directly or indirectly and
whether contained in the final product or not and includes
lubricating oils, greases, cutting oils, coolants, accessories of the
final products cleared along with the final product, goods used as
paint, or as packing material, or as fuel, or for generation of
electricity or steam used in or in relation to manufacture of final
products or for any other purpose, within the factory of production;
(ii)
all goods, except light diesel oil, high speed diesel oil, motor spirit,
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
commonly known as petrol and motor vehicles, used for
providing any output service;
Explanation 1- The light diesel oil, high speed diesel oil or motor spirit,
commonly known as petrol, shall not be treated as an input for any purpose
whatsoever.
Explanation 2.- Input include goods used in the manufacture of capital goods
which are further used in the factory of the manufacturer; but shall not include
cement, angles, channels, Centrally Twisted Deform bar (CTD) or Thermo
Mechanically Treated bar (TMT) and other items used for construction of factory
shed, building or laying of foundation or making of structures for support of
capital goods;
3.4
Thus, the definition of ’input’ as provided in Rule 2(k) of Cenvat Credit Rules , 2004
did not include the motor vehicles used for providing any output service.
3.5
However, with effect from 22.06.2010 the said credit is available to the
assessee on Dumper and Tipper as provided in notification No. 25/2010 dated
22.06.2010. The text of the said notification is as under.
[TO BE PUBLISHED IN THE GAZETTE OF INDIA,
EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]
Government of India
Ministry of Finance
(Department of Revenue)
New Delhi, the 22nd June, 2010.
Notification No. 25 / 2010 - Central Excise (N.T.)
G.S.R.
(E). – In exercise of the powers conferred by section 37 of
the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance
Act, 1994 (32 of 1994), the Central Government hereby makes the
following rules further to amend the CENVAT Credit Rules, 2004,
namely:1.
(1) These rules may be called the CENVAT Credit (Second
Amendment) Rules, 2010.
(2) They shall come into force on the date of their publication in
the Official Gazette.
2.
In the CENVAT Credit Rules, 2004, in rule 2, in clause (a),
after sub-clause (B), the following sub-clause shall be inserted,
namely:-
Page | 5
F.No. STC/4-52/O&A/13-14
“(C)
OIO NO: AHM-SVTAX-000-COM-013-14-15
dumpers or tippers, falling under Chapter 87 of the
First Schedule to the Central Excise Tariff Act, 1985 (5 of
1986), registered in the name of provider of output service
for providing taxable services as specified in sub-clauses
(zzza) and (zzzy) of clause (105) of section 65 of the said
Finance Act;” .
[F.No. 354/ 33/ 2009 – TRU/Pt.I]
(K.S.V.V. Prasad)
Under Secretary to the Government of India
Note.- The principal rules were published in the Gazette of India,
Extraordinary, Part II, Section 3, Sub-section (i) dated the 10th
September, 2004 vide Notification No. 23/2004-Central Excise (N.T.)
dated the 10th September 2004, published vide G.S.R. 600(E), dated the
10th September, 2004 and last amended by Notification No. 21/2010Central Excise (N.T.) dated 18th May 2010, published vide G.S.R.
416(E), dated the 18th May 2010.
Further vide Notification No. 3/2011-Central Excise (N.T.) dated 01.03.2011,
effective from 01.04.2011 rule 2(k) was substituted as under which does not allow
credit of any motor vehicle as input.
(k) “input” means–
(i) all goods used in the factory by the manufacturer of the final product; or
(ii) any goods including accessories, cleared along with the final product, the
value of which
is included in the value of the final product and goods used for providing free
warranty for final products; or
(iii) all goods used for generation of electricity or steam for captive use; or
(iv) all goods used for providing any output service;
but excludes(A) light diesel oil, high speed diesel oil or motor spirit, commonly known as
petrol;
(B) any goods used for(a) construction of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital goods,
except for the provision of any taxable service specified in sub-clauses (zn), (zzl),
(zzm),
(zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act;
(C) capital goods except when used as parts or components in the manufacture
of a final
product;
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
(D) motor vehicles;
3.6
A detailed worksheet containing year-wise, Invoice wise Cenvat credit availed by
the assessee during the period 2008-09 to- 2012-13 is prepared and is marked as
Annexure B to this Show Cause Notice.
3.7
In this regard, it is observed from the Annexure B that, during the period
2008-09 to 2012-13,
the assessee have availed following Cenvat credit of Rs.
3,89,28,759/- on all the motor vehicle as capital goods.
Amount of
Excise
duty
Cenvat credit availed on
various motor vehicle
3.8
E. Cess
2%
SHE.
Cess 1%
Total
3,77,94,914 7,55,896 3,77,949 3,89,28,759
Out of the aforesaid Cenvat credit, following Cenvat credit amounting to
Rs.78,63,156/- [as worked out in Annexure B-1 to this show cause notice] availed
on dumper and tipper after 22.06.2010 is available to the assessee as capital goods.
Cenvat credit availed during 2008-09 to 2012-13 which is eligible
Description of Cenvat
availed during the
period 2008-09 to
2012-13
Amount
of Excise
duty
E Cess
SHE. Cess
2%
1%
Total
Cenvat Credit availed
after 22.06.2010 on
76,34,129
1,52,686
76,341
78,63,156
Tipper and Dumper
Total Cenvat eligible
3.9
76,34,129 1,52,686
76,341 78,63,156
As discussed in para supra, the Cenvat credit availed on Dumper and Tipper
[as worked out in Annexure B-2 this show cause notice] under capital goods prior
to 22.06.2010 and Cenvat credit availed during the period 2008-09 to 2011-12 (and
available in the year 2012-13) as capital goods on Bulldozers, Excavators, Graders,
Loaders are the motor vehicle on which credit is not admissible. Total of such Cenvat
credit
of Rs. 3,10,65,603/- [ as worked out in Annexure B-3
this show cause
notice] not eligible is worked out as under.
Cenvat credit availed during 2008-09 to 2012-13 which is not eligible
Description of Cenvat
availed during the
period 2008-09 to
2012-13
Amount of
Excise duty
E. Cess
2%
SHE.
Cess 1%
Total
Page | 7
F.No. STC/4-52/O&A/13-14
Cenvat Credit availed
before 22.06.2010 on
Tipper and Dumper
(Ann.B-2)
Bulldozers, Excavators,
Graders, Loaders (Ann.B3)
Total Cenvat not
eligible
3.10
OIO NO: AHM-SVTAX-000-COM-013-14-15
1,85,06,178
3,70,117
1,85,064
1,90,61,359
1,16,54,607
2,33,093
1,16,544
1,20,04,244
3,01,60,785 6,03,210 3,01,608 3,10,65,603
The aforesaid Cenvat credit has been used for the payment of service tax on
output service i.e. service of site formation and mining service, which is wrongly used.
3.11
Accordingly, the assessee have availed and utilized Cenvat Credit of Rs.
3,10,65,603/- in violation of Rule 2(a)/ 2(k) and Rule 3 of Cenvat credit Rules, 2004
and the same is required to be recovered along with Interest under the provision of
Rule 14 of Cenvat Credit Rules,2004 read with proviso to Section 73(1) of the Finance
Act,1994.
4.
Excess utilization of Cenvat Credit:-
4.1
During the course of audit, it was observed that, in view of Rule 4(2)(a) of
Cenvat Credit Rules, 2004, the assessee can avail 50% of Cenvat Credit on capital
goods, however, the perusal of Annexure B revealed that in the year 2010-11 the
assessee have availed 100% of Cenvat credit i.e. excess Cenvat credit to the extent of
Rs.56,07,521/-, which was subsequently available to them in the year 2011-12. This
credit is availed in violation of Rule 4(2)(a) of Cenvat Credit Rules, 2004 as existed at
the material time. The same was not taken in the year 2011-12. The said Cenvat credit
is utilized 100% in the year of 2010-11 which has resulted into excess utilization to
the extent of Rs. 56,07,521/- hence they are required to pay interest @13% on the
said amount up to 01.04.2011 from the date of credit taken as they become eligible for
availing the said credit on 01.04.2011.
5.
Non payment of Service tax on the service rendered to Sabarmati River
Front, Ahmedabad
5.1
Scrutiny of various activities related to construction carried out on behalf of
Sabarmati River Front Development Corporation, under various purchase orders,
revealed that the assessee had carried out activities such as“ Constructing of RCC
overflow chamber on junction of SWD and Sewer Diversion pipe line including P/L of
R.C.C. NP-4 class Sewer Pipe line and C.I. Sluice gates on West Bank of Sabarmati
River from Sabarmati Power station to Sardar Bridge on River Sabarmati, Sabarmati
River Front Development Corporation, Ahmedabad”; Constructing General Earth Fill
for the Embankment Construction Behind R.C.C. retaining Wall for the length of 575
mt on East Bank from Subhash Bridge to 575 mt Downstream on River Sabarmati for
Sabarmati River
Front Development Corporation, Ahmedabad.” etc. The details as
provided by the assessee are enclosed in Annexure C of this Show Cause Notice.
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F.No. STC/4-52/O&A/13-14
5.2
OIO NO: AHM-SVTAX-000-COM-013-14-15
The aforesaid activities are related
to construction and the same are
classifiable under “ Commercial or Industrial Construction Service as defined under
section 64(25b) of the Finance Act,1994 which are as under;1[“Commercial or industrial construction”] means —
(a) construction of a new building or a civil structure or a part thereof; or
(b) construction of pipeline or conduit; or
(c) completion and finishing services such as glazing, plastering, painting, floor
and wall tiling, wall covering and wall papering, wood and metal joinery and
carpentry, fencing and railing, construction of swimming pools, acoustic
applications or fittings and other similar services, in relation to building or civil
structure; or
(d) repair, alteration, renovation or restoration of, or similar services in relation
to, building or civil structure, pipeline or conduit, which is —
(i)
(ii)
used, or to be used, primarily for; or
occupied, or to be occupied, primarily with; or
(iii) engaged, or to be engaged, primarily in,
commerce or industry, or work intended for commerce or industry, but does not
include such services provided in respect of roads, airports, railways, transport
terminals, bridges, tunnels and dams;]and the activities carried out by the
assessee on behalf of SRFDC is classifiable under the category 64(25b) clause
(a) and(b) which are having use in commerce or Industry.
The said service is taxable under section 65(105)(zzq) of the Finance Act,1994.
5.3
Similarly, the assessee have also carried out Earth work under various
purchase order. The Earth work carried out will be classifiable under Site preparation
activities and accordingly the said activities is classifiable under taxable of service Site
Preparation Service which is taxable with effect from 16.05.2005 under section
65(105) (zzza) of the Finance Act,1994. However the assessee have not declared
taxable value in their ST-3 returns nor they had assessed service tax leviable thereon
and had not paid any service tax thereon.
5.4
It is also explained by the assessee that aforesaid activities of Commercial or
Industrial Construction service and Site preparation service were carried out only as
labour contractor, wherein no sale of materials have been involved. Accordingly, no
abatement can be allowed
nor the same can be classifiable under work contract
service.
5.5
Scrutiny of the record revealed that the assessee had not declared the taxable
value charged from SRFDC in the ST-3 return, not paid service tax on the taxable
value
under their belief that such activities are not covered in the definition of
“Commercial or Industrial Construction Service” or the Site preparation/formation
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
service. It is also observed that they had not got the Commercial or Industrial
Construction service included in the ST-2 registration.
5.6
From the details given by the assessee, the year wise service tax liability is
worked out to Rs. 8,57,95,771/- on the taxable value of Rs. 79,20,84,453/- for the
year 2008 to 2011-12 as per Annexure C to this show cause notice..
5.7
The above act on the part of the assessee is in violation of section 68 of the
Finance Act, 1994 read with Rule 6 of Service Tax Rules,1994, in as much as they had
not paid service tax of Rs. 8,57,95,771/- as required to be paid under section 66 read
with Section 68 of the Finance Act,1994,
Section 70 of the Finance Act,1994 read
with Rule 7 of Service tax Rules,1994 in as much as they failed to declare the said
value and assess the service tax liability on the taxable value of Rs. 79,20,84,453/under section 67 of the Finance Act,1994 for the year 2008- 2011-12 as worked out in
the Annexure C of this show cause notice..
6.
Commercial
or
Industrial
Construction
Service
Rendered
to
other
persons:6.1
On scrutiny of the record maintained by the assessee revealed that in the year
2011-12 the assessee had provided [Commercial or Industrial construction service as
discussed above] to the following persons and charged consideration from the said
person towards providing service, however, no service tax have been paid, as worked
out in Annexure D to this Show cause notice.
Sr No.
Name
1
Jhankhana
Builders
2
K.B. Builders
3
LVJ Projects
Pvt. Ltd.
4
M. Patel & Co.
5
Sai Krupa
Construction
6
Shashin
Construction
Name of Work
Labour work CC
Lining including
pouring of
leveling
Labour work CC
Lining including
pouring of
leveling
Labour work CC
Lining including
pouring of
leveling
Labour work CC
Lining including
pouring of
leveling
Labour work CC
Lining including
pouring of
leveling
Labour work CC
Lining including
pouring of
leveling
Amount
in Rs.
88410
88410
107000
300000
1728724
619303
Taxable value for the year 2011-12
2931847
Service tax payable at 10.3%
301980
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F.No. STC/4-52/O&A/13-14
6.2
OIO NO: AHM-SVTAX-000-COM-013-14-15
Scrutiny of the record revealed that the assessee had not declared the taxable
value charged from such persons in the ST-3 return, nor paid service tax on the
taxable value under their belief that such activities are not covered in the definition of
“Commercial or Industrial Construction Service”. They had not got the said service
included in the ST-2 registration.
6.3
The above act on the part of the assessee is in violation of section 68 of the
Finance Act, 1994 read with Rule 6 of Service Tax Rules,1994, in as much as they had
not paid service tax of Rs.3,01,980/- as required to be paid under section 66 read
with Section 68 of the Finance Act,1994,
Section 70 of the Finance Act,1994 read
with Rule 7 of Service tax Rules,1994, in as much as they failed to declare the said
value and assess the service tax liability
on the taxable value of Rs.29,31,847/-
under section 67 of the Finance Act,1994 for the year 2011-12 as worked out in the
Annexure D of this show cause notice
6.4
The aforesaid amount of Service tax of Rs. 3,01,980/- not paid is required to be
recovered along with Interest under proviso to section 73(1) of the Finance Act,1994
7.
Total amount recoverable from the assessee is re-capitulated as under.
Sr.No.
Particulars
1
Difference in
Reconciliation
2
3
4
5
Wrong Cenvat
Credit availed
on Capital
Goods
Excess
utilization of
Cenvat Credit
on Capital
goods
Commercial or
Industrial
Construction
Service
Site formation
Service
Taxable Value
in Rs.
Amount to be
recovered in
Rs.
2,28,16,024
21,49,454/-
----
56,07,521/
79,20,84,453/
29,31 847/-
3,10,65,603/-
At applicable
interest rate.
8,57,95,771/-
3,01,980/-
Provision for
recovery
applicable
Proviso to
Section 73(1) of
the Finance
Act,1994
Rule 14 of
Cenvat Credit
Rules, 2004
r/w proviso to
section 73(1) of
the Finance
Act,1994
Interest for
excess
utilization
under Section
75 of the
Finance
Act,1994
Proviso to
Section 73(1) of
the Finance
Act,1994
Proviso to
Section 73(1) of
the Finance
Act,1994
11,93,12,808/7.1
From the above table , as regards Sr. No.1, 4 & 5, it appears that the said
assessee has less declared/mis-declared taxable value in the statutory ST-3 Returns
filed by them during the period 2008-09-2011-12 as compared to the Profit and Loss
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
Account/Balance Sheet of the relevant period, resulting in short payment of service
tax,. The said short payment of service tax has been detected during the course of
audit conducted by the officers of Service Tax, Ahmedabad. Had they not detected the
same, the short payment of service tax would have remained unnoticed. Therefore,
this suppression of value and resultant short payment of service tax has rendered the
said assessee liable to penal action under Section 78 of the Finance Act, 1994.
Therefore, it appears that this is a case of deliberate non-declaration and suppression
of vital information with a willful intention to evade payment of service tax.
Accordingly, the ingredients for invoking the extended period under proviso to Section
73(1) of the Act exist.
7.2
Thus, it appears from the foregoing discussion that the said assessee has
contravened the provisions of:
(i)
Section 67 of the Finance Act, 1994 in as much as, they have failed to
determine the correct value of taxable services provided by them.
(ii)
Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax
Rules, 1994 in as-much-as they have failed to pay the service tax for the
period 2008-09, 2010-11 and 2011-12 to the credit of the Government
within the stipulated time limit. The act of contravention of the provisions
of Section 68 of the Finance Act, 1994 as amended read with Rule 6 of
the Service Tax Rules, 1994 appears to be punishable under the
provisions of Section 76 of the Finance Act, 1994.
(iii)
According to Section 70 of the Finance Act, 1994, every person liable to
pay service tax is required to himself assess the tax due on the services
provided by him and thereafter furnish a return to the jurisdiction
Superintendent of Service Tax by disclosing wholly and truly all material
facts in the ST-3 returns. In the instant case, the said assessee has
contravened the provision under Section 70 of the said Act as they have
not declared the correct value nor did they rightly assess the actual
Service Tax liability on the services provided.
(iv)
Contravened the provisions of Rule 2(k) and Rule 3 of Cenvat Credit
Rules,2004
7.3
As already discussed in foregoing paras, the said assessee has evaded/short
paid Service tax by discharging only a part of the actual Service tax. They have
purposefully not declared the gross value transacted by them in their ST-3 returns
and wrongly availed and declared and utilized cenvat credit on capital goods to avoid
detection of Service Tax short/not paid by them by deliberately withholding of
essential information from the department about service provided and value realized
by them. It appears that all these material information have been concealed from the
department deliberately, consciously and purposefully to evade payment of service tax.
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F.No. STC/4-52/O&A/13-14
7.4
OIO NO: AHM-SVTAX-000-COM-013-14-15
Further, as per Section 75 ibid, every person liable to pay the tax in accordance
with the provisions of Section 68, or rules made there under, who fails to credit the tax
or any part thereof, to the account of the Central Government within the period
prescribed, shall
pay simple interest (at such rate not below ten percent and not
exceeding thirty six percent per annum, as is for the time being fixed by the Central
Government, by notification in the official Gazette) for the period by which such
crediting of the tax or any part thereof is delayed.
7.5
All these acts of contravention of the provisions of Section 68, 69 and 70 of the
Finance Act, 1994 read with Rule 6 and 7 of Service Tax Rules,1994, appears to be
punishable under the provisions of Section 77(2) and 78 of the Finance Act,1994, as
amended from time to time.
7.6
As regard to Sr.No.2 of the aforesaid table the assessee have availed and
utilized Cenvat credit of as discussed in detail in para supra to the tune of Rs.
3,10,65,603/-
on the motor vehicle viz Dumper, Tipper, Bulldozers , excavators,
graders etc. In this regard it appeared that though Rule 2(k) of Cenvat Credit Rules,
2004 clearly not allow cenvat credit of Excise duty paid on such motor vehicles the
assessee had availed the said cenvat credit wrongly with intent to avoid payment of
service tax which would required to have been paid had this credit is not taken. Rule
2(k) of Cenvat Credit Rules, 2004 clear with regard to what is capital and what is not
for the purpose of availing Cenvat Credit for capital goods. The said credit availed on
motor vehicle which are not capital goods
within the meaning of definition given
under Rule 2(k) of Cenvat Credit Rules, 2004 however the said credit was taken and
used as is evident from the St-3 returns filed by the assessee from time to time. Under
the Scheme of self assessment when the assessee intend to avail it is the onus of the
assessee to verify the admissibility/eligibility of cenvat credit
and if the same is
permissible under Rule and law made in this regard they. It appears that the assessee
had wrongly availed the said credit with intention to avoid payment of service tax on
the taxable service as stated above. The dictionary meaning of word “wrong” is defined
in http://www.thefreedictionary.com/wrong as under.
wrong (rông, r
ng)
adj.
1. Not in conformity with fact or truth; incorrect or erroneous.
2.
a. Contrary to conscience, morality, or law; immoral or wicked.
b. Unfair; unjust.
3. Not required, intended, or wanted: took a wrong turn.
4. Not fitting or suitable; inappropriate or improper: said the wrong thing.
5. Not in accord with established usage, method, or procedure: the wrong way
to shuck clams.
6. Not functioning properly; out of order.
7. Unacceptable or undesirable according to social convention.
8. Designating the side, as of a garment, that is less finished and not intended
to show: socks worn wrong side out.
adv.
1. In a wrong manner; mistakenly or erroneously.
2. In a wrong course or direction.
3. Immorally or unjustly: She acted wrong to lie.
4. In an unfavorable way. See Synonyms at amiss.
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F.No. STC/4-52/O&A/13-14
n.
1.
7.7
OIO NO: AHM-SVTAX-000-COM-013-14-15
a. An unjust or injurious act.
b. Something contrary to ethics or morality.
The said assessee have intentionally availed
and wrongly
declared their
eligibility of cenvat credit of Excise duty paid on the said capital goods in violation of
Rule 2(k) and Rule 3 of Cenvat Credit rules,2004 in their ST -3 returns filed for the
period 2008-09 to 2011-12 as provided under Section 70 of the Finance Act,1994 read
with Rule 7 of the Service Tax Rules,1994
and have availed and utilized for payment
of service tax to avoid payment of Service tax on the taxable service. Therefore the
said act on the part of the assessee is appeared to have committed with intention to
evade service tax payable on taxable service and the same is recoverable under Rule
14 of Cenvat credit Rules, 2004 read with proviso to section 73(1) of the Finance
Act,1994
Rule 14 of Cenvat credit Rule,2004 is as under.
Rule 14. Recovery of CENVAT credit wrongly taken or erroneously
refunded.- Where the CENVAT credit has been taken [or] and utilized wrongly
or has been erroneously refunded, the same along with interest shall be
recovered from the manufacturer or the provider of the output service and the
provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of
the Finance Act, shall apply mutatis mutandis for effecting such recoveries.
7.8
Further, as stated in above table at Sr.No.2 and 3, the assessee has wrongly
availed Cenvat Credit on Capital goods and not paid interest on excess Cenvat credit
availed by them. As per Rule 14 of the Cenvat Credit Rules, 2004 (as amended
from time to time) "Where the CENVAT credit has been taken or utilized wrongly or
has been erroneously refunded, the same along with interest shall be recovered from
the manufacturer or the provider of the output service and the provisions of sections
11 A and 11 AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply
mutatis mutandis for effecting such recoveries."The government from the very
beginning placed full trust on the service providers, so far as service tax
concerned and accordingly measures like self assessment etc., based on mutual
trust and confidence are in place. Further, a taxable service provider is required
to maintain any statutory or separate records under the provisions of Service
Tax Rules as considerable amount of trust is placed on the service provider and
private records maintained by him for normal business purposes are accepted,
practically for all the purpose of service tax. All these operates on the basis of
honesty of the service provider; therefore, the governing statutory provisions
create an absolute liability when any provision is contravened as there is a
breach of trust placed on the service provider, no matter how innocently. The
deliberate efforts by wrong availment of Cenvat Credit/ Excess utilization of
Cenvat Credit is utter dis-regard to the requirements of law and breach of trust
deposed on them, such outright act in defiance of law appears to have rendered
them liable for stringent penal action as per the provisions of the Rule 15 of
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F.No. STC/4-52/O&A/13-14
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Cenvat Credit Rules, 2004 for suppression or concealment with intent to evade
payment of service tax as they have failed to inform the excess availment/
wrong availment of Cenvat Credit to the department.
7.9
The range office has issued summons and letters to the assessee to
provide the documents and to give the statement. First Summon was issued to
the assessee on dated 10.10.2013 vide letter No. STC/AR-IX/Div-II/SCN/1314/Patel to appear on 11.10.2013, to provide the documents and to give the
statement under Section-14 of Central Excise Act, 1944, which is made
applicable under the provisions of Section-83 of the Finance Act, 1944, but he
failed to appear. Again, 2nd Summon was issued to the assessee on 11-10-2013
vide letter No. STC/AR-IX/Div-II/SCN/13-14/Patel to appear on 14.10.2013 to
provide the records and to give the statement under Section-14 of Central
Excise Act, 1944, which is made applicable under the provisions of Section-83
of the Finance Act, 1944, but he failed to appear. Further, this office has
requested the assessee to be present on 17.10.2013 vide Summon No. 3 dated
14.10.2013, to give the statement. The assessee is deliberately avoiding, to
produce the documents and to give the statement, in order to suppress/avoid
the material facts, nor has any communication been received by this office
either telephonically or in writing.
The aforesaid violation on their part is an
offence punishable under section 77(1)(iii) of the Finance Act,1994
7.10
In light of aforesaid discussions, M/s P.P. Patel, 2/5 Gold Coin Complex,
Jodhpur Char Rasta, Ahmedabad was called upon to show cause
to the
Commissioner, Service Tax, Ahmedabad, having his office at 1st Floor, Central Excise
Bhavan, Behind Panjara Pole, Ambawadi, Ahmedabad-15 vide SCN No. No.STC/452/O&A/13-14 dated 24.10.2013 as to why:
(i)
The amount of Rs. 81,78,32,324/- should not be considered as taxable
value
and the service tax short paid amounting to Rs. 8,82,47,205/- (
Rupees Eight Crore Eight Two Lakh Forty Seven Thousand Two Hundred
Five), [Rs.21,49,453/- (Ann.A)+Rs.8,57,95,771/- (Ann-C) + Rs.3,01,980/(Ann. D)] should not be charged, demanded and recovered under the proviso
to Section 73(1) of Finance Act, 1994.
(ii)
the interest on the said amount of service tax of Rs. 8,82,47,204/- at the
rate applicable should not be charged from them under Section 75 of the
Finance Act, 1994.
(iii)
Penalty under Section 76 of the Finance Act, 1994, should not be imposed
upon them for failure to pay Service Tax within the period prescribed under
Section 68 of the Finance Act, 1994, read with the Rule 6 of the Service Tax
Rules,1994.
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F.No. STC/4-52/O&A/13-14
(iv)
OIO NO: AHM-SVTAX-000-COM-013-14-15
Penalty under the provision of Section 77(2) of the Finance Act, 1994 should
not be imposed upon them for contravention of Section 70 of the said Act as
they have not correctly assessed the actual Service Tax on the services
provided by less declaring/mis-declaring the taxable value in the statutory
ST-3 Returns filed by them during the period from 2008-09 to 2011-12.
(v)
Penalty under Section 78 of the Finance Act, 1994 as amended should not
be imposed on them for suppressing and not disclosing the value of the said
taxable service provided by them before the department with intent to evade
payment of service tax as mentioned above.
(vi)
the amount of Cenvat Credit of Rs.3,10,65,603/- wrongly availed by
them as discussed in the forgoing paras covering the period of the year
2008-09 to 2012-13 should not be recovered from them under Rule 14
of Cenvat Credit Rules, 2004 along with interest.
(vii)
The interest on excess utilization of Cenvat Credit amounting to
Rs.56,07,521/- should not be recovered from them under Section
11AB of the Central Excise Act, 1944 and Section 75 of the Finance
Act, 1994.
(viii)
Penalty should not be imposed upon the said assessee under Rule 15(2) /
15(3) of Cenvat Credit Rules, 2004 for failure to make payment of the said
amount within the stipulated time.
(ix)
Penalty should not be imposed upon the said assessee under clause
77(1)(c)(iii) of the Finance Act,1994.
8.
Defense Reply of the assessee:-
8.1 The assessee vide their letter dated 11.03.2014 submitted their written
submission with respect of impugned show cause notice
dated 24.10.2013 where
under they submitted as under.
8.2
It was submitted by the assessee that they
are engaged in providing
various taxable services viz., Site Preparation Service, Mining Service and Commercial
and Industrial Construction Service. These services have become taxable from
different dates as mentioned in the Finance Act, 1994 as amended and also shown in
the first paragraph of the show cause notice. They do not have any dispute on that.
8.3
It was submitted by the assessee the said show cause notice was issued
on the basis of Audit Report No.196/2013-14 dt. 22.10.2013 and incidentally or
incoherently the show cause notice issued on 24.10.2013 i.e. two days after issuance
of Audit Report.
It is therefore obvious that the authority issuing the show cause
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
notice has not cause any independent inquiry from them about the points raised in
the Audit Report and has simply by adding few paragraphs here and there in the Audit
Report, show cause notice has been issued. It is well settled legal position that show
cause notice based only on the basis of Audit Report without there being any separate
inquiry or investigation by the authority issuing the show cause notice is not
sustainable. In this regard, they placeed reliance on the decision of Tribunal in the
case of CCE, Ghaziabad v/s L.B. Electronics reported in 2009 (245) ELT 829 (Tri-Del)
wherein it was held as under :“The demand treating the miscellaneous income as income arising out of the sale of
goods not accounted for excise purpose was based only on presumption and not on
any evidence. Such demand without conducting enquiry and investigating into the
nature of miscellaneous income is also not sustainable.”
8.4
They
also placed reliance on the decision of Tribunal in the case of
Swastik Tin Works v/s CCE, Kanpur reported in 1986 (25) ELT 0798 (Tribunal)
wherein it was held as under :“We have carefully considered the facts of the case and the submissions made by
both sides. At the outset, it is quite clear that both the show cause notices seem to
be based only on audit objections. There is no claim that there has been any
further inquiry or investigation by the Department which has helped to establish
that the actual identity of the impugned goods is other than that claimed by the
assessee and earlier approved by the Department itself. After all, the
classification lists themselves declared that the items were in the nature of cut-tosize sheets and for years together these were being cleared as such. It is shown
also that during these years, they were held by different Excise officers as nonexcisable sheets cut-to-size. In the absence of any subsequent evidence to the
contrary, it is not at all clear as to how the Department could have raised demand
merely in view of audit objections holding that the goods were metal containers in
unassembled form. In reply to show cause notices, the appellants have
unassailably urged this point of view and this is not answered at the level of
either the Assistant Collector or the Collector (Appeals). In this connection, we
have seen the two decisions of the Delhi High Court cited by the appellants in the
cases of Poona Bottling Co. Ltd. and another v. Union of India and Others - 1981
E.L.T. 389, and Indian Aluminium Company Ltd. and another v. Union of India
and Others -1983 E.L.T. 349, in which it was held that show cause notices
issued on the basis of advice or directive by the Central Government of the
Central Board of Excise and Customs, were illegal and void, as directives could
not be issued to subordinate authorities exercising quasi-judicial functions. In this
particular case, there have been no such advice or directives by higher
authorities. It would have been perfectly in order if the local Central Excise
officers were to undertake further inquiries on the receipt of audit objection; and
after further examination and necessary investigation, if they were to come to the
conclusion on the basis of evidence collected that the goods in question were
liable to duty or further duty, they would be well within their jurisdiction to issue
a show cause notice to the assessee, explaining to him the grounds and the
evidence on the basis of which the Excise has come to the tentative view that the
assessee has not discharged his liability to duty. However, this, in the present
matters, the Department has failed to do. The show cause notices are veritably
based on audit objection only and no other reason is given for the Department
changing its stand as regards the classification of goods. On this ground, the
show cause notice is liable to be quashed.”
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F.No. STC/4-52/O&A/13-14
8.5
OIO NO: AHM-SVTAX-000-COM-013-14-15
They also placed reliance on decision of Honorable Tribunal in the case
of Aditya College of Competitive Exam reported in 2009 (16) STR 0154 (Tri-Bang)
wherein it was held as under :“Further we find that the show cause notice was issued based on some Audit
objection. There is no justification for invoking the longer period. Therefore, the
demand is also hit by time bar.”
8.6
In this regard we would also like to place reliance on the decision of Honorable
Tribunal in the case of Kumbhi Kasari Sahakari Karkhana Limited reported in 2011
(266) ELT 0087 (Tri-Mumbai) wherein it was held as under :“In the impugned order the Commissioner (Appeals) has clearly held that “the
extended period should not have been invoked since the assessee has been filing
ER-1 returns regularly and alleged wrong availment of credit was on account of
audit objection. In other words, when the alleged short payment/wrong
availment of CENVAT credit is based on the audit objection, the question of
extended period is not available to the department in view of the fact that the
alleged short payment/wrongly availment of CENVAT credit was found out only
from the records maintained/produced by the appellant. On this count also, the
extended period is not available to the department.” These findings are not
challenged by the department in this appeal.”
8.7
They further submitted that the demand worked out on the basis of
“Reconciliation” is not legally sustainable as the said “Reconciliation” has no legal
basis. It is only presumption and assumption that the difference in the value is the
difference of taxable value for the services provided by them. Even if it is assumed that
this difference is relating to taxable service provided by them, the question would arise
which service, as it is admitted fact that they were providing various taxable services.
The department had not shown as to the taxable service for which the differential
service tax pertains. The onus is on the department to show the particular service to
which the said differential service tax can be attributed. There is no such allegation in
the show cause notice. Therefore, it is obvious that the differential service tax of
Rs.21,49,454/-
is being demanded on the basis of arithmetical calculations and
nothing else. On the contrary, the department is required to show the classification of
service category falling under Section 65 of the Finance Act, 1994, the valuation
adopted as per the provisions of Section 67 ibid. The Honorable Gujarat High Court in
its Order dated 04.08.2011 in Tax Appeal No.1621/2010 in the case of Bharat Video
Vision has clearly held that demand cannot be confirmed on such assumptions and
presumptions. The Apex Court has also held in Oudh Sugar Mills Ltd. v. Union of
India - 1978 (002) ELT (J 172) that no order can be based on assumptions and
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
presumptions and "the findings based on such presumptions without any tangible
evidence will be vitiated by an error of law."
8.8.
There is no room for assumption and presumption in cases of
clandestine removal as held in the case of Quality Exports & Chemicals v. CEGAT,
2002 (140) ELT 0362 (All.) and Grauer & Weil (India) Ltd. v. CCE, 2000 (116) ELT 618.
It is equally a well settled legal position that the suspicion however strong it may be
cannot take the place of truth.
We place reliance on judgment of the Honorable
Supreme Court in the case of Gian Mahtani v/s State of Maharashtra reported in 1999
(110) ELT 400 (SC)
8.9
In
the
case
of
HYDERABAD
BOTTLING
COMMISSIONER OF C. EX., HYDERABAD reported in
CO.
(P)
LTD
Vs.
1996 (83) E.L.T. 627
(Tribunal) the Hon’ble CEGAT, Madras Bench held that assumption needs to be made
on rational basis.
11.
In this regard they also wish relied on the following case laws :2009 (247) E.L.T. 271 (Tri. - Bang.) KLENE PAKS LTD Vs.COMMISSIONER OF
C. EX., BANGALORE-I.
2004
(173)
E.L.T.
385
(Tri.
-
Del.)
NUTECH
POLYMERS
LTD
Vs
LTD
Vs
COMMISSIONER OF CENTRAL EXCISE, JAIPUR-II
2009
(245)
E.L.T.
337
(Tri.
-
Del.)
HINDUSTAN
FIBRES
COMMISSIONER OF C. EX., JAIPUR.
2009 (239) E.L.T. 352 (Tri. - Del.) COMMISSIONER OF CUSTOMS, AMRITSAR
Versus KOCHAR SUNG UP ACRYLIC LTD.
8.10.
Without prejudice to the above contentions, they further submitted that
as per column no.2 of the Audit Report No.196/2013-14 page 1, the category of the
unit is shown as “A”. As per the guidelines of the department, units falling under
Category A are required to be audited every year. We had taken registration with the
department on 24.02.2005 and their service tax payment for the year 2008-09 it was
Rs.9,99,245 for 2009-10 it was Rs. 1,43,57,074 for 2010-11 it was Rs. 2,63,44,504 for
2011-12 it was Rs. 3,30,72,498 for 2012-13 it was Rs. 2,63,17,594 As per the norms
of the Government of India their accounts should have been audited every year for the
units paying total duty payment (in cash plus cenvat credit) more than Rs. 3 crores in
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the year, should have been audited once every two years for the units paying total
duty payment (in cash plus cenvat credit) for the amount between Rs. 1 core to Rs.3
crores. Instead, their accounts were audited for the period 2008-09 to 2011-12 on
15.7.2013, 27.7.2013 and 23.09.2013. Without admitting but assuming for a while
that the demand raised under the present show cause notice is sustainable on merit,
if the department had audited their records for the year 2006-07 immediately after
completion of the year, they would not continued the same mistake and after five
years saddled with heavy service tax liability. Therefore, for the laxity on the part of
the department, the assessee cannot be made to suffer. The demand except for the
normal period if any, is time barred and they shall make some more contentions on
this issue in the latter part of their reply.
8.11.
They are regularly filing ST-3 returns from the period
they took
registration and in the returns they were mentioning all the details of taxable value,
rate of tax applicable, details of service tax paid, mode of payment of tax, details of
cenvat credit taken and utilized. All the details which the Government of India
required them to provide in the ST-3 returns had been provided by them. If the
department did not take timely steps to scrutinize or assess the ST-3 returns and
examine the details of cenvat credit or audit the books of account of its assessee
paying large amount of revenue, the department cannot wake up from the snarl and
allege suppression of facts on the assessee. They would divulge more on this issue at
the later and appropriate stage.
8.12.
As per Revenue Para 1 of the said Audit Report the differential service tax
of Rs.21,49,454/- has been worked out by showing reconciliation of income shown in
the Profit & Loss Account/Balance Sheet vis-à-vis value shown in ST-3 returns.
As per accounting system of appellant, debtors are debited net of TDS. Means TDS
amount is not reflected in debtors account. Department has deducted closing debtors
balances while preparing reconciliation which in fact exclusive of TDS amount.
Whereas Work Income credited in P & L account is inclusive of TDS amount. This
work income has been taken as revenue income in reconciliation prepared by the
audit authorities. That means income taken in reconciliation
is inclusive
of TDS
while closing debtors deduction from reconciliation is exclusive of TDS. If this aspect is
considered by the Audit, there would not have been any differential taxable value.
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They reiterate their reliance on the decision of Tribunal referred above as per which
demand raised in such manner cannot be sustained.
8.13
As per Revenue Para 3 they had taken and utilized 100% cenvat credit
on capital goods in the year 2010-11 instead of 50% eligible under Rule 4(2)(a) of
Cenvat Credit Rules, 2004
Hence, there was excess utilization of Rs.56,07,521/-
Hence, they were required to pay interest @ 13% on the excess utilization of cenvat
credit from the date of taking cenvat credit till 01.04.2011 the actual date when they
were eligible for taking remaining 50% cenvat credit on capital goods legally. They
admit this demand.
8.14
As per Revenue Para 4 the activities of construction of various structures
for Sabarmati River Front Development Corporation are considered as taxable under
Commercial or Industrial Construction Service and total demand of Rs.8,57,95,771/is shown as payable by them. In this regard it is their submission that SRFDCL had
given such type of works to various other contractors who are registered with
authorities
other
than
Service
Tax
Commissionerate,
Ahmedabad,
like
ITD
Cementation India Limited which is registered with CST, Mumbai wherein these
constructions had been classified under Site Formation and Clearance, Excavation
and Earth moving Demolition Services and the definition reads as under :“Site Formation and Clearance, Excavation and Earth moving Demolition
Services” includes :(i)
drilling, boring and core extraction services for construction, geophysical,
geological or similar purposes; or
(ii)
soil stabilization; or
(iii)
horizontal drilling for the passage of cables or drain pipes; or
(iv)
land reclamation work; or
(iv)
contaminated top soil stripping work; or
(v)
demolition and wrecking of building structure or road,
but does not include such services provided in relation to agriculture, irrigation,
watershed development and drilling, digging, repairing, renovating or restoring of
water sources or water bodies.”
8.15. In this regard they rely upon the exclusion clause under the definition as per
which the services rendered by them would get covered under the exclusion clause for
renovating or restoring the water resources of water bodies. Hence, the show cause
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
notice classifying the construction activities as per Annexure-C to the show cause
notice under Commercial or Industrial Construction is not maintainable.
8.16
As per Revenue Para 5 it is stated that as detailed in Annexure-B they had
carried out activities covered under Commercial or Industrial Construction Service
during the year 2011-12 and did not pay service tax amounting to Rs.3,01,980/-. In
this regard, they had submitted that they had undertaken
work for CC Lining
including pouring of leveling in respect of irrigation and canal work which is outside
the definition of commercial and industrial construction. Therefore, demand as per
Annexure-D is also not sustainable
8.17
As per para 6 of the show cause notice it is alleged that they had wrongly taken
cenvat credit on motor vehicles as capital goods. For this as stated above, the
department has alleged that they had availed cenvat credit on motor vehicles viz.,
dumpers and tippers. In this regard it is their submission that motor vehicles are used
by them for site formation and excavation in mines. Therefore, these are essential
capital goods for them without which it is not possible for them
to provide site
formation service. These are material handling equipments. They had included the
cost of the motor vehicles while arriving at the costing of providing the services for site
formation and preparation. It is a settled principle of accountancy that when the cost
of the particular product is included in the selling price, Cenvat credit is admissible.
In this regard they placed reliance on the decision of Tribunal in the case of Lumbini
Beverages Pvt. Ltd. reported in 2012 (284) ELT 0695 (T) wherein Cenvat credit on PVC
crates was allowed either as capital goods or inputs, in that case also PVC crates were
being used as material handling equipment for shifting of material within the factory
premises. The ratio of this decision of Honorable Tribunal is admissible to in their case
as a particular site is like registered factory premises for them and if they use some
motor vehicles as material handling equipment at the site and the value of such motor
vehicles is included in the costing of services, they are entitled for Cenvat credit on
these motor vehicles as material handling equipment.
8.18. They further relied on the decision of Tribunal in the case of Tata Steel Limited
reported in 2012 (282) ELT 0469 (T) wherein it was held as under :“The Coke Transfer car is used as material handling equipment and without this,
coke cannot be transferred from oven to furnace as already discussed, supra. In
these circumstances, we find that ld. Commissioner (Appeal’s) order is not
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
sustainable. Therefore the same is set aside and the appeal is allowed with
consequential relief, if any, as per law.”
8.19. They further relied on the decision of the Hon’ble Supreme Court in the case of
J.K. Cotton Spg. & Wvg. Mills Co. Ltd. v. Sales Tax Officer, Kanpur reported in 1997 (91)
E.L.T. 34 (S.C.) wherein it has been held that goods used any process or activity
integrally related to the ultimate manufacture of the goods so that without process or
activity, even if theoretically possible, be commercially inexpedient or activity as
specified in Rule 13 would qualify for special treatment.
8.15
They further reled on the decision of Tribunal in the case of Aditya Cement
reported in 2009 (245) ELT 0266 (T) wherein the assessee was claiming cenvat credit
on dumpers as input, department was of the view that these are capital goods. They
would rely on the decision of Tribunal in the case of India Cements Limited reported in
2009 (238) ELT 0193 (T) wherein it was held as under :“As per the Hon’ble High Court’s decision, the mines in which the capital goods
were used are integrally connected with the cement factory of the respondents
and, therefore, the capital goods should be considered to have been used for
undertaking processes integrally connected with the manufacture of the final
product. Accordingly, the benefit of MODVAT credit under Rule 57Q ibid is
available to the capital goods in question for the material period as rightly held by
the lower appellate authority. In the result, the decision of the learned
Commissioner (Appeals) stands affirmed and this appeal of the Revenue is
dismissed. This order supersedes the earlier Final Order.”
8.20
It is alleged that these dumpers and tippers became eligible as capital
goods from 22.06.2010. Regarding excavator, bulldozer and graders it is alleged that
these were not eligible capital goods even from 22.6.2010. Regarding dumpers they
had already given their defence contentions in length in the above paragraphs.
Regarding tippers, it was submitted by the assessee that since the tippers, an item of
Chapter 87, were being used for Cargo Handling Service covered by Section
65(105)(zzr), the same were covered by the definition of capital goods. They would also
like to refer to the decision of Tribunal where tippers were considered as capital goods
this case law is Jindal Stainless Steel Limited reported in 2009 (245) ELT 0244 (T).
8.21
Regarding bulldozers, the assessee had relied on the decision of Tribunal
in the case of CCE, Tirichurapalli v/s India Cements Limited reported in 2012 (285)
ELT 0341 (T) wherein it was held as under :-
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“The question as to how Rule 57Q should be interpreted came up recently before
the Apex Court in the judgment reported in 2010 (255) E.L.T. 481 (Commissioner
of Central Excise, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd.). In
paragraphs 12 and 13, while applying the “user test” and following the Jawahar
Mills’s case, the Apex Court has held that even though steel plates and M.S.
Channels used in the fabrication of chimney would fall within the ambit of
“capital goods”.
9. The aforesaid judgment makes it clear that the Court should apply liberal test
to find out as to whether a particular item would fall under the definition of
“capital goods” or not. Having regard to the factual finding of the Tribunal that
the above items are used for civil construction, we are of the considered view that
the order of the Tribunal requires no interference. Accordingly, these appeals are
dismissed and the question of law raised in the appeals is answered against the
Revenue.”
8.18.
They had placed reliance on the decision of this Bench in the case of
India Cements Ltd. v. Commissioner of CE, Hyderabad-III reported in 2005 (180) E.L.T.
247 (Tri.-Bang.) wherein credit was allowed in the case of bulldozer. They further also
placed reliance on the decision of Tribunal in the case of Jindal Stainless Steel Limited
(supra) wherein credit on bulldozers has been allowed.
8.22
As regards para 7 the excess utilization of cenvat credit of capital goods
has been proposed to be confirmed along with interest from the date of taking cenvat
credit till 01.04.2011 which is the date when they were eligible to take remaining 50%
credit on the capital goods for the financial year 2011-12 hence not disputed the fact.
8.23.
As per para 8 of the show cause notice it was alleged that they
had
carried out activities such as “Constructing of RCC Overflow chamber on junction of
SWD and Sewer Diversion Pipe Line including P/L of RCC NP-4 class Sewer Pipe line
and C.I.Sluice gates on West Bank of Sabarmati River from Sabarmati Power station to
Sardar Bridge on River Sabarmati, Sabarmati River Front Development Corporation,
Ahmedabad”. Constructing General Earth Fill for the Embankment
Construction
Behind R.C.C retaining wall for the length of 575 mt on East Bank from Subhash
Bridge to 575 mt Downstream on River Sabarmati for Sabarmati River Front
Development Corporation, Ahmedabad, etc”. As per details given in Annexure-C to the
show cause notice. these activities were sought to be classified under Commercial or
Industrial Construction Service as defined under Section 64(25b) of the Finance Act,
1994 as they have already stated that these services had been classified under Site
Formation Service by CST, Mumbai in the case referred above and therefore
classification proposed in the show cause notice is erroneous.
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F.No. STC/4-52/O&A/13-14
8.24
OIO NO: AHM-SVTAX-000-COM-013-14-15
As per para 8 of the show cause notice as detailed in Annexure-C to the
show cause notice they had provided during the year 2011-12 services of Commercial
or Industrial Construction. In this regard it was submitted by the assessee that
“Construction of RCC Overflow Chamber on junction of SWD and Sewer Diversion
Pipeline including pipe line of RCC NP-4 class and C.I slance gates on East Bank of
Sabarmati River from Dafnala to Sardar Bridge”, is a construction relating to sewer
pipeline for disposal of waste effluent. These activities are carried out by Ahmedabad
Municipal Corporation which has to provide these basic facilities/amenities as
sovereign function. These activities are not commercial activities. Hence, these are not
taxable service.
8.24.1
In this regard it was further submitted by the assessee that as per letter
dt.17.5.2010 of Sabarmati Riverfront Development Corporation Limited the “General
Earth Filling Work for the embankment construction behind retaining wall on West
bank for the portion from Usmanpura to Sardar Bridge” is not a commercial
construction activity, the activity of earth filling is covered under Site Formation
activity.
8.25
In summarily it was further again submitted by the assessee that they
had done construction activity as referred above which is not covered under
Commercial or Industrial Construction Service. They have also carried out the service
of General earth filling which is classifiable under Site Formation service. Both these
nature of services have been provided by them to Sabarmati Riverfront Development
Corporation which is owned by Ahmedabad Municipal Corporation and this project is
for the purpose of proper use of water and the water resources, which otherwise would
have been wasted.
The entire project is envisaged by SRFDCL is in fact of the
Ahmedabad Municipal Corporation, in principal approved by the Central and State
Governments. As per letter dated 10-2-2006 written by the Municipal Commissioner of
Ahmedabad Municipal Corporation regarding the service tax liability to M/s ITD
Cementation Limited there is no service tax liability for undertaking these works. The
contract is for construction of diaphragm wall and anchor slab. The diaphragm wall is
constructed for the purpose of regulating the flow of the river which is for flood
control, as well as recharging of ground water level. The construction of anchor slab is
for support of diaphragm wall. The construction of anchor slab is used as walkways
i.e. roads.
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F.No. STC/4-52/O&A/13-14
8.26
OIO NO: AHM-SVTAX-000-COM-013-14-15
It was further submitted by the assessee that the calculation arrived at
for the purpose of demand of service tax is erroneous as the department has included
the entire cost of materials, which goes into the construction of various works i.e.
diaphragm wall and anchor slab, etc. ; that they are in possession of purchase
invoices of the purchase of inputs which have been used by them for providing the
said
services
to
SRFDCL.
Therefore,
they
are
eligible
for
Notfn.No.12/2003-ST or alternatively under Notfn.No.1/2006-ST.
the
benefit
of
The department
has confirmed the demand on the entire value of contracts which is wrong. Again this
is their alternative submission, their main submission is that the demand is time
barred and hence not enforceable for which they have given detailed defence in above
paragraphs along with the case laws. Secondly, the activity is classified by the
department under Commercial or Industrial Construction, which should have been
under Site Formation…..Service. Thirdly, the activity is related to water works, which
has no commercial angle, hence, these services have not been used by Ahmedabad
Municipal Corporation for any commercial purpose. It is their submission that the
entire demand is barred by limitation and the activity of construction and activity
undertaken by SRFDCL was known to public at large.
8.27
With regard to demand of wrong cenvat availed on the capital goods they
further submitted that so far as alleged wrong availment of cenvat credit on capital
goods is concerned, they have declared all the credit taken in their books of accounts
and in the ST-3 returns, the department has failed to scrutinize and find out their
mistake of having taken credit wrongly in the stipulated time period. The department
cannot now invoke the extended period and ask them to reverse the cenvat credit
allegedly wrongly taken by us. As they have already stated above their unit is large
service tax payer unit and the department was supposed to audit their unit at least
once in two years. Had the department scrutinized the ST-3 returns and asked them
to give details of cenvat credit taken during the year 2008-09 itself, they would have
become aware about their
illegibility towards cenvat credit on motor vehicles as
capital goods and they would have done their tax planning by taking depreciation on
the value of the motor vehicles under the Income Tax. But because the department
did not take any objection when they first took cenvat credit on motor vehicles as
capital goods, they planned to forego depreciation under Income Tax and take cenvat
credit. If they would have been made aware about their mistaken belief, they would
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
not have taken this cenvat credit. As per the doctrine of promissory estoppels, once
the ST-3 returns have been scrutinized and finally assessed, the department cannot
take back from them the benefit which has been deemed to have been finally accorded
to them at the material time., unless and until the department proves suppression of
facts on their part with intent to wrongly avail cenvat credit. There is no such
allegation in the show cause notice, the department has failed to prove that they had
deliberately taken cenvat credit on motor vehicles as capital goods. Hence, this is a
case of pure bonafide on their part in taking cenvat credit on motor vehicles and
utilizing the same for discharging service tax liabilities. The demand for recovery of
wrongly availed cenvat credit amounting to Rs.3,10,65,603/- is therefore time barred.
In this regard, they would like to place reliance on Tribunal Ahmedabad Bench
decision in the case of GSPL v/s CCE wherein it is clearly held that the information
which the assessee is not required to provide to the department, if it is not provided, it
cannot be said that there is suppression of facts, fraud, or willful mis-statement and
therefore the larger period cannot be invoked for recovery of wrongly availed cenvat
credit.
8.28
In this regard they placed reliance on decision of Tribunal in the case of
Genuine Engg. (P) Ltd. v. CCE, Jaipur reported in 1999 (109) ELT 0702 (T) laying
down that extended time limit is not invokable where the appellant had informed the
department about taking of credit on the inputs. The Hon’ble Gujarat High Court’s
judgment in the case of Prolit Engg. Co. v. UOI – as reported in 1995 (075) ELT 0257
(Gujarat). The ratio laid down by the said decision that non-disclosure of information
which is not required to be disclosed or recorded does not amount to suppression of
facts is squarely applicable.
8.29
They further placed reliance on the decision of the Tribunal in the case of
ATE Enterprises Limited reported in 2004 (163) ELT 0314 (T), wherein it was held that
department was aware about the transactions of the appellant, hence, appellant
cannot be faulted for any suppression of facts.
8.30
It was further submitted by the assessee that they had a bonafide belief
that they were taking the cenvat credit correctly as in-spite of their filing ST-3 returns,
the department was not taking any objection alleging wrong availment of cenvat credit.
Moreover, there is no evidence to show that we had suppressed information with an
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
intention to evade payment of service tax or with intention to deliberately avail cenvat
credit wrongly. We refer to CBEC Circular No. 5/92-CX.4, dated 13-10-1992 – (1993)
63 ELT T7, wherein Board has taken note of attitude of the department in alleging
suppression. Board has stated that such attitude only increased fruitless adjudication
with the gamut of appeals and reviews, inflation of outstanding figures and
harassment of assesses. Board has warned that such casualness in issuance of show
cause notices will be viewed seriously. It further clarifies that mere non-declaration is
not sufficient for invoking larger period, but a positive mis-declaration is necessary, as
per decision of Supreme Court in Padmini Products v. Collector of Central Excise 1989
(43) E.L.T. 195
8.31
In the case of Chemphar Drugs & Liniments Ltd (2002) TIOL 266 (SC), the
Honorable Supreme Court held that failure or negligence in not taking license or not
paying duty not sufficient to invoke extended period..
8.32
The department cannot sleep over the returns already filed and
scrutinized by the department and then later on, on the basis of audit of records after
two/three years point out the discrepancies and allege suppression of facts, etc. The
lapse of delay in raising objection on the part of the department cannot be allowed to
be made good by invoking the larger period even though there was no suppression of
facts, willful mis-statement or contravention of the provisions with intent to evade
payment of service tax or wrongly avail the cenvat credit. The provisions of extended
period are to be applied only in rarest of the rare case where there is clear cut
intention to evade payment of service tax as held by the Honorable Supreme Court in
the case of Tamil Nadu Housing Board reported in 1994 (74) E.L.T. 9 (SC) Para 3
which is relevant from the judgment of the Honorable Supreme Court is reproduced
below :“3.Section 11A of the Act empowers the Central
Excise Officer to initiate
proceedings where duty has not been levied or short-levied within six months from
the relevant date. But this period to commence proceedings under proviso to the
Section stands extended to five years if the duty could not be levied or it was
short-levied due to fraud, collusion, wilful misstatement or suppression of facts
etc. The proviso to Section 11A reads as under :
“Provided that where any duty of excise has not been levied or paid or
has been short-levied or short-paid or erroneously refunded by reason of
fraud, collusion or any wilful misstatement or suppression of facts, or
contravention of any of the provisions of this Act or of the rules made
thereunder, with intent to evade payment of duty, by such person or his
agent, the provisions of this sub-section shall have effect, as if for the words”
Central Excise Officer", the words “Collector of Central Excise” and for the
words “six months”, the words “five years” were substituted."
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F.No. STC/4-52/O&A/13-14
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A bare reading of the proviso indicates that it is in nature of an exception to the
principal clause. Therefore, its exercise is hedged on one hand with existence of
such situations as have been visualized by the proviso by using such strong
expression as fraud, collusion etc. and on the other hand it should have been with
intention to evade payment of duty. Both must concur to enable the Excise Officer
to proceed under this proviso and invoke the exceptional power. Since the proviso
extends the period of limitation from six months to five years, it has to be
construed strictly. The initial burden is on the Department to prove that the
situations visualized by the proviso existed. But once the Department is able to
bring on record material to show that the appellant was guilty of any of those
situations which are visualized by the Section, the burden shifts and then
applicability of the proviso has to be construed liberally. When the law requires an
intention to evade payment of duty then it is not mere failure to pay duty. It must
be something more. That is, the assessee must be aware that the duty was
leviable and it must deliberately avoid paying it. The word `evade’ in the context
means defeating the provision of law of paying duty. It is made more stringent by
use of the word `intent’. In other words the assessee must deliberately avoid
payment of duty which is payable in accordance with law. In Padmini Products v.
Collector of Central Excise 1989 (43) E.L.T. 195, it was held that where there was
scope for doubt whether case for duty was made out or not, the proviso to Section
11A of the Act would not be attracted. The appellant is a statutory body. It had
taken out licence for concrete as it was being sold to outsiders. No licence was
taken out for wood products as according to it, it was advised so by the Excise
Department itself. It would have been better if the appellant would have examined
the officer who was advised not to take licence. But mere non-examination of
officer could not give rise to an inference that the appellant was intentionally
evading payment of duty. When the appellant was found not to have been making
any profit and it had taken out licence for concrete unit then in absence of any
other material to prove any deliberate act of the appellant the presumption of
reasonable doubt of the appellant cannot be said to have been successfully
rebutted. The finding of the Tribunal that there was an intention on the part of the
appellant to evade payment of duty, is not based on any material. It was an
inference drawn for which there was no basis.”
8.33
In their case entire facts were known to the department and therefore
there is no justification for invoking extended period of limitation on the ground of
suppression, fraud, collusion, willful misstatement, contravention with intent to evade
payment of tax or wrongly avail cenvat credit. The Honorable Supreme Court in the
case of Jaiprakash Industries Ltd. Vs. Commissioner of Central Excise (2002) 146 ELT
481 has held that bona fide doubt as to non-excisability of goods, in such
circumstances extended period of limitation is not invokable as there is no evidence of
any fraud, collusion, wilful misstatement or suppression of fact available with
Department.
The
judgment
of
Honorable
Supreme
Court
in
the
case
of
M/s. Continental Foundation Joint Venture Vs. CCE (2007) 216 ELT 177 , in the case of
Pushpam Pharmaceuticals Company Vs Collector of C. Ex. Bombay (1995) 78 ELT 401,
Tribunal in the case of Catvision Products Ltd (2006) 194 ELT 126, Supreme Court in
the case of Nestle India Limited Vs. CCE (2009) TIOL 26, High Court of Kerala in the
case of Commissioner of Customs Vs. Cochin Minerals & Rutiles Ltd. (2010) 259 ELT
182, Hon’ble Supreme Court in the case of CCE Vs. Ballarpur Industries (2007) 8 SCC
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F.No. STC/4-52/O&A/13-14
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89, Supreme Court in the case of Collector of Central Excise Vs. H.M.M. Ltd. (1995) 76
ELT 497, Hon’ble Mumbai Tribunal in the case of Sands Hotel Pvt. Ltd. Vs CST (2009)
TIOL 441, Hon’ble Tribunal in the case of Rolex Logistics Pvt Ltd Vs Commissioner of
Service Tax 2009 13) STR 147.
8.34
They further placed reliance on the latest judgment of the Honorable
High Court of Jharkhand in the case of CCE, Jamshedpur v/s Tinplate Company of
India Limited reported in (2013) 33 taxmann.com 16 (Jharkhand) wherein the
Honorable High Court set aside the demand on the ground of limitation. Hence, the
ratio of the said judgment is squarely applicable in our case and accordingly the
demand beyond the normal period of one year is time barred.
8.35
Without prejudice to the above submissions, even on merits, it was their
further submission that the definition of capital goods prior to 22.06.2010 at (A) (i)
covered all goods falling under Chapter 84 (CTH 84295200) and since chapter 84 is
covered, they are entitled for the cenvat credit. Here, the department cannot say that
because the goods in question are excavator, the credit cannot be availed. Whatever
the goods may be once the department has accepted the classification of the goods
under Chapter 84 at the manufacturer’s end, the cenvat credit cannot be denied at the
receiver’s end. Hence, in all those invoices where the goods classified under Chapter
84 have been received, they are entitled for the cenvat credit.
8.36
In para 6.3 of the show cause notice it is stated that as per Rule 2(a)(B)
of CCR, 2004, credit of motor vehicles are restricted to specified services and the
services being provided by them do not fall under any of these specified service, hence,
they were not entitled for the credit. In this regard, it was submited as stated above
that first of all since the goods which are falling under Chapter 84 as per Rule 2(a)(A)(i)
they are entitled for the cenvat credit for such goods falling under Chapter 84. The
services for which cenvat credit has been allowed under capital goods on motor
vehicles are such services which require light motor vehicles, none of these services
require heavy vehicles like dumpers, tipper, bulldozer, etc. The legislature by
introducing Notfn.No.25/2010-CE(NT) dated 22.06.2010 and allowing cenvat credit on
dumpers or tippers falling under Chapter 87 and registered in the name of provider of
output service for providing taxable service as specified in sub-clause (zzza) and (zzzy)
of clause (105) of Section 65 of the Finance Act, 1994, has made it clear that dumpers
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and tippers were essentially required by the Site formation service and Mining service.
This was a beneficial legislation and therefore the same was applicable from the
retrospective date.
8.37
As regards the excess utilization of cenvat credit on capital goods, we
would again like to submit that this excess utilization pertains to the year 2010-11
wherein they had by mistake taken cenvat credit of 100% on capital goods in the year
2010-11 instead of taking 50% credit in the year 2010-11 and 50% on or after
01.04.2011 in the year 2011-12. However, this has also been shown by them in their
ST-3 returns and therefore, if it was wrong, the department ought to have reverted
back to them within normal period. Now, this demand is also time barred. However,
since this has been admitted mistake on our part, we are ready to pay or reverse back
the cenvat credit.
8.38
As for the demand proposed to be confirmed under Commercial or
Industrial Construction Service, Sabarmati River Front Development Corporation is a
project of Ahmedabad Municipal Corporation to develop tourism on the riverbed of
Sabarmati River. This being a Government Project the same is not taxable.
The
department is wrong in considering that the said construction has been carried out for
commerce or industry. Attention is invited to budgetary changes made effective from
10.09.2004 and issuance of Circular No. 80/10/2004-S.T dated 17.09.2004 wherein it
is clearly mentioned that normally Government constructions would not be taxable.
However, if such constructions are for commercial purposes like local government
bodies getting shops constructed for letting them out, such activity would be
commercial and builders would be subjected to service tax. In their case all the
constructions carried out by them are for water resources and effluent treatment
which has no commercial use, hence, as per this Board’s Circular also we are not
liable to pay any service tax.
8.39
In this regard they reled on the decision of the Honorable Tribunal
Ahmedabad Bench in the case of Khurana Engineering Limited reported in 2011 (21)
STR 115 (Tri-Ahmd) wherein on merits as well as on limitation ground the demand
confirmed by the Commissioner, Service Tax, Ahmedabad was set aside by the
Honorable Tribunal in so far as construction of quarters for CPWD issue was
concerned which is “para materia” with the issue of construction carried out by them
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for Ahmedabad Municipal Corporation in the river bed for water resources. The
Tribunal in the case of Khurana Engineering (supra) held that :
“We have already explained the submission of learned advocate in brief and as
explained by him in this case, residential complex constructed by the appellant is
meant for use by the Income Tax department to provide the same on rent to the
employees and therefore, it is clearly covered by the explanation given for
“Personal use” in the definition. In this case the CPWD has engaged the appellant
for construction of residential complex for giving it on rent to the employees of
Income Tax department and therefore this service cannot be included in the
definition of residential complex services. It is basically the case of one department
taking the help of another department to get the work done basically because of
specialization of that department in preparing documents and get the work
executed.
3. We also find alternative submissions made by the learned advocate are to be
sustained. The first alternative submission made was that the show cause notice
was issued on 4-10-2007 whereas, the service tax was payable for the period
from 16-6-2005 to 30-7-2007 and therefore, a portion of the demand is time
barred. Even if a view is taken that CPWD is to be treated as separate entity, in
our opinion appellant would be justified to entertain a belief that CPWD and
Income Tax department are to be treated as part of the Govt. of India and
therefore, services provide by him would not be liable to service tax. Further, as
submitted by the appellant in his submission, the agreement also provides that in
case of liability of any tax, the service receiver is liable to pay. In these
circumstances, the appellants had no reason to resort to suppression or misdeclaration of the facts to avoid payment of service tax since if the service tax was
liable, as per the contract, CPWD was liable to pay service tax. Under these
circumstances, invocation of extended time limit cannot be justified in this case.
Therefore, penalties imposed under various sections of Finance Act, 1994 also
cannot be upheld.
4. Another alternative submission made by the learned advocate was that the
contract between the appellant and the CPWD was a works contract and VAT has
been paid treating the same as works contract and therefore, no service tax was
liable to be paid for the period prior to 1-6-2007. He has cited several decisions in
support of this contention. However, we find that the decision of the Tribunal in the
case of Cemex Engineers v. Commissioner of Service Tax Cochin - 2010 (17) S.T.R.
534 (Tri. - Bang.) is relevant. In this case, the Tribunal had considered the
definition of residential complex services and works contract services and had
come to the conclusion that in view of the fact that construction of new residential
complex was included in the definition of works contract, the construction of
residential complex on the basis of works contract, cannot be leviable to service tax
prior to 1-6-2007. In view of the fact that this decision is applicable to the facts of
the present case, this would also go in favour of the appellants.
5. Further, in view of the fact that on merits, we have held that service provided
by the appellant is to be treated as service provided to Govt. of India directly and
end use of the residential complex by Govt. of India is covered by the definition
“Personal Use” in the explanation to definition of residential complex service, the
other aspects need not be considered. In view of the discussion above, the
impugned order cannot be sustained and accordingly the same is set-aside.
Appeal is allowed with consequential relief to the appellant.”
8.40
Here in the case on hand they had provided service directly to the
Ahmedabad Municipal Corporation which is a constituted body and administrative
machinery of Government of Gujarat, a local administrative unit. Even though the
department has filed appeal against this decision of Honorable Tribunal before the
Honorable High Court of Gujarat, the Honorable High Court has not granted any stay
against the operation of the Tribunal’s order, thus, the said decision rules the field as
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F.No. STC/4-52/O&A/13-14
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on today and is applicable to the department also. Therefore, the demand of service
tax under Commercial or Industrial Construction service is required to be dropped.
8.38
They further submitted that there cannot be any kind of service tax when
services are provided to the Government. It is submitted that as per the definition of
taxable service under Section 65 (zzzh) of the Finance Act, 1994, means ‘any service
provided or to be provided to any person by any other person in relation to
construction of complex’. Now as per the definition itself, the services are taxable only
if the same is provided to any person. Here, in the present case, the services are
provided to the Ahmedabad Municipal Corporation and Government whether it is
State Government or Central Government (Union of India) or local administrative
authority, cannot be treated as “person”. Government is “State” or “Union” different
from person or citizen. When the Government of Gujarat has received services, it
cannot be said that any natural or juristic person has received services. Hence, it is
submitted that when services are provided to any natural or juristic person, the same
are taxable service and in other case, the same are not taxable.
9.
Personal Hearing:-
9.1
As requested by the assessee the personal hearing in the matter were granted
on 11.03.2014 wherein Shri Bhavesh Patel appeared before me and submitted written
reply dated 11.03.2014 and explained their contention with respect to different
allegations in the SCN. He also accepted interest liability in respect of excess
utilization of cenvat as proposed in para 12 (vii) of the show cause notice and
requested other allegations to be dropped.
10
Discussions and findings of the case:-
10.1
I have gone through the content of show cause notice STC/4- 52/O&A/13-14
dated 24.10.2013 , relevant case records, Final
Audit report in question, written
submission of the assessee, record of the personal hearing held in the matter. I
observe that based on the Audit report, impugned show cause notices alleges as to
why:-

the amount of Rs. 81,78,32,324/- should not be considered as taxable value
and the service tax short paid amounting to Rs. 8,82,47,205/- ( Rupees Eight
Crore
Eight
Two
Lakh
Forty
Seven
Thousand
Two
Hundred
Five),
[Rs.21,49,453/- (Ann.A) + Rs.8,57,95,771/- (Ann-C) + Rs.3,01,980/- (Ann. D)]
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F.No. STC/4-52/O&A/13-14
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should not be charged, demanded and recovered under the proviso to Section
73(1) of Finance Act, 1994.

the amount of Cenvat Credit of Rs.3,10,65,603/- wrongly availed by
them covering the period of the year 2008-09 to 2012-13 should not be
recovered from them under Rule 14 of Cenvat Credit Rules, 2004 along
with interest.

The interest on excess utilization of Cenvat Credit amounting to
Rs.56,07,521/- should not be recovered from them under Section 75 of
the Finance Act, 1994.
11.
Before I decide aforesaid issues categorically I would first like to discuss the
issue raised by the assessee in their written submission
related to
non
maintainability of show cause notice based on the presumption and assumption basis
on Audit Report.
11.1
While perusing the written submission of the assessee, I observe that the
assessee wchile refuting all the allegations have empathically raised the issue that
entire show cause notice dated 24.10.2013 was raised on presumption and
assumption entirely based on Final Audit Report No.196/2013-14 dt. 22.10.2013 i.e.
within two days of issue of Final Audit report and it is therefore obvious that the
authority issuing the show cause notice has not caused any independent inquiry from
them about the points raised in the Audit Report and has simply by adding few
paragraphs here and there in the Audit Report, show cause notice has been issued.
While raising aforesaid issue assessee had placed their reliance on
following
decisions.
(i)
Decision of Tribunal in the case of CCE, Ghaziabad v/s L.B. Electronics
reported in 2009(245) ELT 829 (Tri-Del)
(ii)
Decision of Tribunal in the case of Swastik Tin Works v/s CCE, Kanpur
reported in 1986(25) ELT 0798 (Tribunal)
(iii)
Decision of Honorable Tribunal in the case of Aditya College of Competitive
Exam reported in 2009 (16) STR 0154 (Tri-Bang)
(iv)
Decision of Honorable Tribunal in the case of Kumbhi Kasari Sahakari
Karkhana Limited reported in 2011 (266) ELT 0087 (Tri-Mumbai)
11.2
I have gone through all the aforesaid decisions of the respective forum and I
observe that their submission is not correct and acceptable. The issue is discussed as
under.
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F.No. STC/4-52/O&A/13-14
(i)
Decision of
OIO NO: AHM-SVTAX-000-COM-013-14-15
Tribunal in the case of CCE, Ghaziabad v/s L.B. Electronics
reported in 2009(245) ELT 829 (Tri-Del)
11.2.1
I have gone through the said decision and for the ease of reference I have
reproduced para 3.1. 3.2 and 5 of the said order as under.
3.1 The facts of the case are that the respondent has done job work for
M/s. Goldwin Technologies (P) Ltd. The original authority held that some
supplies made to Goldwin Technologies (P) Ltd. covered by three challans
have been sent without payment of duty. The respondent explained that
in respect of some earlier consignments received under Section 57F(4),
the quantities returned after processing were in short-supply and these
quantities covered by three challans were relating to consignments shortsupplied earlier as clearly indicated in the challans themselves. This view
has been accepted by the Commissioner (Appeals).
3.2 Another issue was that the miscellaneous income of Rs. 2,42,364/shown in the balance sheet by the respondent firm was treated as sale of
goods not accounted for excise purpose and demand of Rs. 38,778/- was
confirmed by the original authority which was also set aside by the
Commissioner (Appeals).
5. Show cause notice has been issued based on audit objection. It is not
disputed that the respondent was doing job work for M/s. Goldwin
Technologies (P) Ltd. They have claimed that there were some shortsupply as per earlier challans in returning processed goods which were
made good. The order in original confirming demand of duty has been
passed stating that “It was inferred that party cleared the said PCB
clandestinely without payment of duty”. Such inference has not been
based on reliable document. There is no admission statement by the
respondent. There is no investigation at the end of M/s. Goldwin
Technologies (P) Ltd. Under these circumstances, Commissioner
(Appeals) after perusing the documents relied upon by the respondent in
support of their defence has accepted the claim of the party that it was a
case of short-supply made good subsequently. The demand treating the
miscellaneous income as income arising out of the sale of goods not
accounted for excise purpose was based only on presumption and not on
any evidence. Such demand without conducting enquiry and
investigating into the nature of miscellaneous income is also not
sustainable
11.2.2
Critical examination of the aforesaid decisions clearly suggests that in
the said show cause notice charge of clandestine removal of PCB was inferred on the
basis of Audit report by the adjudicating authority. In this regard I observe that
clandestine removal is never reflected in the records of the assessee. In the said case,
before drawing such inference by the audit, the same should have been investigated
and should have been concluded accordingly. Accordingly I observe that CESTAT while
delivering the said decision have observed that such presumption cannot be
entertained as evidence.
11.2.3
However, in the case on hand I find that the officers while on audit have
obtained details of Income related to taxable and exempted service and receipt against
providing the said service from their books of accounts, reconciled the same with what
have been reported by them in ST-3 returns, Invoices have been obtained, details of
Cenvat credit availed on capital goods given by the assessee. All these documents
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
have been signed by the assessee. Based on prima facie observation draft audit report
was perused by the concerned authority and pending release of final approval of audit
the jurisdictional Assistant Commissioner, and Superintendent have been asked to
examine issue with the assessee. The assessee was also called several times by them,
however they did not turn up as discussed herein after.
The authenticity of the
records submitted is proved as the assessee have signed each and all the documents
submitted by the assessee. The correctness of the same was not at all disputed by the
assessee in their submission. I find that there is no reasons to believe that various
print outs of records maintained by the assessee and submitted by them out of the
records maintained for all the statutory purposes is acceptable for the departmental
proceedings and particularly nothing in this regard have been refuted by the assessee.
Therefore, decision cited above for relying in the present case is clearly distinguishable
from the facts recorded in the decision cited by the assessee.
11.3. (ii)
Decision of Tribunal in the case of Swastik Tin Works v/s CCE,
Kanpur reported in 1986(25) ELT 0798 (Tribunal) where in the facts of the
matter was that on raising audit objection, the assessee was not given any
opportunity to explain their case.
11.3.1
On going through the aforesaid decisions I find that the facts of the said
case and the case on hand are different. Further from the judicial analysis of the same
I find that it was distinguished in the following decisions.
11.3.2
2002(141) ELT101 (Tribunal-Delhi) in the case of Commissioner of
Central Excise, Lucknow vs Mathura Poly Pack Pvt. Ltd. The Ho’ble tribunal while
referring the decision of this Tribunal in the case or Swastik Tin Works v. CCE cited
above. It was noted that the decision relied upon by the Commissioner is not
applicable to the facts of the present case in-as-much as in the case of Swastik Tin
Works, a SCN was issued without any investigation into identity of goods at any
stage whereas in the present case we find that packing forwarding and other
expenses were being collected by the assessee and were shown in their records.
We also note that this allegation has not been rebutted by the assessee. Simply
because it was pointed out by audit does not make them not includible in the
assessable value.
The ratio of the afore said decision 2002(141) ELT101 (Tribunal-Delhi) in the case of
Commissioner of Central Excise, Lucknow vs Mathura Poly Pack Pvt. Ltd. on which I
rely is squarely applicable to present case as discussed below.
11.3.3
In the case on hand the audit officer have reconciled the records of the
assessee which is not disputed facts. The difference in the taxable value is arrived at
by comparing records/ books of accounts maintained by the assessee; that year wise
details of taxable value received and Invoiced were segregated according to the taxable
service and exempted category of services and than the taxable value derived as per
the books of account was compared with the year wise ST-3 returns filed by the
assessee from time to time and the difference were detected on the basis of which
demand of service tax was raised. Here I also observe that in the ST-3 returns filed the
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
assessee had declared only taxable value viz Mining service provided and no other
taxable
value/
exempted
value
of
services
have
been
included.
Therefore
receipt/Invoiced value of taxable value derived out of the accounts books of the
assessee related to mining service compared with the ST-3, it is totally logical and
legal that the difference in the taxable value noticed by the audit party is definitely
answerable by the assessee, however on being pointed out assessee did not agree and
did not explain the difference in the taxable value. All the details reflected in the
Reconciliation are obtained out of the Audited Balance sheet and profit and loss
account which I hold to the reliable documents. The receipt of such difference is not
declared in the ST—3 returns will definitely amount of suppression of facts. If the said
exercise of reconciliation would have been carried out by the assessee himself, they
could have filed revised returns as prescribed under the Service Tax Rules 1994 which
they did not. Therefore the demand raised by the department is not based on the
assumption and presumption and is sustainable on the ground of limitations.
11.3.4
Further as regard to cenvat credit availed by the assessee I observe that the
said credit availed by the assessee was also based on the purchase Invoices of capital
goods which were looked into by the audit party and then it was derived that the
assessee have availed cenvat credit on various motor vehicles which were not the
capital goods within the meaning of definition of capital goods defined in Cenvat Credit
Rules, 2004. The ST-3 returns does not contains the capital goods-wise description.
Under the self assessment system of assessment the onus to decide eligibility of cenvat
credit and its availment is on the assessee. When the rules are very specific regarding
eligibility of cenvt credit on specified capital goods, cenvat credit availed wrongly and
its utilization by the assessee is definitely with malafide intention. Such wrong
availment of cenvat credit is recoverable under Rule 14 of Cenvat Credit Rules, 2004
read with Proviso to Section 73(1) of the Finance Act, 1994.Therefore, I rely on the
decision distinguished by the CESTAT in their order 2002(141) ELT101 (TribunalDelhi) in the case of Commissioner of Central Excise, Lucknow vs Mathura Poly Pack
Pvt. Ltd and the decision cited by the assessee is not relevant and is misquoted.
11.4. (iii) Decision of Honorable Tribunal in the case of Aditya College of
Competitive Exam reported in 2009 (16) STR 0154 (Tri-Bang) and (iv) Decision
of Honorable Tribunal in the case of Kumbhi Kasari Sahakari Karkhana Limited
reported in 2011 (266) ELT 0087 (Tri-Mumbai)
11.4.1
I have gone through both the decisions cited by the assessee, however they
are clearly distinguishable as already discussed above.
In light of aforesaid discussion I find that demand raised based on the audit objection
is not merely issued on the basis of assumption and presumption. I also observed that
the officers have collected various evidences during the course of audit which are also
relied upon in the show cause notice. As discussed above, charge of suppression is
also proved. Therefore I find the show cause notice is correctly raised and sustainable
on the ground of limitation also.
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F.No. STC/4-52/O&A/13-14
11.4.2
OIO NO: AHM-SVTAX-000-COM-013-14-15
Accordingly I observe that demand raised on the basis of audit report is
sustainable on limitation ground. Now I proceed to decide the remaining issues
categorically.
12. Now coming to the determinations of various issues on which show cause
notices proposes recovery of service tax I find that in the impugned show cause
notice following amounts have been demanded from the assessee.
Sr.
No.
1
2
3
Taxable
Value in Rs.
Amount to be
recovered in Rs.
Difference in
Reconciliation
2,28,16,024
21,49,454/-
Wrong Cenvat
Credit availed on
Capital Goods
----
Particulars
Excess utilization
of Cenvat Credit
on Capital goods
4
5
Commercial or
Industrial
Construction
Service
Site formation
Service
56,07,521/
79,20,84,45
3/
29,31 847/-
3,10,65,603/-
At applicable
interest rate.
8,57,95,771/-
3,01,980/-
Provision for
recovery applicable
Proviso to Section
73(1) of the Finance
Act,1994
Rule 14 of Cenvat
Credit Rules, 2004
r/w proviso to section
73(1) of the Finance
Act,1994
Interest for excess
utilization under
Section 75 of the
Finance Act,1994
Proviso to Section
73(1) of the Finance
Act,1994
Proviso to Section
73(1) of the Finance
Act,1994
11,93,12,808/-
12.1
Difference in Reconciliation:-
12.1.1
I have gone through the details of reconciliation carried out by the
officers while in audit. It is observed that there is no reason to disbelieve the details
filled in the reconciliation statement which is based on the Annual Financial
Statement, details obtained from various ledgers viz Income ledger, debtors ledgers
[segregated by the assesssee himself for taxable service and exempted service], details
from Service tax payable accounts-ledger which were duly maintained by the assessee
and the details of taxable value and tax payment shown in the ST-3 returns filed from
time to time by the assessee. All these documents are part and partial of reconciliation
carried out by the officer. It is also noted here that aforesaid details were the print
outs of the books of accounts maintained by the assessee in the computer and were
duly signed by the assessee. Further the said details were also part of Audited Balance
Sheets and Profit and loss accounts for the year 2008-09 to 2011-12. Thus all the
details were reliable evidence and relied by the department for the purpose of raising
demand. None of the figures shown therein have been disputed by the assessee at the
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
time of audit. It is also not the claim of the assessee that the said details obtained by
the audit officers are not correct.
12.1.2
I have gone through the submission in this regard made by the assessee.
It is their submission that demand worked out on the basis of “Reconciliation” is not
legally sustainable as the said “Reconciliation” has no legal basis and that it is only
presumption and assumption that the difference in the value is the difference of
taxable value for the services provided by them.
Even if it is assumed that this
difference is relating to taxable service provided by them, the question would arise
which service, as it is an admitted fact that they were providing various taxable
services. The department has not shown as to the taxable service for which the
differential service tax pertains. The onus is on the department to show the particular
service to which the said differential service tax can be attributed. There is no such
allegation in the show cause notice. Therefore, it is obvious that the differential service
tax of Rs.21,49,454/- is being demanded on the basis of arithmetical calculations and
nothing else.
12.1.3
I find that the aforesaid submission is full of contradictions. On one side
the assessee agrees that difference in the taxable value was arrived at in the
Reconciliation on presumption and assumption and on the other side, they have not
contradicted the accounts and ledgers of debtors which were produced by them for
taxable service and exempted service. I observe in this regard that if debtors of
exempted service is excluded from the total sundry debtors lists, then only debtors left
will be related to Mining services considered as taxable service in their books and
accordingly the same were considered by the officers during the course of audit. I also
note here that during the period 2008-09 to 2011-12 the assessee had discharged
service tax only on mining service as provider of service. Even ST-3 returns for the
said period reflected that they had discharged service tax only on Mining service.
Therefore demand of Rs. 21,49,454/- is definitely raised on Mining service which is
quite legal and logical. Hence, the differential service tax of Rs.21,49,454/- being
demanded is not solely based on arithmetical calculations in the reconciliation but
the same is based on correct derivation of difference based on the details given by the
assessee from their audited records which were duly signed by them. Accordingly, I
find that demand of service tax is not at all based on assumption and presumption
but on the contrary the same is based on the books of account maintained by the
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
assessee and ST-3 returns filed by them which are not at all refuted by the assessee.
Under the circumstances the difference in taxable value received and not declared in
the ST-3 returns filed by the assessee is clearly found to be suppression of material
fact and assessee can not be exonerated only on the ground that they have filed ST-3
return. Under the self assessment which is also a assessment as defined under Rules
2(b) of Service Tax Rules, which states as under.
[(b)
“assessment” includes self-assessment of service tax by the assessee,
reassessment, provisional assessment, best judgment assessment and any
order of assessment in which the tax assessed is nil; determination of the
interest on the tax assessed or reassessed;]
12.1.4
Under the self assessment scheme the onus is on the assessee to include
and declare correct taxable value in their ST-3 returns filed from time to time which
the assessee appeared to have failed to do in as much as the difference arrived at by
the officers is not disclosed/declared in the ST-3 returns filed by the assessee. The
same is also not otherwise explained by the assessee during the course of audit. In
view of above discussions, I do not find it necessary to go through various decisions
cited by the assessee in this regard.
12.1.5
It was further argued by the assessee that as per column no.2 of the
Audit Report No.196/2013-14 page 1, the category of the unit is shown as “A”. As per
the guidelines of the department, units falling under Category A are required to be
audited every year. They have taken registration with the department on 24.02.2005
and their service tax payment for the year 2008-09 it was Rs.9,99,245, for 2009-10 it
was Rs. 1,43,57,074 for 2010-11 it was Rs. 2,63,44,504 for 2011-12 it was Rs.
3,30,72,498, for 2012-13 it was Rs. 2,63,17,594 They further stated that as per the
norms of the Government of India their accounts should have been audited every year
for the units paying total duty payment (in cash plus cenvat credit) more than Rs. 3
crores in the year, should have been audited once every two years for the units paying
total duty payment (in cash plus cenvat credit) for the amount between Rs. 1 crore to
Rs.3 crores. Instead, their accounts were audited for the period 2008-09 to 2011-12
on 15.7.2013, 27.7.2013 and 23.09.2013 and that if the department had audited their
records for the year 2006-07 immediately after completion of the year, they would not
continued the same mistake and after five years saddled with heavy service tax
liability. Therefore, for the laxity on the part of the department, the assessee cannot be
made to suffer.
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F.No. STC/4-52/O&A/13-14
12.1.6
OIO NO: AHM-SVTAX-000-COM-013-14-15
I am unable to accept their above contention. Norms for auditing
particular units in particular frequencies are prescribed for Departmental officers and
non adherence of the same does not give any liberty to the assessee to evade tax by
mis-declaring the facts, with regard to the receipt of taxable amount reflected in their
books of accounts and that declared in ST-3 returns. Further, it is also prescribed in
the Service Tax Rules, 1994 that assessee can file revised ST-3 returns within 90 days
of filing regular returns, which the assessee could have done instead of waiting for
audit by the department. Further it is fact that their books of accounts have been
audited regularly by the statutory auditors. Therefore I am unable to accept their
contention that if the department had audited
their records for the year 2006-07
immediately after completion of the year, they would not have continued the same
mistake and after five years be saddled with heavy service tax liability.
12.1.7
It was their further argument that they are regularly filing ST-3 returns
from the period they took registration and in the returns they are mentioning all the
details of taxable value, rate of tax applicable, details of service tax paid, mode of
payment of tax, details of cenvat credit taken and utilized. They also alleged that if the
department does not takes timely steps to scrutinize or assess the ST-3 returns and
examine the details of cenvat credit or audit the books of account of its assessee
paying large amount of revenue, the department cannot wake up and allege
suppression of facts on the assessee.
12.1.8
In this regard I find that their explanation and blame on department for
not auditing their unit cannot be accepted.
12.1.9
It was further argued by them that with regard to reconciliation that as
per accounting system of appellant, debtors are debited net of TDS. Means TDS
amount is not reflected in debtors account. Department has deducted closing debtors
balances while preparing reconciliation which is in fact exclusive of TDS amount.
Whereas Work Income credited in P & L account is inclusive of TDS amount. This
work income has been taken as revenue income in reconciliation prepared by the
audit authorities. They contended that income taken in reconciliation is inclusive of
TDS while closing debtors deduction from reconciliation is exclusive of TDS and that if
this aspect is considered by the Audit, there would not have been any differential
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F.No. STC/4-52/O&A/13-14
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taxable value. They reiterated reliance on the decision of Tribunal referred above as
per which demand raised in such manner cannot be sustained.
12.1.10
I find that afore said contention is not at all correct. As per accounting
principle, when any Invoice is raised it has two effect in books of account viz. income
account is credited to the extent of Invoice amount and equivalent amount are being
debited to service recipient account i.e. debtors account, which has been followed by
the assessee. Therefore debit side of debtors [which are Invoice amount] includes TDS
amount. Further, if the assessee had not credited TDS amount on receipt side it is
their fault. As per Section 67 gross amount charged by the service providers in their
Invoice is inclusive of TDS. Accordingly their contention is wrong and is mis conceived
and given with mala-fide intention and as such the same can not be accepted.
12.2
Wrong Cenvat Credit on Capital goods:-
12.2.1
With regard to wrong availment of cenvat credit on Motor vehicles viz.
Dumpers, Tippers, Excavators, Bulldozers, graders etc. it is the argument of the
assessee that these motor vehicles are used by them for site formation and excavation
in mines; that these are essential capital goods for them without which it is not
possible for them to provide site formation service; that these are material handling
equipments; and have included the cost of the motor vehicles while arriving at the
costing of providing the services for site formation and preparation; that it is a settled
principle of accountancy that when the cost of the particular product is included
in the selling price, Cenvat credit is admissible; that they relied on the decision of
Tribunal in the case of Lumbini Beverages Pvt. Ltd. reported in 2012 (284) ELT 0695
(T) wherein Cenvat credit on PVC crates was allowed either as capital goods or inputs,
in that case also PVC crates were being used as material handling equipment for
shifting of material within the factory premises. The ratio of this decision of Honorable
Tribunal is admissible to them as a particular site is like registered factory premises
for them and if they use some motor vehicles as material handling equipment at the
site and the value of such motor vehicles is included in the costing of services,
They further relied on the following decisions
(i)
Tribunal in the case of Tata Steel Limited reported in 2012 (282) ELT 0469
(T) wherein it was held as under.
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F.No. STC/4-52/O&A/13-14
(ii)
OIO NO: AHM-SVTAX-000-COM-013-14-15
Decision of the Hon’ble Supreme Court in the case of J.K. Cotton Spg. &
Wvg. Mills Co. Ltd. v. Sales Tax Officer, Kanpur reported in 1997 (91) E.L.T.
34 (S.C.)
(iii)
(iii) decision of Tribunal in the case of Aditya Cement reported in 2009 (245)
ELT 0266 (T) wherein the assessee was claiming cenvat credit on dumpers
as input, department was of the view that these are capital goods. (iv)
(iv)
They relied on the decision of Tribunal in the case of India Cements
Limited reported in 2009 (238) ELT 0193 (T)
12.2.2
In this regard I have critically examined the contention of the assessee
and observed that the argument that said motor vehicles and main equipment with
the help of which they had provided Mining service; that its cost is included in the
valuation service and hence they are entitled to avail cenvat credit as capital
goods is not tenable. Cenvat Credit Rules, 2004 as amended from time to time clearly
suggests that motor vehicle is classifiable under chapter 87 of CETA, 1985 which is
excluded from the definition of capital goods and from the definition of Inputs under
Cenvat Credit Rules. I have gone through the said definitions which are reproduced as
under.
Rule 2. Definition: - In these rules, unless the context otherwise requires,(a) "capital goods" means:(A)
the following goods, namely:(i)
all goods falling under Chapter 82, Chapter 84, Chapter 85, Chapter
90, heading No. 68.05 grinding wheels and the like, and parts thereof
falling under heading 6804 of the First Schedule to the Excise Tariff
Act;
(ii)
pollution control equipment;
(iii)
components, spares and accessories of the goods specified at (i) and
(ii);
(iv)
moulds and dies, jigs and fixtures;
(v)
refractory and refractory materials;
(vi)
tubes and pipes and fittings thereof; and
(vii)
storage tank, used(1)
in the factory of the manufacturer of the final products, but does
not include any equipment or
appliance used in an office; or
(2)
for providing output service;
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F.No. STC/4-52/O&A/13-14
(B)
OIO NO: AHM-SVTAX-000-COM-013-14-15
motor vehicle registered in the name of provider of output service for
providing taxable service as specified in sub-clauses (f), (n), (o), (zr),
(zzp), (zzt) and (zzw) of clause (105) of section 65 of the Finance Act;
12.2.3
Thus, in the definition of Capital Goods, provided in Rule 2(B) of Cenvat
Credit Rules,2004,
credit of motor vehicles are restricted for the service providers
classifiable under sub-clauses (f), (n), (o), (zr), (zzp), (zzt) and (zzw) of clause (105)
of section 65 of the Finance Act,1994. Therefore, the Cenvat Credit on the motor
vehicle used for providing Commercial or Industrial Construction Service, taxable
under Section 65(105) (zzq) taxable with effect from 10.09.2004, Site preparation
service, taxable with effect from 16.05.2005 under section 65(105) (zzza) and
Mining service, taxable with effect from 01.06.2007 under section 65(105) (zzzy) of the
Finance Act, 1994, was not available to the said assessee.
12.2.4
The definition of input as defined under Rule 2(k) of Cenvat
Credit Rules, 2004 as on 22.06.2010 was as under.
2(k)
"input" means(i)
all goods, except light diesel oil, high speed diesel oil and motor
spirit, commonly known as petrol, used in or in relation to the
manufacture of final products whether directly or indirectly and
whether contained in the final product or not and includes
lubricating oils, greases, cutting oils, coolants, accessories of the
final products cleared along with the final product, goods used as
paint, or as packing material, or as fuel, or for generation of
electricity or steam used in or in relation to manufacture of final
products or for any other purpose, within the factory of production;
(ii)
all goods, except light diesel oil, high speed diesel oil, motor spirit,
commonly known as petrol and motor vehicles, used for
providing any output service;
12.2.5
Thus, the definition of ’input’ as provided in Rule 2(k) of Cenvat
Credit Rules , 2004 also does not include the motor vehicles used for providing any
output service.
12.2.6
However, with effect from 22.06.2010 the said credit is available to
the assessee on Dumper and Tipper as provided in notification No. 25/2010 dated
22.06.2010. The text of the said notification is as under.
[TO BE PUBLISHED IN THE GAZETTE OF INDIA,
EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]
Government of India
Ministry of Finance
(Department of Revenue)
Page | 44
F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
New Delhi, the 22nd June, 2010.
Notification No. 25 / 2010 - Central Excise (N.T.)
G.S.R.
(E). – In exercise of the powers conferred by section 37 of the
Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act,
1994 (32 of 1994), the Central Government hereby makes the following
rules further to amend the CENVAT Credit Rules, 2004, namely:1.
(1) These rules may be called the CENVAT Credit (Second
Amendment) Rules, 2010.
(2) They shall come into force on the date of their publication in
the Official Gazette.
2.
In the CENVAT Credit Rules, 2004, in rule 2, in clause (a), after
sub-clause (B), the following sub-clause shall be inserted, namely:“(C)
dumpers or tippers, falling under Chapter 87 of the
First Schedule to the Central Excise Tariff Act, 1985 (5 of
1986), registered in the name of provider of output service
for providing taxable services as specified in sub-clauses
(zzza) and (zzzy) of clause (105) of section 65 of the said
Finance Act;” .
[F.No. 354/ 33/ 2009 – TRU/Pt.I]
(K.S.V.V. Prasad)
Under Secretary to the Government of India
Note:- The principal rules were published in the Gazette of India,
Extraordinary, Part II, Section 3, Sub-section (i) dated the 10th September,
2004 vide Notification No. 23/2004-Central Excise (N.T.) dated the 10th
September 2004, published vide G.S.R. 600(E), dated the 10th September,
2004 and last amended by Notification No. 21/2010-Central Excise (N.T.)
dated 18th May 2010, published vide G.S.R. 416(E), dated the 18 th May
2010.
12.2.7
Further vide Notification No. 3/2011-Central Excise (N.T.) dated
01.03.2011, effective from 01.04.2011 rule 2(k) was substituted as under which does
not allow credit of any motor vehicle as input.
(k) “input” means–
(i) all goods used in the factory by the manufacturer of the final product;
or
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
(ii) any goods including accessories, cleared along with the final product,
the value of which
is included in the value of the final product and goods used for providing
free warranty for final products; or
(iii) all goods used for generation of electricity or steam for captive use; or
(iv) all goods used for providing any output service;
but excludes(A) light diesel oil, high speed diesel oil or motor spirit, commonly known
as petrol;
(B) any goods used for(a) construction of a building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for support of capital
goods,
except for the provision of any taxable service specified in sub-clauses
(zn), (zzl), (zzm),
(zzq), (zzzh) and (zzzza) of clause (105) of section 65 of the Finance Act;
(C) capital goods except when used as parts or components in the
manufacture of a final
product;
(D) motor vehicles;
12.2.8
From the above definition I find that, when the said motor vehicle is
neither capital goods nor inputs for the services rendered by the assessee cenvat credit
of excise duty paid can not be permitted to be taken. The decisions cited by the
assessee are not relevant to the present case in as much as the said decisions were
with reference to erstwhile provisions of MODVAT Credit Rules.
12.2.9
Claiming admissibility of cenvat credit on tippers they submitted that
since the tippers, an item of Chapter 87, were being used for Cargo Handling Service
covered by Section 65(105)(zzr), the same are covered by the definition of capital
goods. They
invited my attention to the decision of Tribunal where tippers were
considered as capital goods this case law is Jindal Stainless Steel Limited reported in
2009 (245) ELT 0244 (T). In this regard I observe from the definition of input given and
discussed above that Cenvat credit is not available on tippers as Input also. In the
said case, it was observed by Hon’ble CESTAT that “tippers” were accessories
classifiable under Chapter 85 of CETA,1985 and the credit was held to be admissible. I
find that the assessee had purchased “FM 400 8x4 Tipper” under various Invoices of
M/s
Volvo India Private Limited. A specimen copy of Invoice No. Invoice
No.0000001705 dated 30.03.2010 of M/s Volvo India Private Limited perused by me
Page | 46
F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
wherein I find that the said item have been classified under Sub heading No.
87042390 of CETA, 1985. Hence the aforesaid decision is not applicable to the present
case.
12.2.10
Regarding bulldozers, they placed reliance on the decision of Tribunal in
the case of CCE, Tirichurapalli v/s India Cements Limited reported in 2012 (285) ELT
0341 (T) wherein it was held as under :“The question as to how Rule 57Q should be interpreted came up recently before
the Apex Court in the judgment reported in 2010 (255) E.L.T. 481 (Commissioner
of Central Excise, Jaipur v. Rajasthan Spinning & Weaving Mills Ltd.). In
paragraphs 12 and 13, while applying the “user test” and following the Jawahar
Mills’s case, the Apex Court has held that even though steel plates and M.S.
Channels used in the fabrication of chimney would fall within the ambit of
“capital goods”.
9. The aforesaid judgment makes it clear that the Court should apply liberal test
to find out as to whether a particular item would fall under the definition of
“capital goods” or not. Having regard to the factual finding of the Tribunal that
the above items are used for civil construction, we are of the considered view that
the order of the Tribunal requires no interference. Accordingly, these appeals are
dismissed and the question of law raised in the appeals is answered against the
Revenue.”
12.2.11
They further relied on the decision of this Bench in the case of India
Cements Ltd. v. Commissioner of CE, Hyderabad-III reported in 2005 (180) E.L.T. 247
(Tri.-Bang.) wherein credit was allowed in the case of bulldozer. They
also placed
reliance on the decision of Tribunal in the case of Jindal Stainless Steel Limited
(supra) wherein credit on bulldozers has been allowed.
In this regard I find that aforesaid decisions were pertaining to period prior to Cenvat
Credit Rules,2004 and hence of no relevance to the case on hand.
12.3
Demand of Interest on excess utilization of Cenvat credit in Capital
goods account.
12.3.1
In this regard it is submitted by the assessee that as per Revenue Para 3
they had taken and utilized 100% cenvat credit on capital goods in the year 2010-11
instead of 50% eligible under Rule 4(2)(a) of Cenvat Credit Rules, 2004 Hence, there
was excess utilization of Rs.56,07,521/- Hence, they were required to pay interest @
13% on the excess utilization of cenvat credit from the date of taking cenvat credit till
01.04.2011 the actual date when they were eligible for taking remaining 50% cenvat
credit on capital goods legally. They admit this demand.
Page | 47
F.No. STC/4-52/O&A/13-14
12.3.2
OIO NO: AHM-SVTAX-000-COM-013-14-15
As the assesse have admitted the said facts, with regard to non payment
of interest on excess utilization, it requires no further comments and this demand of
Interest is liable to be confirmed.
12.4
Construction related to SRFDCL Rs. 8,57,95,771/-:-
12.4.1
With regard to demand of Service tax of Rs. 8,57,95,771/-
as per
Revenue Para 4 the activities of construction of various structures for Sabarmati River
Front Development Corporation are considered as taxable under Commercial or
Industrial Construction Service and total demand of Rs.8,57,95,771/- is shown as
payable by them, they submitted that SRFDCL has given such type of works to various
other contractors who are registered with authorities other than Service Tax
Commissionerate, Ahmedabad, like ITD Cementation India Limited which is registered
with CST, Mumbai wherein these constructions have been classified under Site
Formation and Clearance, Excavation and Earth moving Demolition Services and that
the definition reads as under :“Site Formation and Clearance, Excavation and Earth moving Demolition
Services” includes :(i)
drilling, boring and core extraction services for construction,
geophysical, geological or similar purposes; or
(ii)
soil stabilization; or
(iii)
horizontal drilling for the passage of cables or drain pipes; or
(iv)
land reclamation work; or
(iv)
contaminated top soil stripping work; or
(v)
demolition and wrecking of building structure or road,
but does not include such services provided in relation to agriculture,
irrigation, watershed development and drilling, digging, repairing,
renovating or restoring of water sources or water bodies.”
12.4.2
They relied upon the exclusion clause under the definition as per which
the services rendered by them would get covered under the exclusion clause for
renovating or restoring the water resources of water bodies. Hence, they stated the
show cause notice classifying the construction activities as per Annexure-C to the
show cause notice under Commercial or Industrial Construction is not maintainable.
Page | 48
F.No. STC/4-52/O&A/13-14
12.4.3
OIO NO: AHM-SVTAX-000-COM-013-14-15
In this regard I observe that Annexure C the show cause notice states as
under
Sr. Sr. No. of
No. Annexure
C
Year
1
1 t0 5
2008-09
2
1 to 5
2009-10
3
6 to 8
2009-10
4
1 to 5
2010-11
5
1 to 3
2010-12
12.4.4.
Description of service
Commercial or
Industrial Construction
General earth work for
embankment wall [ [
site formation]
Earth Work [site
formation]
Commercial or
Industrial Construction
Commercial or
Industrial Construction
Taxable
Value
Service
Tax
demanded
202420979
25266433
186221842
19180850
5652855
582244
373506981
38471219
22281796
2295025
792084453
85795771
From the aforesaid table I observe that as tabulated above Sr. No.
1, 4 and 5 demand of service tax is under construction service and for Sr.No.2 and 3
demand of service tax is under Site formations Service. In the Annexure C specific
activities carried out by the assessee have been mentioned. The said details were
incorporated on the basis of purchase order produced by the assessee at the time of
audit. Thus the aforesaid table is re- tabulated on the basis of Annexure C of the show
cause notice clearly suggests that demand of service tax is made in two separate
category of service viz. Commercial or Industrial Constructions service and Site
formation Service i.e. earth work service. I further observe from the para 5.3 and 8.5
of the show cause notice as under.
5.3
Similarly, the assessee have also carried out Earth work under various
purchase order. The Earth work carried out will be classifiable under Site
preparation activities and accordingly the said activities is classifiable under
taxable of service Site Preparation Service which is taxable with effect from
16.05.2005 under section 65(105) (zzza) of the Finance Act,1994. However the
assessee have not declared taxable value in their ST-3 returns nor they had
assessed service tax leviable thereon and had not paid any service tax thereon.
8.5
Scrutiny of the record revealed that the assessee had not declared the
taxable value charged from SRFDC in the ST-3 return, not paid service tax on
the taxable value under their belief that such activities are not covered in the
definition of “Commercial or Industrial Construction Service” or the Site
preparation/formation service. It is also observed that they had not got
the Commercial or Industrial Construction service included in the ST-2
registration.
Page | 49
F.No. STC/4-52/O&A/13-14
12.4.5
OIO NO: AHM-SVTAX-000-COM-013-14-15
Since the rate of service tax on both the category of service were same in
the respective year, Annexure C of the show cause notice was prepared in combined
way, which contains the details of earth work and Commercial or Industrial
construction activities separately and taxable value and service tax payable is
quantified accordingly. Thus it is quite evident that the assessee was asked to show
cause why an amount of Rs. 8,57,95,771/- should not be demanded from them.
12.4.6
Further, I have gone through individual serial Nos. of Annexure C of the
Show cause notice and observe that wherever construction of different items of works
is mentioned, the demand of service tax is under Commercial or Industrial
Construction service and wherever words Earthwork have been mentioned the
demand is made under Site formation service. Therefore two separate quantification
already available in the Annexure C to the show cause notice. Accordingly their claim
that demand of service tax is not properly quantified accordingly to services is not
correct.
12.4.7
With regard to their argument of the assessee that their activities
reflected in Annexure C to the show causes notice falls under the exclusion clause of
site formation service on the ground that the said activities carried out was in relation
to agriculture, irrigation, watershed development and drilling, digging, repairing,
renovating or restoring of water sources or water bodies.”, is not correct in as much as
SRFDCL is not a water body. I have carefully gone through the exclusion part of the
definition under Section 65 (97a) of the Act. I find that it is explicitly clear that the
services provided by the assessee are not in relation to agriculture or irrigation so as
to be covered under the exclusion part. I further find that the services are also not in
relation to watershed development as a watershed can be defined as the drainage
basin or catchment area of a particular stream or river. It refers to the area from
where the water to a particular drainage system, like a river or stream, comes from. In
the case before me neither the services are in relation to watershed not there exists
any such aim of Sabarmati River Front Development Corporation Ltd. to improve the
quality and standard of living of the people through watershed development.
Therefore, the services provided by the assessee are not in relation to watershed
development so as to be covered under the exclusion part. Further in order to
revitalize such water resources or water bodies, services provided in relation to
drilling, digging, repairing, renovating or restoring of water sources or water bodies
have been excluded from the said definition. Thus, it can be conclusively said that the
work executed by the assessee for Sabarmati River Front Development Corporation
Ltd. does not get covered under the exclusion part of the definition under Section
65(97a) of the Act.
Page | 50
F.No. STC/4-52/O&A/13-14
12.4.8
OIO NO: AHM-SVTAX-000-COM-013-14-15
In this regard I find there are two issues to be addressed. One is that in
the show cause notice the demand of service tax on site formation activities have been
made under Commercial or Industrial Construction service and other is related to non
taxability of site formation activities pertaining to exclusion clause. With regard to
first issue I have already discussed the quantification of demand of service tax with
respect to Commercial or Industrial construction activities and Site formation in para
12.4.3 to 12.4.6 above hence I find that their contention is not correct. With regard to
the non taxability on the ground of exclusion clause available in the definition of Site
formation activities, I observe that there is nothing on record produced by the assessee
which suggest that the activities mentioned in Annexure C to the show cause notice is
related to aforesaid exclusion category of Site formation service nor any evidence have
been produced by them that the said activities have been carried out by them on
behalf of M/s SRDFCL is a water body. Therefore I am unable to accept their claim in
this regard.
12.5.
Abatement of material value under notification No.12/2003-STor
1/2006-ST:12.5.1
While
denying
classification
under
Commercial
or
Industrial
Construction Service, assessee submitted alternate argument that they are having
possession of documents to prove that the construction activities carried out by them
was with material and therefore they are entitled to abatement under notification
1/2006-ST. In this regard I observe that as tabulated above Sr. No. 1, 4 and 5 demand
of service tax is under construction service and for Sr.No.2 and 3 demand of service
tax is under Site formations Service. In the Annexure C specific activities carried out
by the assessee have been mentioned. The said details were incorporated on the basis
of purchase order produced by the assessee at the time of audit. The perusal of the
said purchase order [ which were also relied upon records for the purpose of show
cause notice] reveals that in none of the purchase orders placed by SRFDCL/other to
M/s P. P. Patel mentioned that the said orders was with material. In this regard I
have also gone through para 8.4 of the show cause notice which is as under wherein it
was alleged in the show cause notice that the assessee have carried out
construction/site formation activities only as labour contractor and therefore, no
abatement can be allowed nor the same can be classifiable under work contract
service. The text of the show cause notice is reproduced as under.
8.4 It is also explained by the assessee that aforesaid activities of Commercial
or Industrial Construction service and Site preparation service were carried out
only as labour contractor, wherein no sale of materials have been involved.
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
Accordingly, no abatement can be allowed nor the same can be classifiable
under work contract service.
12.5.2
The aforesaid facts were recorded in the show cause notice was based on
the explanation given by the assessee at the time of audit. I have gone through various
agreement/contract/purchase order placed by concerned vendor and find that in none
of the contract/Purchase order there is mention about cost of material to be used The
assessee failed to produce any evidence in this regard that the construction activities
were carried out along with the material. Further Profit and loss accounts submitted
by the assessee at the time of audit, and available in the concerned file, I find that
there is no purchase of materials and its sales for execution of the contracts. Therefore
their argument is for the sake of argument only and is without any substance. Hence I
am not able to accept their claim of abatement under commercial or industrial
construction service.
12.5.3
Further, with regard to deduction of value of material claimed for
deduction under Notification No. 12/2003-ST I find from their Annual Reports and
profit and loss account produced at the time of audit that there is no sale of Material
have been recorded in their Profit and Loss account. Not only that, as explained in
above para, perusal of
various agreement/contract/purchase order placed by
concerned vendor revealed that there is no mention about any usage of material in
providing the said service. However, in none of the contract/Purchase order there is
mentioned about cost of material to be used or it did not mentions about materials for
the concerned work carried out by them. Therefore, I am not able to accept their
contention in this regard.
12.6
Classification:-
12.6.1
It is further submitted by the assessee that CST, Mumbai had classified
identical construction activities which have been carried out by them under the Site
Formation in the case and therefore classification proposed in the show cause notice is
erroneous. However, I find that they had not put forth before me any documents like
purchase order placed by service recipient. In the absence of such evident or factual
information about which the assessee is referring, such an argument cannot be
accepted.
12.7
Issue of non taxability on construction having non commercial use.
Page | 52
F.No. STC/4-52/O&A/13-14
12.7.1
OIO NO: AHM-SVTAX-000-COM-013-14-15
With regard to construction services carried out by them during the year
2011-12 as detailed in Annexure-C to the show cause notice it was submitted by them
that during the year 2011-12 they carried out “Construction of RCC Overflow
Chamber on junction of SWD and Sewer Diversion Pipeline including pipe line of RCC
NP-4 class and C.I. slance gates on East Bank of Sabarmati River from Dafnala to
Sardar Bridge”, is a construction relating to sewer pipeline for disposal of waste
effluent and that these activities are carried out by Ahmedabad Municipal Corporation
which has to provide these basic facilities/amenities as sovereign function. They
stated that these activities are not commercial activities and are not taxable service.
12.7.2
In this regard I observe from the definition of Commercial or Industrial
Construction service that such construction [sewer pipeline for disposal of waste
effluent] is not excluded from the definition nor there is any exemption available to
Municipal Corporation. With regard to non commercial use by SRFDCL
of the
construction carried out by the assessee, the assessee have not produced any evidence
which suggests that the said construction will not be for commercial use.Hence I am
unable to accept their contention in this regard.
12.8.
Services
rendered
to
Sabarmati
River
Front
Development
Corporation Limited:12.7.1
It was further submitted that as per letter dt.17.5.2010 of Sabarmati
Riverfront Development Corporation Limited the “General Earth Filling Work for the
embankment construction behind retaining wall on West bank for the portion from
Usmanpura to Sardar Bridge” is not a commercial construction activity, the activity of
earth filling is covered under Site Formation activity. It was further submitted by the
assessee that they have carried out construction activity as referred above which is
not covered under Commercial or Industrial Construction Service. They have also
carried out the service of general earth filling which is classifiable under Site
Formation service. Both these nature of services have been provided by them
to
Sabarmati Riverfront Development Corporation which is owned by Ahmedabad
Municipal Corporation and this project is for the purpose of proper use of water and
the water resources, which otherwise would have been wasted. They stated that the
entire project envisaged by SRFDCL is in fact of the Ahmedabad Municipal
Corporation, in principal approved by the Central and State Governments. As per
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
letter dated 10-2-2006 written by the Municipal Commissioner of Ahmedabad
Municipal Corporation regarding the service tax liability to M/s ITD Cementation
Limited there is no service tax liability for undertaking these works. They stated that
the contract is for construction of diaphragm wall and anchor slab; the diaphragm
wall is constructed for the purpose of regulating the flow of the river which is for flood
control, as well as recharging of ground water level; the construction of anchor slab is
for support of diaphragm wall; the construction of anchor slab is used as walkways i.e.
roads.
12.7.2
I observe that General Earth Filling Work for the embankment
construction behind retaining wall on West bank for the portion from Usmanpura to
Sardar Bridge” pertaining to the year 2009-10 as is evident from the Annexure –C of
the show cause notice is classifiable under Site Preparation Service. Whether the end
use is commercial or non commercial does not matter for the purpose of said
activities, hence their claim on this count is not acceptable. However, with regard to
applicability of exclusion clause available to the services, of Site preparation I find that
the assessee had not produced letter dated 10.2.2006 and 17.05.2010 of Sabarmati
River front Development Corporation Limited. Therefore I am unable to accept their
contention in this regard. Therefore, the said service is liable to be taxed under the
category of site preparation service.
12.8.
Commercial construction services by others:-
It was further submitted that as per Revenue Para 5 it is stated that as detailed in
Annexure-D they had carried out activities covered under Commercial or Industrial
Construction Service during the year 2011-12 and did not pay service tax amounting
to Rs.3,01,980/-. In this regard, they submitted that they had undertaken work for
CC Lining including pouring of leveling in respect of irrigation and canal work which is
outside the definition of commercial and industrial construction and that demand as
per Annexure-D is also not sustainable. In this regard the assessee had nothing on
record to prove that the said activities carried out by them were related to irrigation
and canal work. The description “ Labour work CC Lining pouing of leveling” available
in the details given in the work receipt for the year 2011-12 given by the assessee at
the time of audit were duly signed by them. The said description have been mentioned
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
in the annexure D to the show cause notice. Under the circumstances I am unable to
accept their contention.
13.
As discussed in detail in above para, I find that the demand of service tax
of Service Tax of Rs. 8,57,95,771/- involving taxable value of Rs. 79,20,84,453/- as
per Annexure C and service tax of Rs. 3,01,980/- involving taxable value of Rs.
29,31,847/- as per Annexure D is liable to be confirmed on merit as discussed above.
13.1
With regard to total demand of Service Tax of Rs. 8,57,95,771/- as per
Annexure C and Rs. 3,01,980/- as per Annexure D, I find that the assessee failed to
determine taxable value as required under section 67 of the Finance Act, and declare
the said taxable value in ST-3 returns filed by them from time to time as required
under section 70 of the Finance Act, 1994 read with Rule 7 of the Service Tax Rules,
1994 and thereby they had contravened the said provisions. Further the assessee also
failed to determine the service tax payable [on the said taxable value] as provided in
section 68 of the Finance Act, 1994 read with Rule 6 of Service Tax rules, 1994 and
thereby they had contravened the said provision. The assessee have not submitted
anything in this regard in their submission.
14.
Suppression of facts:
14.1
While denying their liabilities as alleged in the show cause notice the assessee
refuted that entire demand is hit by limitations as prescribed under Section 73(1) of
the Finance Act, 1994. The present demand of service tax is mainly on two accounts.
One is related to wrong availment of cenvat credit on capital goods and the other is
related to non-payment of service tax on Commercial or Industrial construction
Service and Site Formation service carried out by them.
14.2
In this regard it was the main argument of the assessee that the entire demand
is based on the audit objection and as they are filing ST-3 returns from time to time by
declaring cenvat credit availed on capital goods and department had not objected to
the said credit till the audit was carried out. In this regard I have not accepted their
submissions as discussed in main para 11 of this order and its sub para 11.1 to
11.4.2. Therefore I find that the same is not required to be repeated here. Accordingly I
find that their submission is not acceptable and accordingly entire demand is liable to
be confirmed under proviso to section 73(1) of the Finance Act,1994.
Page | 55
F.No. STC/4-52/O&A/13-14
14.3
OIO NO: AHM-SVTAX-000-COM-013-14-15
With regard to non-payment of service tax on the Commercial or Industrial
Construction Service and Site Formation Service I have discussed merit of the issue in
detail and the said demand is liable to be confirmed on merit. I find that as held the
said activities to be classifiable under the said two service, I find that the assessee
have not added the said services in ST-2 registration; have not declarared the taxable
value related to both the services in the ST-3 returns filed by them from time to time
and had failed to pay service tax payable on the said services. Therefore, the demand
of service tax on the said two services sustain on the ground of limitation.
15.
As discussed above entire demand survives on merit as well as on the limitation
grounds and service tax of Rs. 8,82,47,205/- as demanded in the show cause notice
is liable to be confirmed under provisio to section 73(1) of the Finance Act,1994.
Similarly the demand of Rs. 3,10,65,603/- for wrong availment and its utilizing of
cenvat credit on capital goods is liable to be confirmed under Rule 14 of Cenvat Credit
Rules,2004 read with provisio to section 73(1) of the Finance Act,1994.
16
Penalty under Section 76, 77 (2), 77 (iii) and 78
16.1
I further observe that the show cause notice also proposes imposition of
penalty under Section 78 of the Finance Act, 1994. I find that fraud, suppression of
facts and wilful mis-statement on the part of M/s P.P. Patel, has been established
beyond doubt as discussed and concluded in the earlier part of this order.
Accordingly, I hold that M/s M/s P.P. Patel is liable to penalty under the provisions of
Section 78 of the Finance Act, 1994.
16.2
As it is already proved that the service provider had suppressed the facts, the
consequences shall automatically follow. Hon’ble Supreme Court has settled this issue
in the case of U.O.I Vs Dharmendra Textile Processors reported in 2008 (231) ELT 3
(S.C) and further clarified in the case of U.O.I Vs R S W M reported in 2009 (238)
ELT 3 (S.C). Hon’ble Supreme Court has said that the presence of malafide intention
is not relevant for imposing penalty and mens rea is not an essential ingredient for
penalty for tax delinquency which is a civil obligation.
16.3
I, therefore, hold that they have rendered themselves liable to penalty under
Section 78 of the Finance Act, 1994. My above view gets support from below
mentioned case laws;
 Shiv Network Vs CCE, Daman reported in 2009 (14) STR 680 (Tri.Ahmd.)
 CCE, Vapi Vs Ajay Sales Agencies reported in 2009 (13) STR 40 (Tri.
Ahmd.)
 Order No. A/754/WZB/AHD/2010 dt. 09.06.2010 / 23.06.2010 in the case
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
of M/s Bajrang Security Services Vs CST, Ahmedabad.
 Order No. A/1937/WZB/AHD/2010 dated 08.10.2010 / 20.12.2010 in the
case of M/s Dhaval Corporation Vs CST, Ahmedabad.
16.4
I further observe that Hon’ble High Court of Punjab & Haryana, in the case of
CCE Vs Haryana Industrial Security Services reported at 2011 (21) STR 210 (P&H),
has also upheld the penalty equal to service tax imposed under Section 78 of the
Finance Act, 1994. Hon’ble Karnataka High Court has also taken similar view in the
case of CCE, Mangalore Vs K Vijaya C Rai reported at 2011 (21) STR 224 (Kar.)
16.5
Penalty under Section 76 & 78 justified.
16.5.1
I also find that penalty under Section 76 ibid is provided for failure to
pay service tax whereas penalty under Section 78 ibid is for suppressing value of
taxable service. In the instant case, service tax liable to be paid in terms of Section 68
read with Rule 6 of the Service tax Rules, 1994, have not been found paid as well as
service tax has not been paid / short paid by suppressing value of taxable service by
reason of wilful mis-statement and suppression of facts. Of course these two offences
may arise in the course of same transaction, or from the same action of the person
concerned. But the incidents of imposition of penalty are distinct and separate and
even if the offences are committed in the course of same transaction or arises out of
the same act the penalty is imposable for ingredients of both offences, this aspect was
also considered by the Hon’ble High Court of Kerala in the case of Assistant
Commissioner, C.Ex. Vs Krishna Poduval – 2006 (1) STR 185 (Ker). I also find that
the Hon’ble Mumbai Tribunal in the case of Golden Horn Container Services Pvt.
Ltd. v/s Commr. of C. Ex., Raipur reported at 2009 (16) S.T.R. 422 (Tri.-Mumbai),
has held that Section 76 provides for a penalty who commits default simpliciter in
payment of the tax whereas section 78 is a more stringent penal provision, which
provides harsher penalty who commits default with mens rea. Since in this case also,
M/s M/s P.P. Patel has committed default with mens rea, the decision of the Tribunal
is squarely applicable.
16.5.2
Therefore, I am of the view that in the facts and circumstances of the
case, imposition of penalty is justifiable under the provisions of Section 76 and 78 of
the Finance Act, 1994, separately, following the decisions of Hon’ble Kerala High Court
and Mumbai tribunal (supra). My views are also further supported by various
decisions of tribunals in the cases of ;
a) Shiv Network v/s Commissioner of Central Excise & Customs, Daman
reported at 2009 (14) S.T.R. 680 (Tri.-Ahmd.)
b) Commissioner of Central Excise, Vapi v/s Ajay Sales Agencies reported at
2009 (13) S.T.R. 40 (Tri.-Ahmd.), and
c) Mett Macdonald Ltd. v/s Commissioner of Central Excise, Jaipur reported
at 2001 (134) E.L.T. 799 (Tri.-Del.).
d) M S Shah & Co., Vs CST, Ahmedabad – Order No. A/1328/ WZB/ Ahd/
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OIO NO: AHM-SVTAX-000-COM-013-14-15
2010 dated 30.06.2010 / 26.08.2010.
e) Bajarang Security Services Vs CST, Ahmedabad – Order No. A/745/
WZB/Ahd/2010 dated 09.06.2010 / 23.06.2010.
f) CESTAT, Principal Bench, New Delhi in the case of Bajaj Travels Ltd., Vs
CCE, Chandigarh – 2009 (16) STR 183 (Tri.Del.)
16.6
Further since the assesee have failed to declare taxable value of Rs.
81,78,32,324/- and assess service tax of Rs. 8,82,47,205/- payable thereon in the
ST-3 returns filed by them from time to time, the assessee is liable to penalty under
Section 77(2) of the Finance Act,1994.
16.7
In light of the aforesaid discussions and findings I hold that the service tax
amount of Rs.8,82,47,205/- alongwith interest is liable to be confirmed under section
73(2) of the Finance Act,1994 read with Section 75 of the Act ibid and they are also
liable to penalty under the provisions of section 76,77 and 78 of the Finance Act,1994.
However, the present demand is being confirmed under proviso to section 73(1) of the
Finance Act, 1994, I restrict the penalty under Section 76 up to 09.05.2008 in view of
amendment made in Section 78 of the Finance Act,1994
16.8. As regard to penalty specifically proposed under 77(1)(c)(iii) of the Finance
Act,1994 for non appearance before the departmental officer,
I observe that as
the entire show cause notice was based on the audit report No. 196/2013 dated
22.10.2013. I observe that the officers had audited the records for the period
2008-
09 to 2011-2012 during their visits to the premises of the assessee on 15.07.2013,
27.07.2013 and 23.09.2013. Based on the primary findings of the officers during the
audit which was under way, and looking to period involved, and to safe guard the
revenue
within time limit, the matter was brought to the notice of the Assistant
Commissioner, Service tax, Division II, Ahmedabad
2000/AP-V/2013-14
dated
03.10.2013
who
in
turn
vide letter No. No.ST/04-149/EAhad
directed
Superintendent to take immediate action in the matter.
to
the
Range
The Superintendent,
concerned had issued First Summon to the assessee on dated 10.10.2013 vide
letter No. STC/AR-IX/Div-II/SCN/13-14/Patel to appear on 11.10.2013, to provide
the documents and to give the statement under Section-14 of Central Excise
Act, 1944, which is made applicable under the provisions of Section-83 of the
Finance Act, 1944, but he failed to appear. Again, 2 nd Summon was issued to
the assessee on 11-10-2013 vide letter No. STC/AR-IX/Div-II/SCN/13-14/Patel
to appear on 14.10.2013, but he failed to appear. Further, this office had
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
requested the assessee to be present on 17.10.2013 vide Summon No. 3 dated
14.10.2013, to give his statement. The assessee was deliberately avoiding, to
produce the documents and to give the statement, in order to suppress/avoid
the material facts, nor has any communication been received by this office
either telephonically or in writing. These facts are already brought on record in
the show cause notice to which the assessee in his written submission have
avoided to answer.
16.9 Therefore to avoid any loss to the revenue on account of limitation as the
last date for issuance of show cause notice was approaching on 24.010.2013,
the impugned show cause notice was issued in the matter on approval of Audit
Report in the Monthly Committee of Monitoring.
I find that the assessee had
deliberately avoided appearance before the officer and thereby avoided the
investigation and avoided explanation being sought for by the department with
regard to the issues being raised in the Audit. I find that such avoidance was a
deliberate one because of which department could not investigate the issue and
has no option but to rely on the details/ records obtained by the officers and
accordingly based on the audit objection the show cause notice was issued.
Such non cooperation from the assessee’s side is not expected and accordingly I
hold them to penalty under Section 77(1)(c)(iii) of the Finance Act,1994.
17.
In light of aforesaid discussions, I find that entire demand is liable to be
confirmed and as the assessee failed to pay the said amount by the due date as
prescribed under the Finance Act,1994 and Rules made there under, I find that
the assessee is liable to pay interest on the said amount for the period from due
date till the same is paid.
In view of above findings & discussions, I pass the following order.
ORDER
(i)
I confirm the amount of Rs. 81,78,32,324/- as taxable value
and the
service tax short paid amounting to Rs. 8,82,47,204/- (Rupees Eight Crore
Eight Two Lakh Forty Seven Thousand Two Hundred Four). [Rs.21,49,453/(Ann.A)+Rs.8,57,95,771/- (Ann-C) + Rs.3,01,980/- (Ann. D)] under the
proviso to Section 73(1) of Finance Act, 1994.
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F.No. STC/4-52/O&A/13-14
(ii)
OIO NO: AHM-SVTAX-000-COM-013-14-15
I confirm interest on the said amount of service tax of Rs. 8,82,47,204/- at
the rate applicable under Section 75 of the Finance Act, 1994.
(iii)
I impose Penalty under Section 76 of the Finance Act, 1994, at the rate of
Rs. 200/- per day or 2% rate per month which ever is higher up to
09.05.2008 for failure to pay Service Tax within the period prescribed under
Section 68 of the Finance Act, 1994, read with the Rule 6 of the Service Tax
Rules, 1994.
(iv)
I impose a Penalty of Rs. 10,000 under the provision of Section 77(2) of the
Finance Act, 1994 upon them for contravention of Section 70 of the said Act
as they have not correctly assessed the actual Service Tax on the services
provided by less declaring/mis-declaring the taxable value in the statutory
ST-3 Returns filed by them during the period from 2008-09 to 2011-12.
(v)
I impose penalty of Rs. 8,82,47,204/- under Section 78 of the Finance Act,
1994 on them for suppressing and not disclosing the value of the said
taxable service provided by them and not paying service tax thereon .
(vi)
I confirm the amount of Cenvat Credit of Rs.3,10,65,603/- wrongly
availed by them covering the period of the year 2008-09 to 2012-13
under Rule 14 of Cenvat Credit Rules, 2004 read with proviso to
Section 73(1) of the Finance Act,1994 along with interest.
(vii)
I confirm the interest on excess utilization of Cenvat Credit amounting
to Rs.56,07,521/- under Section 75 of the Finance Act, 1994.
(viii)
I impose a Penalty of Rs. 3,66,73,124/- (Rs. 3,10,65,603 + Rs. 56,07,521)
upon them under Rule 15(3) of Cenvat Credit Rules, 2004.
(ix)
I impose a Penalty of Rs.10,000/- or Rs. 200/- for everyday during
which such failure continues, whichever is higher, starting with the
first day after the due date, till the date of actual compliance, upon the
said assessee under clause 77(1)(c)(iii) of the Finance Act,1994.
(Tejasvini P. Kumar)
Commissioner
Service Tax, Ahmedabad.
F. No: STC/4–52/O&A/13–14
Date: 06.08.2014
By Regd. Post AD
To,
M/s. P. P. Patel
2/5, Gold Coin Complex,
Jodhpur Char Rasta,
Ahmedabad.
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F.No. STC/4-52/O&A/13-14
OIO NO: AHM-SVTAX-000-COM-013-14-15
Copy to :(1)
(2)
(3)
(4)
(5)
The Chief Commissioner, Central Excise, Ahmedabad Zone,Ahmedabad for
information please.
The Deputy Commissioner, Service Tax ,Audit, Hdqrs., Ahmedabad
The Deputy Commissioner, Service Tax, Division-II, Ahmedabad.
The Superintendent, Service Tax, Range-IX, Division-II, Ahmedabad
Guard File.
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