ICE OF THE ASSISTANT COMMISSIONER OF SERVICE TAX: by 05GoB17T

VIEWS: 10 PAGES: 17

									                                                                                    33/JC/2011
                                                                               Dtd. 31.10.2011

                   lhek “kqYd ,oa dsUnzh; mRikn “kqYd vk;qDrky;]
                             dsUnzh; mRikn “kqYd Hkou]
                           jsl dkslZ] fjax jksM jktdksV-360001
                    OFFICE OF THE COMMISIONER OF CUSTOMS & CENTRAL EXCISE
                              RACE COURSE RING ROAD, RAJKOT-360001
F.No V.ST/15-266/Adj./10                   By RPAD/HAND DELIVERY

                                  vkns”k dh frfFk                          31.10.2011
Ekwy vkns”k Lka.
                                  Date of Order:-
Order in Original NO.
33/JC/2011                        tkjh djus dh frfFk                       31.10.2011
                                  Date of Issue:-
                                                         ,e- KkulqUnje
vkns”kdrkZ dk uke :                                         संयक्त आयक्त
                                                               ु     ु
Passed by:                                         ds0 m-0 “kqYd vk;qDrky;]
                                                           jktdksV
ds lanHkZ esa :                   M/s. Pratik Enterprise,
In the matter of         Panchvati Society,
                         TPS Road, Sikka,
                         Distt-Jamnagar
dkj.k crkvksa uksfVl la- SCN No. V.ST/AR-JMR/JC/237/2010
&frfFk                   Dated : 14.10.2010
Show Cause Notice No. &
Date.

  1-    ;g izfrfyfi ml O;fDr dks futh mi;ksx ds fy, fu%'kqYd nh xbZ gSA ftls ;g tkjh fd;k
  x;k gSA
  1.    This copy of order is granted free of charges to the person to whom it is issued.

  2-     bl vkns'k ls ;fn dksbZ O;fDr vlarq"V gS rks bl vkns'k ds fo:) fuEufyf[kr dks vihy
  dj ldrk gSA&vk;qDr ¼vihy½ lhek ,oa dsUnzh; mRikn 'kqYd] jsl dkslZ fjax jksM
  jktdksVA
  2.     Any person deeming himself aggrieved by this order may appeal against this order to
  the Commissioner (Appeals), Customs & Central Excise, Central Excise Bhavan, Race
  Course Ring Road, Rajkot.

  3-      vihy dk QkeZ ,l-Vh-&4 nks izfr esa Hkjk tk, ,oa mlds lkFk fu.kZ; dh izfrfyfi ;k
  lsokdj fu;e] 1994 dh dye 8 esa fofufnZ"V vuqlkj vkns'k ds fo:) vihy dh izfrfyfi gksuh
  pkfg,A
  3.      The Appeal should be filed in form ST-4 as per Rule 8 of Service Tax Rules, 1994 and
  it shall be signed by the person as specified in Rule 3 (2) of the Central Excise (Appeals)
  Rules, 2001.

  4-      ikVhZ }kjk bl vkns'k dks O;fDrxr izkIr fd, tkus dh rkjh[k ls ;k Mkd }kjk izkfIr dh
  rkjh[k ls rhu eghus ds vanj vihy Qkby dh tkuh pkfg,A
  4.      The appeal should be filed within three months from the date of receipt of this order.
  [Section 85 of the Finance Act, 1994].

  5.    blds lkFk fuEufyf[kr dkxtkr gksuh pkfg,A
  5.     The appeal should be accompanied by:

  ¼v½ ,slk vkns'k dh izfrfyfi ;k nwljs dh d izfrfyfi ftl ij uhps n'kkZ, v?khu fu/kkZfjr dksVZ
  dh Qhl LVsEi gksuh pkfg,A
  (a)     Copy of this order which should bear court fee stamp as prescribed under Schedule 1
  of Article 6 of the Court Fee Stamp Act, 1870, as under:
  (i) ;fn lCtsDV eSVj dh jde ;k ewY; ;k ewY; 50 :i; ;k 50 :i;s ls de gks rks :i;s 00-25
  gksA
  (i) If the amount or value of subject matter is rupees fifty or less, then Rs.0.25;

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(ii) ;fn lCtsDV eSVj dh jde ;k ewY; ;k ewY; 50 :i; ;k 50 :i;s ls v/khd gks rks :i;s 00-50
gksA
(ii) If such amount exceed Rs.50, then, Rs.0.50 paisa.

¼c½ vihy izfrfyfi ftl ij :i;s 2-50 dh dksVZ Qh LVsEi gksuh pkfg,A
(b) A copy of the appeal should also bear a court fee stamp of Rs.2.50.

6. lsok dj ]naM ¼isuYVh½ vkfn ds Hkqxrku dk izek.k A
Proof of payment of duty, penalty etc., should also be attached to the original form of appeal.


BRIEF FACTS OF THE CASE:

       M/s. Pratik Enterprise (hereinafter referred to as “the noticee”) are
having their office at Panchvati Society, TPS Road, Sikka, Distt-Jamnagar
and are having Service Tax Registration No. AAGFP9978GST001 in Form
ST-2 under Section 69 of the Finance Act, 1994 (32 of 1994) (hereinafter
referred to as “the Act”) and have undertaken to comply with conditions
prescribed in Service Tax Rules, 1994 (hereinafter referred to as “the said
Rules”).


2.     During the course of audit for the period July-2005 to March-2008,
while scrutinizing the invoices issued by the said noticee, it was observed
that during the years 2005-06, 2006-07 & 2007-08, the said noticee had
provided Grass Cutting Services to its clients at their land and open
spaces at their premises as per work orders for a value of Rs.
1,69,49,485/-       which     appeared       to   be   covered      under     the    category
“Management, Maintenance or Repair Services” as defined under section
65(64) of the Finance Act, 1994.


3.     In view of the above, it appeared that the said noticee has provided
Grass Cutting Service in relation to management of immovable property
under the category of “management, maintenance or repair” services and
are liable to pay Service Tax as worked out under:


                        VALUE OF TAXABLE                          SERVICE TAX TO
   YEAR                   SERVICE (Rs.)                            BE PAID (Rs.)
 2005-06                  Rs. 42,89,353/-                           Rs. 4,37,514/-
 2006-07                  Rs. 55,08,443/-                           Rs. 6,74,233/-
 2007-08                  Rs. 71,51,689/-                           Rs. 8,83,948/-
 TOTAL                   Rs. 1,69,49,485/-                          Rs. 19,95,695/-


4.     While scrutinizing the invoices issued by the said noticee and other
related documents, it was further observed that the said noticee had
executed Work Order No. 1J18/W/862 dated 11.09.2006 of M/s Reliance
Engineering Associates Pvt. Ltd., Jamnagar (REAL) for Operation of

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Batching Plant for Supply of Concrete to different sites. They had executed
another Work Order No. JS3/84739 dated 28.02.2007 from M/s Reliance
Industrial Infrastructure Ltd., Mumbai (RIIL) for occasional operating &
Maintenance of Equipment at their Jamnagar Complex and had provided
the services related to collection of materials from store, operation of
batching plant of concrete, supply of concrete to different construction
sites, including loading unloading and transportation services to its
respective clients. The services provided by the noticee as per the above
mentioned work orders appear to be classifiable under the “Commercial or
Industrial Construction Service” as defined under section 65 of the said
Act and thus subject to Service Tax.


5.     It also appeared that the noticee had provided the services / activity
which are classifiable under the construction services in respect of
commercial or industrial building and had collected the billed amount and
paid Service Tax thereon. But in certain invoices the said noticee had not
paid Service Tax on the collected amount, though the nature of service
was as a result of work orders/contracts was similar to the service
provided through invoices on which Service Tax was paid. Details thereof
are as under:
CLIENT’S I.NO. & DATE   W.O. NO. &    PAYMENT       BILL             SERVICE
NAME                    DATE          ADVICE NO. & AMOUNT            TAX TO BE
                                      DT.           (Rs.)            PAID (Rs.)
REAL      897/17.10.06  862/11.09.06  5840/22.11.06   1,12,68,185      13,79,225
REAL      1264/21.03.07 862/11.09.06  377/20.04.07      48,25,173       5,90,601
RIIL      318/30.06.07  84739/28.2.07 95/19.09.07         5,53,046        68,356
RIIL      388/24.07.07  84739/28.2.07 95/19.09.07         5,96,206        73,691
RIIL      626/28.09.07  84739/28.2.07 140/07.11.07      10,25,232       1,26,719
                                                     1,82,67,842      22,38,592


       In view of the above, it appeared that the noticee are required to
pay Service Tax of Rs. 22,38,592/- which was not paid by them for
providing taxable service to the tune of Rs. 1,82,67,842/-.


6.     While scrutinizing the invoices issued by the said noticee and other
related   documents,     it   further    observed   that   vide   Invoice   No.
39/21.04.2007, the said noticee had provided Construction Services in
respect of Commercial and Industrial Building to M/s Reliance Industries
Ltd., Jamnagar. The total billed amount was Rs. 10,86,884/- including
Service Tax of Rs. 1,16,202/- and Ed. Cess Rs. 2,234/-, which was
received vide Payment Advice No. 74,864/11.10.2007, but the said
noticee had not paid the Service Tax to the tune of Rs. 1,18,527/- which
is required to be recovered from them with interest.

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7.          It appeared that the said noticee had suppressed the total taxable
value of Rs. 3,63,04,211/- and evaded and short paid the Service Tax
totally amounting to Rs. 43,52,814/- for the period July-2005 to March-
2008 and contravened the various provisions of Service Tax. Therefore, a
Show Cause Notice was issued to the said noticee requiring them to show
cause as to why:


     (i) Service Tax along with Education Cess totally amounting to Rs.
            43,52,814/- (Rs. Forty Three Lakhs Fifty Two Thousand Eight
            Hundred Fourteen Only) should not be recovered from them under
            proviso to section 73(1) of the Finance Act, 1994.
     (ii) Interest at the applicable rate on the above amount should not be
            recovered from them under Section 75 of the Finance Act, 1994.
 (iii) Penalty should not be imposed on them under Section 76 of the
            Finance Act, 1994.
 (iv) Penalty should not be imposed on them under Section 78 of the
            Finance Act, 1994.


DEFENCE SUBMISSIONS:


8.               The said noticee vide letter dated 18.11.2010 filed their
defence submissions wherein, it is inter alia, contended that:


     (i)         The activities of removal of vegetation / wild grass (uprooting)
                 / Jungle, plants (cutting) etc. cannot be classifiable under the
                 taxable category of ‘management, maintenance or repair
                 service’ as is evident from the perusal of the definition of the
                 said service provided vide Section 65(64) of the Act and
                 therefore the impugned notice is not sustainable.
     (ii)        The definition of the word ‘management’ as given in Oxford
                 Dictionary & Thesaurus-III and the activities carried out by
                 them of removal of vegetation/ wild grass (uprooting) /
                 Jungle, plants (cutting) etc. from land and open spaces cannot
                 be equated as ‘management of immovable property’ and
                 hence the show cause notice is not sustainable in law.
     (iii)       The definition of ‘immovable property’ as per section 3 of the
                 Transfer of Property Act specifically excludes ‘grass’ from its
                 ambit and therefore removal of vegetation / wild grass


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        (uprooting) / Jungle, plants (cutting) etc. cannot be equated
        as ‘management of immovable property’ as alleged in the
        Show      Cause   Notice      and   therefore   the   demand    is
        unsustainable. In this regard, they rely upon the judicial
        judgment in the case of CCE, Jaipur-I Vs ANS Construction
        Ltd., 2010 (17) S.T.R. 549 (Tri.-Del)
(iv)    The activities of operation and maintenance of various
        equipments in terms of relevant work orders cannot be
        classified under the taxable category of ‘commercial or
        industrial construction service’ as per the definition provided in
        Section 65(25b) of the Act.
(v)     They have neither constructed a new building or a civil
        structure or a part thereof or a pipeline or conduit nor they
        have performed completion and finishing services or repair or
        alteration or renovation or restoration in relation to any
        building or civil structure etc., therefore classifying the said
        services under the category of ‘commercial or industrial
        construction service’ and demanding service tax thereon is not
        tenable in law.
(vi)    It is an admitted fact that they have never provided the
        services to M/s RIL, Jamnagar (the ultimate beneficiary of the
        services) but provided services to M/s REAP Limited and M/s
        RIIL who were the ‘main contractors’ and therefore, the
        impugned notice demanding service tax from them as a sub-
        contractor is not sustainable.
(vii)   That since these associate / group companies were providing
        taxable   services   to   M/s RIL    they naturally must    have
        discharged service tax liability thereon. They rely on the
        Board’s Circular No. B-43/5/97-TRU dated 02.07.1997 in
        support to their claim and B-11/3/98-TRU dated 07.10.1998,
        wherein the Board had clarified that there cannot be service
        tax in the absence of service provider and client nexus.
        Though the clarifications were issued in respect of different
        taxable categories, but the same are equally applicable in the
        present case. They also rely upon the following judicial
        judgments in support of their submissions:
               Newton Engg.& Chemicals Vs CCE., Vadodara
                2008 (12) STR 378 (Tri. – Ahmd.)
               Oikos Vs CCE, Bangalore-III


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                 2007 (5) STR 229 (Tri. – Bangalore)
(viii)   The demand of service tax Rs. 1,18,527/- pertaining to invoice
         No. 39/21.04.2007 is unsustainable as the same has already
         been paid by them alongwith interest of Rs. 18,997/- (total
         payment Rs. 1,37,524/-). They refer to their letter dated
         03.12.2009 wherein they had informed the department about
         payment of the said amount alongwith interest and also
         provided copies of relevant payment challans.
(ix)     The said notice is against the provisions of section 67(2) of
         the Finance Act, 1994 inasmuch as the amount received
         towards service provided has not been treated as cum-tax
         value and therefore the impugned notice is unsustainable in
         law. As they have not charged any service tax separately in
         the relevant invoices, the amount received by them towards
         the same should be treated as inclusive of service tax and
         accordingly the demand should be adjusted / reduced. They
         rely upon the judgment in the case of Commissioner Vs
         Advantage Media Consultant - 2009 (14) S.T.R. J49 (S.C.).
(x)      The Show Cause Notice is barred by limitation as the show
         cause covers the period from July, 2005 to March, 2008
         invoking extended period of limitation and the same was
         issued on 14.10.2010, whereas the necessary ingredients to
         invoke such extended period of limitation is completely absent
         and hence the SCN is not tenable.
(xi)     The issue involved relates to interpretation of statutory
         provisions and the taxability of the activities in which they
         were engaged. Consequently, the invocation of the proviso to
         Section 73(1) of the Act is illegal and without authority of law.
         They rely on the judicial pronouncement in the case of K.K.
         Appachan Vs. CCE, Palakkad - 2007 (7) S.T.R. 230 (Tri.-
         Bang.).   Further,   all   the      relevant   documents/information
         pertaining to the present matter were with the department
         since   March,   2009,     whereas,      the   SCN   was   issued   on
         14.10.2010, i.e., after a gap of more than 18 months and
         therefore, the same is barred by limitation. They rely on the
         judgment of Hon. Supreme Court in he case of Commissioner
         Vs. Gammon India Ltd. – 2002 (146) ELT A313 (SC).




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     (xii)       As the recovery of service tax is unsustainable, proposal for
                 recovery of interest under Section 75 of the Act and imposition
                 of penalty is not sustainable in law.
     (xiii)      As the recovery of service tax itself is without authority of law,
                 both on merits as well as on limitation, the SCN proposing
                 imposition of penalties on them under various provisions of
                 law is unsustainable in law. Further, since the present issue
                 involves interpretation of law, imposition of penalty in such
                 cases is unsustainable in law. They rely on the decision of
                 Tribunal in the case of Uttam (Bharat) Electricals (P) Ltd. Vs.
                 CCE, Jaipur – 2010 (17) STR 240.
     (xiv)       Proposal of imposing simultaneous penalties under section 76
                 and 78 of the Act is not permissible in law and hence the
                 notice, to that extent, is unsustainable in law.


9.          Shri Dinesh Kumar Jain, C.A. of the said noticee appeared for the
personal hearing on 30.08.2011 and reiterated the submissions made by
them on 14.10.2010.


DISCUSSION AND FINDINGS:


10.         I have carefully gone through the entire case records, SCN issued,
defence put forth by the noticee in written submission as well as
contentions raised during personal hearing. I find that the issues to be
decided in present case are:
     (i)         Whether the noticee is liable to pay service tax on the “grass
                 cutting service” provided to their client, under the category
                 “Management, Maintenance or Repair Service”;
     (ii)        Whether the noticee is liable to pay service tax on work orders
                 executed with M/s. REAL and M/s. RIIL for operation of
                 batching plant for supply of concrete and for occasional
                 operating and maintenance of equipment, under the category
                 “Commercial or Industrial Construction Service”;
     (iii)       Whether sub-contractor is liable to pay service tax or
                 otherwise;
     (iv)        Whether penalties can be imposed upon the noticee under
                 section 76 and 78 of the Finance Act, 1994.
     (v)         Whether the benefit of cum tax value can be granted for
                 charging service tax on the receipts


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11.   Regarding the first point, the noticee has contended that activities
carried     on    by     them    of       removal          of     vegetation/wild       grass
(uprooting)/Jungle, plants (cutting) etc. from land and open spaces cannot
be equated as ‘management of immovable property’. They have also
enclosed a copy of work-order in this regard. I have gone through the
copy of work order produced by the noticee. The work order No.
JS1/80506 dated 30.11.2005 is given by M/s. Reliance Industries Ltd. to
the noticee for Rs. 90,00,000/-. The following works are to be performed
as per the copy of work order:


      “01    Grass     Cutting    –        Removal         of      vegetation/wild      grass
      (uprooting)/jungle, plants (cutting) etc. with all necessary tools
      and tackles including disposal etc. complete with your own transport
arrangement as directed by Engineer-In-Charge.


      02 Painting – 0201 – White Wash – Providing and applying two
      coats at all heights of white wash using approved quality including
      necessary scaffolding and surface preparation etc. complete as per
      specifications and as directed by Engineer-In-Charge.


      0202 – Oil Bund Distemper – Providing and applying two coats at all
      heights of OBD using Asian/Berger/or equivalent approved quality
      including    necessary     scaffolding         and        surface   preparation    etc.
      complete as per specifications and as directed by Engineer-In-
      Charge.


      0203 – Acrylic Emulsion Interior Paint – Providing and applying two
      coats at all heights of acrylic emulsions using Asian/Berger/ or
      equivalent approved quality including necessary scaffolding and
      surface preparation etc. complete as per specifications and as
      directed by Engineer-In-Charge.


      0204 – Synthetic Enamel Paint – Providing…….. – similar clause -
      0205 – Terracota Paint – Providing …… - similar clause-
      0206 – Cement Paint - …. Similar clause……
      0207 – Road Paint, Road Marking – Zebra Painting - ….Similar
             clause…..
      0208 – Fluorescent Paint - …similar clause….


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          03 – Scaffolding/Staging – Providing resources for erection of
          scaffolding as per Reliance Safety norms with scaffolding material to
          be issued as free issue material on returnable basis after completion
          of the job as directed by Engineer-In-Charge.


          It is clear from the above that the noticee is not only required to cut
the grass under the work order but he is also responsible for different
types of paint to be applied in interior, exterior as well as on roads with
scaffolding. Thus, it is not a contract/work order for grass cutting alone
but it appears a work order for overall maintenance of immovable
property of their client. Therefore, the classification of such services under
“Management, Maintenance or Repair Service” is proper.


12.       The   noticee     has    also     reproduced     definition   of   ‘management’
appearing in Oxford Dictionary & Thesaurus-III to contend that the
activities carried out by them cannot be termed as ‘management’. In this
regard, the definition of the service “Management, Maintenance or Repair”
as given in section 65(64) of the Finance Act, 1994 is as under:


“Management, Maintenance or Repair” means any service provided by –
   (i)             any person under a contract or an agreement; or
   (ii)            a manufacturer or any other person authorised by him, in
                   relation to –
             (a)      management of property, whether immovable or not;
             (b)      maintenance or repair or properties, whether immovable or
                      not; or
             (c)      maintenance         of    repaid    including     reconditioning    or
                      restoration, or servicing any goods, excluding a motor
                      vehicle;”


          It is clear from the above definition that the activities of cutting
grass, paining interior and exterior of building, painting of road, etc.,
would fall under maintenance of immovable property and therefore the
classification proposed in the SCN is correct.


13.       The noticee has also cited the case-law CCE, Jaipur-I Vs. ANS
Constructions Ltd. – 2010 (17) STR 549 (Tri-Del) to contend that the
activities carried out by them would not fall under the category of


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“management, maintenance or repair service”. I have gone through the
case law. In the cited case, the party was maintaining green belt under
annual contract. It was held by Hon. CESTAT that such activities are not
covered under section 65(24b) and 65(64) of the Finance Act, 1994.
However, in the present case, as discussed hereinabove, the noticee is not
only required to cut grass or carry out activities relating to horticulture but
the noticee is also required to maintain the colour of the buildings and
roads. Therefore, whole property is being maintained by the noticee under
a work order from their client. Thus, the circumstances of the present
case being different from the circumstances of the case law cited, the
same is not applicable to the present case.


14.   Regarding the issue of non payment of service tax on operation and
maintenance of various equipments under the category ‘commercial or
industrial construction service’, it is contended by the noticee that the
activity carried out by them does not fall within the ambit of definition of
‘commercial or industrial construction service’. On the other hand, the
SCN alleges that the noticee had executed work order No. 1J18/W/862
dated 11.09.2006 from M/s. Reliance Engineering Associates Pvt. Ltd. for
operation of batching plant for supply of concrete to different sites and
another work order No. JS3/84739 dated 28.02.2007 from M/s. Reliance
Industrial Infrastructure Ltd. for occasional operating and maintenance of
equipments. It is alleged in the SCN that the noticee had collected the
billed amount and paid service tax on the collected amount but in certain
invoices, they have not paid service tax on the collected amount, though
the nature of service was as a result of work order/contracts and was
similar to the service provided through invoices on which service tax was
paid. The noticee has not provided any reason for paying service tax on
some invoices and not paying service tax on some invoices. If it is the
contention of the noticee that the activity carried out by them does not fall
within the definition of ‘commercial or industrial construction service’, the
question remains unanswered is – why they paid service tax on some of
the invoices raised under the referred two work orders?


15.   In my view the particular work order may be a part of whole activity
being entrusted to the noticee by their client and therefore, they must be
paying service tax on the payments received against invoices raised under
the two work orders. Anyway, once the noticee himself had assessed the
tax liability and paid service tax on portion of the income from work order,


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it cannot be argued now that the activity carried out by them is not
taxable for the remaining portion.


16.    It is also contended by the noticee that they have provided services
to M/s. REAL and M/s. RIIL who were main contractors of M/s. Reliance
Ind. Ltd. and being sub-contractor, they are not liable to pay service tax
in view of Board’s circular No. B-43/5/97-TRU dated 02.07.1997 and No.
B-11/3/98-TRU dated 07.10.1998. They have also relied upon two CESTAT
decisions. I have gone through both the letters issued by the Board. The
first letter dated 02.07.1997 is regarding two services – (i) Manpower
Recruitment Agencies and (ii) Consulting Engineers. At Para 3.4 of the
said letter, it is mentioned that “the services should be rendered to a
client directly, and not in the capacity of a sub-consultant/associate
consultant to another consulting engineer, who is the prime consultant. In
case services are rendered to the prime consultant, the levy of service tax
does not fall on the sub-consultant but is on the prime or main consulting
engineer who raises a bill on his client (which include the charge for
services rendered by the sub-consultant)”. It is seen that this clause is
applicable only for consulting engineer and not to manpower recruitment
agencies, though both of them are discussed in the said letter dated
02.07.1997. Since this clarification/instruction is not appearing in the
portion of discussion regarding manpower recruitment agencies, the same
is applicable only to the consulting engineer category. It is also worth here
that   the   words   used   by   the   Board     are   “sub-consultant/associate
consultant” and not the words “sub-contractor”. The further letter dated
07.10.1998 is also on the same line and applicable to architect/interior
decorator, which is akin to the category consulting engineer. At Para 5.6
of the said letter dated 07.10.1998, similar instructions are issued by the
Board for the said category. In the letter dated 07.10.1998, many other
services are also discussed and instructions are issued but no similar
clause is found in respect of any other services. If the intention of the
Board was to grant exemption to sub-contractor, then such clause would
have been applied to all the categories of service and not to a limited
category, for specific nature of service. Therefore, the Board’s letters cited
by the noticee and judgments of CESTAT relied upon by the noticee
(which are also for the engineering category) are not applicable to the
present case.




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17.     Further, levy of service tax is by virtue of Act and no levy can be
imposed by way of instructions/circular by the Board. In this regard, the
recent decision of Hon. Tribunal in the case of M/s. Sew Construction Ltd.
Vs. CCE, Raipur – 2011 (22) STR 666 (Tri.-Del) is most relevant. It was
found by the CESTAT that -


      “5. We do not find any provision in the Finance Act, 1994 to grant
      immunity to the sub-contractor from levy of service tax when
      undisputedly taxable services were provided by them. No evidence
      was before us to notice whether the service provided by the sub-
      contractor to the contractor was ever been taxed. We noticed that
      para 9 of the Larger Bench decision in the case of M/s. Vijay Sharma &
      Co. cited by the learned AR clearly speaks that a sub-contractor shall
      not be immune from service tax under Finance Act, 1994. The said
      para 9 is reproduced below for appreciation.

      “9. It is true that there is no provision under Finance Act, 1994 for
      double taxation. The scheme of service tax law suggest that it is a
      single point tax law without being a multiple taxation legislation. In
      absence of any statutory provision to the contrary, providing of
      service being event of levy, self same service provided shall not be
      doubly taxable. If service tax is paid by a sub-broker in respect of
      same taxable service provided by the stock-broker, the stock broker is
      entitled to the credit of the tax so paid on such service if entire chain
      of identity of sub-broker and stock broker is established and
      transactions are provided to be one and the same. In other words, if
      the main stock broker is subjected to levy of service tax on the self
      same taxable service provided by sub-broker to the stock broker and
      the sub-broker has paid service tax on such service, the stock broker
      shall be entitled to the credit of service tax. Such a proposition finds
      support from the basic rule of Cenvat credit and service of a sub-
      broker may be input service provided for a stock-broker if there is
      integrity between the services. Therefore, tax paid by a sub-broker if
      there is integrity between the services. Therefore, tax paid by a sub-
      broker may not be denied to be set off against ultimate service tax
      liability of the stock broker if the stock broker is made liable to service
      tax for the self same transaction. Such set off depends on the facts
      and circumstances of each case and subject to verification of evidence
      as well as rules made under the law w.e.f. 10-9-2004. No set off is
      permissible prior to this date when sub broker was not within the fold
      of law during that period.”

        In view of the foregoing discussion, it is clear that even when
service is provided in the category of sub-contractor, he is liable to pay
service tax. This view is also supported by Board’s circular No. 96/7/2007-
ST dated 23.08.2007 and 138/7/2011-ST dated 06.05.2011.


18.     Regarding service tax pertaining to invoice No. 39/21.04.2007, it is
stated by the noticee that they have already paid the amount of service
tax Rs. 1,18,527/- alongwith interest of Rs. 18,997/- and that they had
also informed the Range Officer vide their letter dated 03.12.2009. Since


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                                                            Dtd. 31.10.2011
the noticee has already paid the amount of service tax alongwith interest,
the same is liable to be appropriated against the demand.


19.   The noticee has further contended that amount received should be
treated as cum-tax value as per section 67(2) of the Finance Act, 1994.    I
do not agree with the contention of the noticee as they failed to
specifically establish that the gross amount charged was inclusive of
service tax. Therefore, in absence of any of the evidence in this regard,
cum-tax value benefit can not be extended to them. In this regard, I rely
upon the decision of CESTAT Ahmedabad in the case of M/s Shakti Motors
Vs. Commissioner of Service Tax, Ahmedabad as reported at 2008 (12)
S.T.R. 710 (Tri-Ahmd).


20.   It is also contended by the noticee that the demand is time barred
as the ingredient required for suppression of facts are not present and
that the issue involved interpretation of statutory provisions. They relied
upon the judgment of Tribunal in the case of M/s. K. K. Appachan Vs. CCE,
Palakkad – 2007 (7) STR 230. It is further argued that demand was issued
after 18 months of department coming to know about service provided
and they relied upon the judgment of Hon. Supreme Court in the case of
Commissioner Vs. Gammon India Ltd. – 2002 (146) ELT A313 (SC). On
careful study of the circumstances of the case, the fact is that the noticee
is registered with the department and paying service tax and filing
returns. However, the noticee failed to pay service tax on the services of
‘management, maintenance and repair’ provided to            M/s. RIL and
‘commercial or industrial construction’ provided to REAL and RIIL. Since
the noticee is well aware of the provisions of law, being registered with
the department, there cannot be any ambiguity about liability to service
tax. When the noticee has not shown the activities carried out by them to
the department in any manner whatsoever, the noticee has certainly
suppressed the facts from the department. Regarding providing of
information called for by the department and department issuing SCN
after 18 months of provision of such information, I find that the proviso to
section 73(1) of the Finance Act, 1994 is very clear. It nowhere says that
once department has obtained information, the SCN should be issued
within normal period of limitation. It says that when there is suppression
of facts with intent to evade payment of service tax, extended period is
invokable. Hon. High Court of Gujarat, in the case of CCE, Surat-I Vs.
Neminath Fabrics Pvt. Ltd. – 2010 (256) ELT 369 (Guj.), held that -


                               Page 13 of 17
                                                                    33/JC/2011
                                                               Dtd. 31.10.2011
      Demand - Limitation - Extended period - Knowledge of Department,
      effect - Suppression admitted but Tribunal held demand as barred by
      limitation importing concept of knowledge of Department, as
      submitted - Proviso to Section 11A(i) of Central Excise Act, 1944
      provides for a situation whereunder provisions of sub-section (i) ibid
      recast by legislature extending period within which SCN issued -
      Proviso cannot be read to mean that because there is knowledge,
      suppression which stands established disappears - Concept of
      knowledge, by no stretch of imagination, can be read into the
      provisions - Suppression not obliterated, merely because Department
      acquired knowledge of irregularities. - What has been prescribed
      under the statute is that upon the reasons stipulated under the
      proviso being satisfied, the period of limitation for service of show
      cause notice under sub-section (1) of Section 11A, stands extended
      to five years from the relevant date. [paras 15, 16, 20]


        Section 73 of the Finance Act, 1994 and section 11A of the Central
Excise Act, 1944 are pari material and hence the judgment is squarely
applicable to the present case.


        In view of the above, I conclude that the suppression clause is
properly invoked in the present case and for the same reason, the noticee
is liable for imposition of   penalty under section 78 of the Finance Act,
1994.


21.     With regard to the demand of interest, I find that the noticee has so
far not paid the service tax due to the exchequer. Section 75 of the
Finance Act, 1994 provides that every person liable to pay service tax in
accordance with the provisions of section 68 or the rules made
thereunder, who fails to credit the tax or nay part thereof to the account
of the Central Government within the period prescribed, shall pay simple
interest at such rate fixed by the Central Government by notification, for
the period by which such crediting of the tax or any part thereof is
delayed. Thus, it is clear that interest is chargeable from an assessee who
has withheld the payment of any tax as and when it is due and payable.
Interest is compensatory in character as held by the Hon’ble Supreme
Court in the case of Pratibha Processors Vs. Union of India reported in
1996 (88) E.L.T. 12 (S.C.). In Pratibha Processors (supra), the Hon’ble
Apex Court held as follows:


         “13. In fiscal Statutes, the import of the words – “tax”,
         “interest”, “penalty”, etc. are well known. They are different
         concepts. Tax is the amount payable as a result of the
         charging provisions. It is a compulsory exaction of money by a
         public authority for public purposes, the payment of which is
         enforced by law. Penalty is ordinarily levied on an assessee for

                                  Page 14 of 17
                                                                    33/JC/2011
                                                               Dtd. 31.10.2011
       some contumacious conduct or for a deliberate violation of the
       provisions of the particular statute. Interest is compensatory in
       character and is imposed on an assessee who has withheld
       payment of any tax as and when it is due and payable. The
       levy of interest is geared to actual amount of tax withheld and
       the extent of the delay in paying the tax on the due date
       (emphasis supplied). Essentially, it is compensatory and
       different from penalty – which is penal in character.”


      Thus, interest is chargeable from the noticee for the period for which
they have withheld the tax payable.



22.   Since the noticee has delayed payment of service tax due, the
noticee appears liable to be penalised under section 76 of the Finance Act,
1994, also.

      The use of the words, “who fails to pay such tax, shall pay, in
addition to such ….… a penalty which shall not be less than two hundred
rupees for every day during which such failure continues….” in section 76,
ibid indicates that it was an in-built provision in the statute itself for
payment of penalty at a specified scale for every day for delay, in addition
to the tax and interest, leviable thereon under section 75 of the Finance
Act, 1994. The words “shall pay” as used in section 76 of the Finance Act,
1994, in regard to penalty on account of non payment of tax within the
stipulated time indicate that the penalty there under has to be paid
mandatorily by the tax payer.



23.   It may not be out of place to point out at this point that section 78,
vide its fifth proviso provides that ‘if penalty is payable under this section,
the provisions of section 76 shall not apply’. The proviso supra thus
prohibits imposition of penalty under section 76 ibid, if the finding is that
the concerned entity is liable to penal action under section 78 ibid.
However, the said fifth proviso to section 78 ibid was inserted vide Finance
Act, 2008, w.e.f. 10.05.2008. Since the acts of non-payment of service
tax due in accordance with the law in this case pertain to the period prior
thereto, the said fifth proviso to section 78 ibid can’t apply to the case in
hand and, as such, in accordance with the law prevalent at the material
time, the noticee is liable to penalty under section 76 as well as section 78
of the Finance Act, 1994.


24.   In view of the above, I pass the following order:


                                Page 15 of 17
                                                                          33/JC/2011
                                                                     Dtd. 31.10.2011


                                      ORDER
  (i)      I confirm the demand of service tax of Rs. 19,95,695/-
           (Rupees Nineteen Lakhs Ninety Five Thousand Six Hundred
           Ninety    Five     Only)    under     the   category     “Management,
           Maintenance or Repair Service” under section 73 of the
           Finance Act, 1994;
  (ii)     I confirm the demand of service tax Rs.23,57,119/- (Rupees
           Twenty Three Lakhs Fifty Seven Thousand One Hundred
           Nineteen Only) under the category “Industrial or Commercial
           Construction Service under section 73 of the Finance Act,
           1994     and     appropriate    the   amount    of     service   tax   of
           Rs.1,18,527/- already paid by them in this regard.
  (iii)    I order payment of interest on the amounts confirmed under
           Sl. No. (i) and (ii) above, under section 75 of the Finance Act,
           1994 and appropriate the amount of interest of Rs.18,997/-
           already paid by them in this regard.
  (iv)     I impose a penalty of Rs.200 per day or two percent per
           month on the demand confirmed at Sl. No. (i) and (ii)
           above, whichever is higher, on the Noticee, under the
           provisions of Section 76 of the Finance Act, 1994 starting
           with the first day after the due date till the date of actual
           payment of service tax, provided that the total amount of the
           penalty payable in terms on this account shall not exceed the
           service tax payable.
  (v)      I impose a penalty of Rs.43,52,814/- (Rupees Forty Three
           Lakhs Fifty Two Thousand Eight Hundred Fourteen Only) under
           the provisions of Section 78 of the Finance Act, 1994. If the
           amount, as determined under Sr. No. (i) and (ii) above, is paid
           within 30 days from the receipt of the order along with interest
           payable then as per proviso to Section 78 the penalty will be
           only 25% of the service tax determined at Sl. No. (i) and (ii)
           above. The benefit of reduced penalty shall be available only if
           the amount of penalty so determined has also been paid within
           the period of thirty days from the receipt of the order.




                                                 (M. GNANASUNDARAM)
                                                 JOINT COMMISSIONER.
F. No. V.ST/15-266/Adj./10

                                 Page 16 of 17
                                                                 33/JC/2011
                                                            Dtd. 31.10.2011

BY REGD. POST A. D.
To,
M/s. Pratik Enterprise,
Panchvati Society,
TPS Road, Sikka,
Distt-Jamnagar.

Copy   to:
  1.   The Assistant Commissioner(RRA), Central Excise, HQ, Rajkot.
  2.   The Deputy Commissioner, Service Tax Division, Rajkot.
  3.   The Superintendent, Service Tax Range, Jamnagar.
  4.   Guard File.




                               Page 17 of 17

								
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