OIO No. 55/STC-AHD/ADC(MKR)/2011-12
Page 1 of 43
BRIEF FACTS OF THE CASE:
M/s. N.J. Devani Builders Private Limited (hereinafter referred to as the
said assessee) are registered with the service tax department for rendering
taxable services under the service categories of Commercial & Industrial
Construction, Construction of Residential Complex, Goods Transport Agency &
Works Contract Services and are holding Service Tax Registration Number
AAACN4952DST001.
1.2.
Whereas audit of the said assessee for the period 10.09.2004 to
30.09.2007 was carried out on 22nd & 23rd August, 2008.
1.3.
Whereas during the course of audit, it was noticed that during the
financial years 2005-2006 & 2006-2007, the said assessee had carried out
construction activities as per the following details:Sr.
No.
1
2
3
RIL (retail outlet)
DAE, Pune
Shri
Ramchandra
Mission
1
2
DAE, Pune
GERMI
3
4
5
6
1.4.
Name of the Party
GSPC
Shri
Ramchandra
Mission
Work Done
Taxable
Value
2005-06
Counter of PA Block
Lab, Building, Hostel
Meditation Hall, Dormitory
Building,
apartment
Building
2006-07
Lab, Building, Hostel
Academic & Administrative
Block (Pt. Deen Dayal
University)
Strengthening of Culvert
Meditation Hall, Dormitory
Building,
apartment
Building
Mandir & Prayer Hall
Sant
Haridaram
Swami
Basanram
Sewa Trust
RRDT
Gokul Gram Yojana
TOTAL
1551634
1173082
4143264
22781801
38739367
853720
14255911
1350000
2697845
87546624
Whereas, it was noticed that in respect of the above mentioned works
carried out, the said assessee had not paid service tax to the tune of
Rs.34,89,946/- (as detailed in the above table)
Sr.
No.
1
2
3
1
2
Name of the Party
RIL (retail outlet)
DAE, Pune
Shri Ramchandra
Mission
DAE, Pune
GERMI
Work Done
Amt. on
which S.
Tax not
paid
2005-06
Counter of PA Block
1551634
Lab, Building, Hostel
1173082
Meditation Hall,
Dormitory Building,
4143264
apartment Building
2006-07
Lab, Building, Hostel
22781801
Academic &
38739367
Taxable
value after
abatement
(33%)
S.Tax
@
S.Tax
Amt.
(Rs.)
512039
387117
10.20
10.20
52228
39486
1367277
10.20
139462
7517994
1278399
12.24
12.24
1564760
920202
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
3
GSPC
4
Shri Ramchandra
Mission
5
6
1.5.
Administrative Block
(Pt. Deen Dayal
University)
Strengthening of
Culvert
Meditation Hall,
Dormitory Building,
apartment Building
Mandir & Prayer
Hall
Sant Haridaram
Swami Basanram
Sewa Trust
RRDT
Gokul Gram Yojana
TOTAL
Page 2 of 43
853720
281728
12.24
34483
14255911
4704451
12.24
575825
1350000
445500
12.24
54529
2697845
87546624
890289
12.24
17384794
108971
3489946
Whereas, on being pointed out about short payment of service tax, the
said assessee did not agree with the objections raised. The said assessee
submitted that they had carried out the above mentioned construction
activities in respect of educational institutions and charitable institutions and
as per the provisions of Circular No.80/10/04-ST dated 17.09.2004, the
activities of construction carried out in respect of the above are not taxable.
1.6.
Whereas, on being asked, the said assessee could not produce any
evidence to the fact that the above mentioned concerns for which they had
carried out construction activities, and had availed exemption granted to
educational institutions and charitable institutions as per provisions of
Circular No. 80/10/04-ST dated 17.09.2004, are in fact institutions which are
non-commercial in nature or are actually rendering charitable work and are
not established for the purpose of profit.
1.7.
Therefore it appeared that the benefit as envisaged under the Circular
No.80/10/04-ST dated 17.09.2004 is not available in respect of the taxable
services rendered by the said assessee as per details above.
1.8.
As per Section 75 ibid, every person liable to pay the tax in accordance
with the provisions of Section 68, or rules made thereunder, who fails to credit
the tax or any part thereof, to the account of the Central Government within
the period prescribed, is liable to 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) for the period by which such crediting of the tax or any part thereof
is delayed. Therefore, the said assessee had contravened the provisions of
Section 67 of the Finance Act, 1994 in as much as, they had failed to
determine the correct value of taxable services provided by them; Section 68 of
the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, in as
much as, they failed to determine and pay the correct amount of service tax.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
1.9.
Page 3 of 43
In view of the discussions in the foregoing paras, evidences on record, it
appeared that: The said assessee is a service provider providing taxable Services of
construction of pipelines which falls under “Commercial or Industrial
Construction Service” with effect from 16.06.2005 and has been defined in
Clause (25a) of Section 65 of the Finance Act, 1994.
As per Section 65(25a) of the Finance Act, 1994;
“Commercial or Industrial Construction Service 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 or 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 of, or similar services in relation to building or
civil structure, pipeline or conduit, which is:
i) Used, or to be used, primarily for; or
ii) 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”.
1.10. Further, as per sub-clause (zzq) of Clause (105) of Section 65 of the
Finance Act, 1994 the taxable service means any service provided or to be
provided to any person, by a commercial concern, in relation to commercial or
industrial construction service. Further it is interalia provided under Section
67(1)(i) of the Finance Act, 1994 that where service tax is chargeable on any
taxable service with reference to its value, then such value shall be the gross
amount charged by the service provider for such service provided or to be
provided by him.
1.11. The value of the taxable service provided by a Service Provider to a
person is the gross amount charged by such Service Provider from the Service
receiver for the services rendered in connection with the “Commercial or
Industrial Construction Service”. Therefore, M/s. N.J. Devani Builders Private
Limited were required to pay Service Tax and Education Cess at appropriate
rates on the gross amounts collected by them from their clients for providing
“Commercial or Industrial Construction Service”.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 4 of 43
1.12. M/s N.J. Devani Builders Private Limited , during the afore-mentioned
period had provided taxable service of “Commercial or Industrial Construction
Service” to their clients. For the said services of construction, they had opted to
avail the benefit of Circular No. 80/10/04-ST dated 17.09.2004, but failed to
fulfill the conditions of the said circular in as much as they had failed to
establish that the taxable services rendered by them were in fact made to
charitable institutions/educational institutions as stipulated in the said
circular and thus were not eligible to avail the benefit of said circular. The said
assessee had therefore during the financial years 2005-06 & 2006-07 short
paid Service Tax of Rs. 34,89,946/- which is required to be recovered from
them under Section 73 of the Finance Act, 1994.
1.13. Whereas, as per 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 jurisdictional
Superintendent of service tax by disclosing wholly & truly all materials facts in
ST-3 returns. Whereas the said assessee had not disclosed full, true and
correct information about the value of the service provided by them. Thus, it
appeared that there is a deliberate withholding of essential and material
information from the department about service provided and value realized by
them. It appeared that all these material information had been concealed from
the department deliberately, consciously and purposefully to evade payment of
service tax. Therefore, in this case all essential ingredients existed to invoke the
extended period in terms of Section 73(1) of Finance Act, 1994 to demand the
Service Tax short paid.
1.14. It also appeared that the said assessee had contravened the provisions of
Section 68 of the said Act in as much as they had failed to pay service tax at
the rate specified under Section 66 of the said Act and thereby rendered
themselves liable for penalty under section 76, 77 & 78 of the said act.
1.15.
The said assessee was also liable to pay interest at the appropriate
rates for the period from due date of payment of Service Tax till the date of
actual payment as per the provisions of Section 75 of the Finance Act, 1994.
1.16. From the evidence, it appeared that the said assessee had not taken into
account all the incomes received by them for rendering taxable services for the
purpose of payment of service tax and thereby sought to minimize their tax
liability. The deliberate efforts to mis-declare the value of taxable service in
ST-3 returns and not paying the correct amount of service tax in utter
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 5 of 43
disregard to the requirements of law and breach of trust deposed on them such
outright act in defiance of law appeared to have rendered them liable for
stringent penal action as per the provisions of Section 78 of Finance Act 1994
for suppression or concealment or furnishing inaccurate value of taxable
service with intent to evade payment of service tax.
1.17. Therefore, N.J. Devani Builders Pvt. Ltd., B/h Ishwar Bhuvan, Near
Kailash Flats, Navrangpura, Ahmedabad-380009, was issued
show cause
notice bearing F.No. STC-11/O&A/SCN/NJD/JC/R-15/D-III/10-11 dated
21.05.2010 asking them as to why:
i).
the benefit of Circular No.80/10/04-ST dated 17.09.2004 should not be
disallowed and as to why Service Tax amounting to Rs. 34,89,946/short paid/not paid on “Commercial or Industrial Construction Service”,
during 2005-06 to 2006-07 should not be demanded and recovered from
them under section 73(1) of Finance Act, 1994.
ii).
Interest applicable should not be charged and recovered from them
under Section 75 of the finance Act, 1994;
iii).
Penalty under Section 76 of the Finance Act, 1994 for the failure to make
the payment of Service Tax in prescribed time limit should not be
imposed upon them.
iv).
Penalty under Section 77 of the Finance Act, 1994 should not be
imposed upon them for contravention of Rule 6 of the Service Tax Rules,
1994.
v).
Penalty under Section 78 of the Finance Act, 1994 should not be
imposed upon them for suppressing the value of taxable services with an
intent to evade service tax.
2.
Defence reply:-
2.1
The said service provider vide their letter dated 08.08.2010 interalia
submitted that
there is no substance or any justification in the proposals
leveled in the show cause notice against them; and
submitted
that the
proposals are leveled against them on factually and legally incorrect basis. The
Audit Officers or any other Officers of the Service-tax Department had never
suggested to them that there was any short payment of Service-tax by them as
regards the above works and therefore, the suggestion made in paragraph 5 of
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 6 of 43
the show cause notice that they did not agree with the objections raised is
ex-facie incorrect; there being no such objection ever put to them and their
explanation or view never having been sought by the authorities. They further
submitted that there is no levy of Service-tax attracted on any of the works
referred to in paras 3 and 4 of the show cause notice and therefore, there is no
substance in the allegation leveled in the show cause notice that there was
short payment/non-payment of Service-tax on their part as regards these
works.
2.2
They further submitted that they are a registered Service provider who
has been discharging Service-tax liability scrupulously and properly, and have
also been filing returns periodically as prescribed under the said Act, disclosing
therein all taxable activities and consequently, the allegation of contravention
of the provisions of the Act by them is also without any basis or justification;
that the proposals for demand of Service-tax, interest and penalties are invalid
and illegal in the facts of the present case, and therefore, they requested you
to withdraw this show cause notice at once in the interest of justice; that as
aforesaid, and as confirmed in para 1 of the show cause notice itself, they are
registered with the Service Tax Department as a service provider and therefore,
their activities are well within the knowledge of the authorities; that they have
been entering into contracts and arrangements with various clients for
construction activities, and all the payments received by them from all the
clients have always been reflected in their Books of Account including Ledger
and Profit and Loss Account. All taxable services falling under commercial and
industrial construction as well as construction of residential blocks, they have
discharged Service-tax liability properly leaving no Service-tax liability unremitted or undercharged; that the way the Central Excise and Service Tax
Officers always have a free access to their statutory records including their
books of account, the Audit Officers were also given full and free access to all
their records, accounts etc. when they carried the audit in
March , 2008.
However, the Audit officers have never consulted them as regards the works for
which the present show cause notice has been issued to them, and their
explanation has never been sought by them before this show cause notice came
to be issued to them. The controversy raised in this show cause notice could
have been avoided, if the Audit Officers or the Service-tax authorities had
sought any explanation from them as regards the works in question; that there
is no Service-tax liability on them for the works for which the show cause
notice is issued to them and therefore, they request to drop these proceedings
after considering the submissions and explanations made hereunder.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
2.3
Page 7 of 43
They further submitted that the Central Government has brought
construction activity under the levy of Service-tax from 10.9.2004 by virtue of
“Commercial or Industrial Construction Service” category having been covered
under the Finance Act. From 16.6.2005, the construction of complex service
has also been brought under the cover of levy of Service tax by the Central
Government.
2.4
The definition of the term “Commercial or Industrial Construction”
excludes the services provided in respect of roads, airports, railways, transport
terminals, bridges, tunnels and dams. Further the definition of this term also
clarifies that construction of a new building or a civil structure etc., which was
used or to be used primarily for commerce or industry was covered under this
levy.
By a Circular No. B-2/8/2004-TRU dated 10th September, 2004, the
Government of India has clarified that construction for the use of organizations
or institutions being established solely for educational, religious, charitable,
health, sanitation or philanthropic purposes and not for the purposes of profit
were not taxable, being non-commercial in nature.Various further clarifications
have also been issued by the Government as regards levy of Service-tax on
commercial or industrial construction activity, thereby clarifying beyond doubt
that only those construction works were covered under the levy which were
used or to be used for commerce or industry, and the information about the
purpose could be gathered from the approved plan of the building or civil
construction; but constructions which were for the use of organizations or
institutions like those above referred were not covered under this levy of
Service-tax.
2.5
They further submitted that this principle and the scope of the levy have
however, been lost sight off by the Audit party while forming the incorrect view
about their liability for paying Service-tax on the works in question.
If the
works for which the show cause notice has been issued to them were
considered and examined properly, it would have been clear that they all fall
outside the purview of the category of commercial or industrial construction for
which Service-tax is proposed to be recovered from them.
2.6
They further submitted that however, this exercise not having been done
by the Revenue, the show cause notice must fail on this ground itself that the
Revenue has not discharged the burden to prove that Service-tax liability was
attracted on their activities; because the burden to prove contrary would shift
to them only when the Revenue had first discharged the burden to prove
taxability.
In any case, the discussion and explanation that they are giving
hereunder would establish it beyond a shred of doubt that there was no
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 8 of 43
liability to pay Service-tax on them for any of these works and therefore, the
proposals leveled in this show cause notice do not hold any water.
2.7
They further explained that,
I.
RIL (Retail Outlet):
At serial No.1 of the table for year 2005-2006 in para 3 of the show cause
notice and also at serial No. 1 of the table for year 2005-2006 in
paragraph 4 of the show cause notice, the works of counter for PA block
for Reliance Industries Limited (Retail out-let) are referred to, and this
work executed by them is by implication suggested to be the taxable
activity.
However, these works was for furniture, and not for construction activity.
They enclose a copy of the works order issued by RIL. These works have
been for supplying furniture for counters in restaurants attached to the
Petrol pumps of RIL, and thus, these works having been for already
constructed buildings and was in any case in the nature of furniture
items,
no
Service-tax
liability
under
commercial
or
industrial
construction service category would arise.
II.
DAE, Pune :
At serial No.2 and 1 of the tables for year 2005-2006 and 2006-2007 in
para 3 of the show cause notice and also at serial Nos. 2 and 1 of the
tables for years 2005-2006 and 2006-2007 in paragraph 4 of the show
cause notice, Service-tax demand is made for laboratory building and
hostel for DAE, Pune.
This contract is entered into with President of India, through the
Department of Atomic Energy, Government of India, Directorate of
Construction
services
and
Estate
Management,
Anushaktinagar,
Bombay. The work is for construction of NCCS (National Centre for Cell
Science) Office Complex at Pune University campus, Pune.
The profile of NCCS, as could be gathered from their website, namely –
www.nccs.res.in is as under:The National Centre for Cell Science (NCCS) took birth as National Tissue Culture
Facility in March 11, 1986 with a mandate of basic research, teaching and
training, and as a national repository for cell lines/hybridomas etc. The centre is
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 9 of 43
located in the midst of academically enriched environment of University of Pune
campus, Pune.
During its transformation, the centre has undergone several changes to facilitate
achievement of its goals.
The centre has expanded its scientific charter to
strengthen basic research in the areas of cancer biology, cell biology,
immunology, genomics and proteomics.
As a frontline Research and Development Centre, the centre focuses on basic
research in the areas of Cell Biology, Cancer Biology, Infectious diseases,
Immunology, Molecular Biology, Proteomics, Genomics, Diabetes and Tissue
Engineering that leads to enhancement in understanding the events at molecular
level.
As a National Repository, the centre has to receive, identify, maintain, store, grow
and supply:

Animal and human cells/cell cultures, cell lines of both existing (typed) and newly
developed hybrid cells including hybridomas.

Tissues, organs, eggs (including fertilized) and embryos.

Unicellular obligate pathogens, parasites and vectors, plasmids, genes and genomic
libraries, culture media, other reagents and materials and cell products independently
and in collaboration with industry and other organizations.

To serve as National Reference Centre for tissue culture, tissue banking, cell products,
data bank etc.
Further to provide consultancy services to medical, veterinary,
pharmaceutical institutions, public health services and industries etc. in the country.
As a focal point of Human Resources Development the centre has to establish and
conduct post graduate courses, workshops, seminars, symposia and training
programmes in the area of mammalian tissue culture and transgenic animals etc.
Having referred to the profile of NCCS, they also enclose a copy of the
work order issued to them by NCCS for the above works of laboratory,
building and hostel. When the above institute has been an educational
and research centre of the Department of Atomic Energy, Government of
India; it is clear that the construction for laboratory building, hostel etc.,
for this institute could not be considered to be industrial or commercial
construction activity.
These works fall in the excluded categories as
clarified by the Central Government vide the above referred Circular and
therefore, demand of Service-tax for these works is without any
jurisdiction and justification.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
III.
Page 10 of 43
Shri Ramchandra Mission:
At serial Nos.3 and 4 of the tables for years 2005-2006 and 2006-2007 in
para 3 and serial Nos. 3 and 4 of table for 2005-2006 in para 4 of the
show cause notice, service-tax demand is made with respect to Shri
Ramchandra Mission.
As is stated in column 3 of the tables in paragraphs 3 and 4 of the
show cause itself, these works have been for meditation hall, dormitory
building, and apartment building for Shri Ramchandra Mission. It is a
matter of common knowledge and information that Shri Ramchandra
Mission is a religious, spiritual, non-profitable organization. Donations
to the mission are granted exemption from Income Tax under Section
80G of the Income Tax Act, 1961. It propagates meditation and they have
constructed for them a Meditation Hall and allied building on SarkhejGandhinagar Highway near Adalaj Police Station. The buildings are for
religious and meditation purpose and there is no commercial use. The
buildings are complete and are in use.
Though there could be no dispute or doubt about the fact that Shri Ram
Chandra Mission is a religious and spiritual organization, the following
details are noteworthy, which are extracted from their website, namely
htpp://www.srcm.org.
Shri Ram Chandra Mission (SRCM) was registered in India in the year
1945. The Mission is a non-profit spiritual organization in India, and in all the
countries where it is registered.
Over the years, the Mission has grown enormously, and now has more than 1000
centres in India, and is present in 90 countries spread over all the continents.
The Mission now has more than 2,00,000 abhyasis worldwide practicing the
Sahaj Marg system of meditation.
The Mission does not charge any fees of any kind for this spiritual training.
The Mission is the skeleton around which the spiritual edifice of the Mission is
built. As such, it is meant to be virtually invisible, but must nevertheless support
the spiritual work of the Master, and provide the services that are required by the
abhyasis.
The current president of the Mission is Shri Parthasarathi Rajagopalachari,
affectionately known as Chariji.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12

Instruction
in
Meditation:
Page 11 of 43
Instructors,
called
preceptors,
provide
introductory, one-on-one meditation instruction for all practitioners, ongoing
individual meditation sessions, and support for spiritual growth and
understanding.

Group Meditations: Practitioners meet and mediate together in their local
areas. Meditation centers offer a large number of materials – books, audio
tapes, videos and DVDs for further study and guidance.

Retreat Centers and Meditation Halls: There are many meditation halls
and centers around the world to accommodate the growing number of spiritual
seekers and those wishing to add spiritual values to their lives. Many offer
overnight accommodations for members of Shri Ram Chandra Mission.

The Sahaj Marg Research and Training Institute: SMRTI is involved in
research to enhance our understanding of the goal of human perfection.
Activities include classes, study groups, youth programs, training programs,
publications, research into the benefits of meditation, and conferences and
seminars about spirituality.
However, a copy of the works order and also a copy of the
registration/order issued by the Income Tax authorities as regards
Section 80G of the Income Tax Act for this organization are enclosed by
them. They further submitted that it would be appreciate that the
construction of Meditation Hall and also of buildings where the people
interested in meditation and other religious/spiritual activities would
stay, could never be considered to be industrial or commercial activities.
The works for this organization also fall under the exclusions clarified by
the Central Government vide the above referred Circular and therefore,
the demand of Service-tax for these activities do not call for any
consideration.
IV.
GERMI: (Pandit Deen Dayal University):
At serial No.2 of the table for year 2005-2006 in para 3 of the show
cause notice and also at serial No. 2 of the table for year
2006-2007 in
paragraph 4 of the show cause notice, service-tax demand is made for
works executed by them for
Gujarat Energy Research and Management
Institute (GERMI), which is also known as “Pandit Deen Dayal
University” registered as a Society under the Societies Registration Act.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 12 of 43
The institute is set up by the Government of Gujarat and it has
established a Petroleum University named as Pandit Deen Dayal
Petroleum University, located on Sarkhej – Gandhinagar road, near
Gandhinagar; that they have constructed the building, which is complete
and the said University is functioning. It is an educational institution
and there is no commercial or industrial use. You may verify the facts
and produce any evidence of commercial or industrial use, if you have, or
find any.
When one considers the details of GERMI on their websites,
namely – www.pdpu.ac.in and www.germi.org. the details shown therein
clearly indicate that it is an educational institution and it is not engaged
in any industrial or commercial activities. They enclosed the extracts
from website of GERMI and also the extracts from the Annual Report for
year 2007-08 for your consideration.
Further, the description of the works in column 3 of the tables in
the show cause notice also clarifies that the construction was for
academic and administrative block of Pandit Deen Dayal University and
therefore, these works would also fall outside the purview of commercial
and industrial construction service.
The Central Government has
clarified under the above referred Circular that even the offices,
administrative buildings etc., used by Government organizations or the
organizations engaged in religious, educational and similar activities
were not liable for Service-tax under this levy. In this view of the matter,
demand of service tax for the works executed by us for GERMI is wholly
illegal.
V.
Gujarat State Petroleum Corporation (GSPC):
At serial No.3 of the table for year 2006-2007 in para 3 of the show
cause notice and also at serial No. 3 of the table for year 2006-2007 in
paragraph 4 of the show cause notice, service-tax demand is made for
works executed by them for GSPC.
These works were for Gujarat State Petroleum Corporation, a State
Government Corporation; and the works was for strengthening of culvert
on road near Kanawara village in Anand District. A copy of the work
order issued to us by GSPC was enclosed.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 13 of 43
A perusal of the above works order shows that the work was for
culvert strengthening i.e. strengthening of a road bridge; and thus, this
was works for public benefit.
Strengthening of culvert has not been
works of any commercial or industrial nature and therefore, there was no
levy of Service-tax for these works either.
Therefore, the demand of
Service-tax for this public utility activity is also illegal.
VI.
RRDT, Gokul Gram Yojana:
At serial No.6 of the table for year 2006-2007 in para 3 of the show
cause notice and also at serial No. 6 of the table for year 2006-2007 in
paragraph 4 of the show cause notice, the works in question has been for
construction of Community Halls under Gokul Gram Yojana of Reliance
Rural Development Trust (RRDT). Gokul Gram Yojana is a prestigious
scheme of the Government of Gujarat. This scheme was started in 1995.
To support this scheme, Government of Gujarat announced the incentive
policy stating that an industrial undertaking setting up an industrial
unit in an industrially backward area with the project cost of more than
Rs.10 crores and eligible to avail sales tax incentives, shall have to
contribute 2% of sales tax incentives availed of in case of exemption, and
3% of deferred amount in case of sales tax deferment. Reliance availed
the tax incentives as per Gujarat Governments industrial policy and
donated Rs. 51.00 lakhs to this bhandol.
They
enclose
extracts of
Gokul Gram Yojana, the work under this scheme and related matters
obtained from the website, namely – ruraldev.gujarat.gov.in
The purpose for which the works was executed by them, namely –
construction of Community Halls is also clearly not that of commercial or
industrial nature.
Since this has also been the works for benefit and
upliftment of downtrodden people at large and the works having been
executed under a public scheme of the State Government, no commercial
or industrial motive was involved.
Therefore, these works also fall
outside the purview of Service-tax and no liability to pay Service-tax on
them for any of these works would arise and therefore, the proposals
leveled in this show cause notice do not hold any water.
VII.
Sant Hirdram Swami Basantram Sewa Trust; Mandir and
Prayer Hall.
At serial No.5 of the table for year 2006-2007 in para 4 of the show cause
notice, the works in question relates to construction of temple.
The
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 14 of 43
description of the works in column 3 of the table itself shows that it was
a
Mandir (temple) and prayer hall.
Sant Hirdram Swami Basantram
Sewa Trust has been a registered charitable Trust. The construction of
the
temple
and prayer
hall
has been
undertaken at
Kubernagar, Ahmedabad and is complete and in use.
copy of the work order for these works.
C-75/76,
They
enclose
However, it is needless to
emphasise that construction of a temple and a prayer hall for a religious
Trust would never fall within the taxable category of commercial and
industrial construction service.
The demand of service-tax for these
works is therefore, wholly illegal.
They further submitted that
in the above premises,
there is no
justification in the demand of Service-tax of Rs. 34,89,946/- from them.
The suggestion made in paragraph 10B of the Show cause Notice that
they failed to fulfil the conditions of Circular No. 80/10/04-ST dated
17.9.2004 and therefore, the above works attracted levy of Service-tax is
without any basis and justification.
When the above explanation
regarding each of the works shows that the construction done by them
was
in
the
nature
of
educational,
religious,
charitable,
health,
philanthropic etc. there is no justification in still demanding service-tax
from them on such construction not involving any commercial or
industrial nature.
There is no obligation on us under the law for
submitting any documents or evidence showing that the concerned
clients were religious institutions or educational organizations or
Government Corporations, when the clients for whom the works have
been executed by them are well-known organizations and entities, and it
is a matter of common knowledge that all these organizations,
institutions and Corporations are engaged in
providing educational,
religious, charitable, health, sanitation and philanthropic activities. It is
also a matter of common knowledge that none of these institutions or
organizations is engaged in any commercial or industrial activity.
Therefore, the suggestion made in paragraph 10B of the show cause
notice that they had not established that the clients were charitable
institutions or educational institutions and therefore, they had to pay
Service-tax on these works, is wholly illegal.
They further submitted that the explanation above referred also shows
that the works executed by them are actually being used for purposes like
educational, religious, charitable, health and philanthropic. The actual
use of all these constructions could be verified by the Revenue even at
this stage though it was otherwise an obligation cast by the law on the
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Page 15 of 43
Revenue to have verified the use of these constructions before raising this
controversy; be that as it may, the details available from the Websites of
the concerned clients and also the details coming out from the works
order for these works establish it beyond doubt that no commercial or
industrial purpose or objective is involved in any of these works.
Therefore, there is no levy of service-tax that they were required to
discharge under commercial or industrial construction service category
for these works and consequently, the proposals leveled against them
being ex-facie illegal, they deserve to be withdrawn at once in the interest
of justice.
2.8
They further submitted that this show cause notice issued under Section
73, demanding tax, interest and penalty is premature and illegal as it has not
been preceded by procedure of collecting evidence and hearing the assessee as
prescribed under Section 72 of the Finance Act, 1994. In view of the above, the
Show Cause Notice deserves to be vacated.
2.9
They finally submitted that before concluding this reply, they may
emphasize that the show cause notice issued to them in June, 2010 for the
period of 2005-2006 and 2006-2007 has been wholly time barred. There is no
justification in invoking extended period of limitation against them in the facts
of this case and therefore, the show cause notice is without jurisdiction.
2.10 They further submitted that there is no dispute on the fact that the
works undertaken by them under the Scheme of the State Government for
educational, religious, charitable or for the public purposes like strengthening
of culverts on road etc. were not works of any commercial or industrial nature
and therefore, there was no levy of Service-tax for these works; that they are
registered with the Service-tax Department as a service provider and their
activities are well within the knowledge of the authorities; that they have been
discharging Service-tax liability scrupulously and properly, and they have also
been filing their returns periodically as prescribed under the said Act,
disclosing therein all their taxable activities; that they have been entering into
contracts
and arrangements with various clients for construction activities,
and all the payments received by them from all the clients have always been
reflected in their Books of Account including Ledger and Profit and Loss
Account.
In the cases of taxable services falling under commercial and
industrial construction as well as construction of residential blocks, they have
discharged Service-tax liability properly leaving no Service-tax liability unremitted or undischarged, that the way the Central Excise and Service Tax
Officers always have a free access to our statutory records including their
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Page 16 of 43
books of account, the Audit Officers were also given full and free access to all
their records, accounts etc. when they carried the audit in August, 2008. If the
Audit Officers have now formed a different view of the matter, allegation of
deliberate contravention of the provisions of the Service-tax law would not be
sustainable.
2.11 They further submitted that for invoking extended period of limitation,
the Revenue must show that the assessee was guilty of suppression of facts
and/or willful misstatement and/or contravention of the provisions of the Act
and Rules with intention to evade payment of duty. However, it is not shown in
these proceedings as to what was the suppression of facts or willful misstatement or contravention of the provisions of the Service-tax law on our part
and therefore, invocation of extended period of limitation is wholly illegal, that
what is “suppression” is considered by the Hon’ble Supreme Court in the case
of Continental Foundation Jt. Venture Vs. CCE, Chandigarh, reported in 2007
(216) ELT 177 (SC), and it is held by the Hon’ble Supreme Court with regard
to the proviso to Section 11A of the Central Excise Act, 1944, which is asking
to the proviso to Section 73 of the Finance Act, 1944, that mere omission to
give correct information was not suppression of facts unless it was deliberate
and to stop the payment of duty. In the previous case like Messrs Jaiprakash
Industries Ltd., reported in 2002 (146) ELT 481 (SC) also, the Hon’ble
Supreme Court has held that a bonafide doubt as to non-dutiability of goods
was sufficient for the assessee to challenge the demand on the point of
limitation. Thus, it is a totally settled legal position that extended period of
limitation by invoking proviso to the main Section for demanding duty or tax
beyond the normal period of limitation would be justified only when the
assessee knew about the duty/tax liability and still however, he did not pay the
tax and deliberately avoided such payment, and it was only in such a situation
where suppression of facts on part of the assessee could be justifiably alleged
by the Revenue.
However, mere failure on the part of the Audit Officers in
noticing a correct information would not be a case where the Revenue can
invoke extended period of limitation.
2.12 They further submitted the law about invocation of extended period of
limitation is well settled. Only in a case where the assessee knew that certain
information was required to be disclosed and yet the assessee deliberately did
not disclose such information, the case would be that of suppression of facts.
When the Excise Officers called for certain information and the assessee did
not disclose the same or deliberately disclosed wrong information that would be
a case of willful mis-statement. Even in cases where certain information was
not disclosed, as the assessee was under a bonafide impression that it was not
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Page 17 of 43
duty bound to disclose such information, it would not be a case of suppression
of facts as held by the Hon’ble Supreme Court in the landmark cases of
Padmini Products and Camphor Drugs and Liniments reported in 1989 (43)
ELT 195 (SC) and 1989 (40) ELT 276 (SC) respectively. This is the view taken
by the Appellate Tribunal in number of cases as could be seen from the
decisions reported in the cases of – India Tin Industries V/s. Commissioner of
Central Excise, Bangalore - 1994 (70) ELT 731 (Trib.), Bony Rubber Co. Pvt.
Ltd. V/s. Collector of Central Excise, New Delhi - 1996 (84) ELT 58 and D.J.
Vora, Batliboi & Co. Ltd. V/s Collector of Central Excise, Surat - 1999 (30) RLT
223, and therefore, the extended period of limitation would not be available to
the Revenue in the facts of the present case.
2.13 They further submitted that in fact, the present one is a case where all
the facts discussed in the show cause notice issued to them now were within
the knowledge of the Department right from day one.
The balance-sheet of a
company like them is a public document because the balance-sheets are filed
with various Government agencies including the office of the Registrar of
Companies.
It is held by the Appellate Tribunal in cases like Hindalco
Industries reported in 2003 (161) ELT 346, Kirloskar Oil Engines Ltd. Vs.
CCE, Nasik reported in 2004 (178) ELT 998 and Martin & Hariss Laboratories
Ltd. Vs. Commissioner, reported in 2005 (185) ELT 421 that balance sheet
being a public document, when any information was disclosed or recorded in
the balance-sheet, then the assessee could not be accused of suppressing the
fact because a balance-sheet was a public document open to scrutiny of all and
therefore, any information disclosed in a balance-sheet was not a case of
suppression of any facts by the assessee. Under these circumstances, the show
cause notice issued to them now is barred by limitation and there is no
justification in the action of invoking extended period of limitation against them
in these facts of the case.
The show cause notice therefore, deserves to be
dropped on this ground also.
2.14 They further submitted that the proposal of imposing penalties under
Sections 76 and 78 of the said Act on them is also without jurisdiction because
they cannot be penalised under different Sections for the same alleged offence.
Since the Constitution of India also prohibits punishing a person more than
once for the same offence, proposing penalties on us under different Sections
for the same offence is also a punishment more than once for the same alleged
offence. The proposal to penalize us twice for the same alleged offence is
therefore, illegal and liable to be vacated at once.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
2.15 They further submitted that
Page 18 of 43
the proposal for imposition of penalty is
also bad in law inasmuch as there is no violation of any nature committed by
them, that they have not acted dishonestly or contumaciously and therefore,
even a token penalty would not be justified. No malafide intention on their
part is also alleged in this notice. There is also no specific reason or ground
spelt out in the notice for proposing to impose penalty and thus, penalty could
not be imposed on hearsay or presumption.
2.16 They further submitted that interest could be levied and recovered only
where any tax had not been levied or paid or had been short levied or short
paid or erroneously refunded for the period from the first date of the month
succeeding the month in which the Service tax/duty ought to have been paid
under the Act till the date of payment of such duty. However, firstly there is
no short levy or short payment of service tax in this case. Secondly, they have
not paid any service tax late as contemplated under the above provision. In
this view of the matter, the proposal to recover interest from them does not
hold any water.
2.17 They further submitted that in the above premises, the proposals leveled
in the show cause notice are unsustainable in facts as well as in law, that they
request to withdraw this show cause notice with all the proposals leveled
thereunder and an opportunity of personal hearing may also be given to them
before passing any final order on this show cause notice, in the interest of
justice.
3.
Personal Hearing
The personal hearing was granted on 24.11.2011 vide this office letter
dated 10.11.2011. The assessee vide their letter dated 23.11.2011 requested to
adjourn the personal hearing till March 2012. The further hearing was granted
on 21.12.2011 vide this office letter dated 28.11.2011 but the same was held
on 23.12.2011 as per request of assessee’s Advocate. Shri P.M.Dave, Advocate
and Shri N.J.Devani, Director of the said firm appeared on 23.12.2011 and
reiterated their reply dated 08.08.2010.
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4.
Discussion & Finding:-
4.1
I have gone through the content of show cause notice, written
submissions of the said service provider, and record of personal hearing.
The show cause notice alleges that the said service provider had not discharged
service tax on the taxable value for the services provided under various
contracts during the period 2005-06 to 2006-07 as envisaged in table reflected
in para 1.3 & 1.4 of this order, and also proposed to recover the said amount of
service tax along with interest and also proposed to impose penalty as provided
under Sections 76,77 and 78 of the Finance Act,1994 for the various violations
pointed out in the show cause notice. The said service provider, while
defending their case, inter alia mainly submitted that, some of the activities
carried out is not at all construction activities and some of the activities of
construction carried out by them under various contracts referred in the show
cause notice were on behalf of various charitable trusts, on behalf of bodies of
Central/State Government and the said constructions were not meant for
utilization for commercial or Industrial use by the service recipients and
therefore they are not liable to service tax in view of circular No.80/10/04-ST
dated 17.09.2004. Evidencing the aforesaid facts, they submitted various
contracts/ agreements entered by them with the service recipients in support
of their claim. They further also submitted that there is no element of
suppression of facts on their part, and as such, demand of service tax is hit by
limitation under section 73(1) of the Finance Act,1994. In view of their
aforesaid submissions the show cause notice is liable to be set aside.
4.2
Therefore, it will be pertinent to examine their claim, first I would like to
have look at circular No.80/10/04-ST dated 17.09.2004. The relevant portion
of the said circular is as under.
13. Construction services (commercial and industrial buildings or civil
structures):
13.1 Services provided by a commercial concern in relation to construction, repairs,
alteration or restoration of such buildings, civil structures or parts thereof which
are used, occupied or engaged for the purposes of commerce and industry
are covered under this new levy. In this case the service is essentially provided
to a person who gets such constructions etc. done, by a building or civil contractor.
Estate builders who construct buildings/civil structures for themselves (for their own
use, renting it out or for selling it subsequently) are not taxable service providers.
However, if such real estate owners hire contractor/contractors, the payment made
to such contractor would be subjected to service tax under this head. The tax is
limited only in case the service is provided by a commercial concern. Thus service
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 20 of 43
provided by a labourer engaged directly by the property owner or a contractor who
does not have a business establishment would not be subject to service tax.
13.2
The leviability of service tax would depend primarily upon whether
the building or civil structure is ‘used, or to be used’ for commerce or
industry. The information about this has to be gathered from the approved
plan of the building or civil construction. Such constructions which are for
the use of organizations or institutions being established solely for
educational, religious, charitable, health, sanitation or philanthropic
purposes and not for the purposes of profit are not taxable, being noncommercial
in
nature.
Generally,
government
buildings
or
civil
constructions are used for residential, office purposes or for providing civic
amenities. Thus, 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.
(emphasis provided)
4.3
Thus, for the taxability of service tax for the “commercial or Industrial
construction service”, the real test as explained in para 13.1 of the said letter
is to verify the usage of such construction by the service recipients on whose
behalf
such construction carried out by the said service provider. In other
words if such constructions are used for commercial or Industrial purpose, by
the service recipients then only such construction activities are liable to service
tax.
4.4
Para 13.2 categorically clarifies the scope of applicability and non
applicability of service tax with regard to this service. If we look at the said para
it is mentioned therein that “The leviability of service tax would depend
primarily upon whether the building or civil structure is ‘used, or to be
used’ for commerce or industry. The information about this
has to be
gathered from the approved plan of the building or civil construction.
4.5
Thus it is stipulated therein that information has to be gathered with
regard to usage of the construction in question from the approved plan of the
building or civil construction.
4.6
In the said para 13.2 , it is further clarified “Such constructions which
are for the use of organizations or institutions being established solely
for
educational,
religious,
charitable,
health,
sanitation
or
philanthropic purposes and not for the purposes of profit are not
taxable,
being
non-commercial
in
nature.
Generally,
government
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Page 21 of 43
buildings or civil constructions are used for residential, office purposes
or
for
providing
civic
amenities.
Thus,
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.
4.7
Thus, what transpires from above clarification is that though the
constructions carried out for use by organization or institutions being
established solely for educational, religious, charitable, health, sanitation or
philanthropic purpose, it should not be for the purposes of profit and should
be non-commercial in nature. It also further clarifies that Government building
or civil construction are used for residential, office purpose or for providing
civic amenities are not liable to service tax, however, if such constructions are
for
commercial
purposes
like
constructed for letting them out,
local
government
bodies
getting
shops
such activity would be commercial and
builder would be subjected to service tax.
4.8
Therefore, to determine usage of the construction is meant for
commercial or non commercial it is very decisive to examine the meaning of
word “commercial”. In this regard I would like to find the meaning of
“commercial” as defined by the Government of India, (Ministry of Finance),
Department of Revenue, Central Board of Excise and Customs, Tax Research
Unit in their D.O.F. No. 334/1/2010-TRU, dated 26-2-2010 related to the
Budget 2010-11 — Changes and Clarifications on Service Tax. The said word
was defined as under while “Redefining the scope of Commercial Training and
Coaching Service” giving retrospective effect w.e.f. July, 2003. The relevant
portion of the said circular is reproduced as under.
6. Redefining the scope of Commercial Training and Coaching Service
6.1
Commercial training and coaching service was introduced in Budget 2003
with a view to tax the mushrooming coaching institutes and training centres
which either provide coaching classes for examinations or unrecognized courses
in various areas such as, management, marketing, engineering etc. The schools,
institutes, colleges and universities providing courses that lead to award of
recognized diplomas/degrees and sports education were kept out of tax net.
These include universities created under a Central or State Act, institutes
recognized by UGC as universities or deemed universities, institutes granted
recognition professional councils like AICTE, Medical Council of India, Bar Council
of India etc. To distinguish the former types of institutes/centres from the latter,
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
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the word ‘commercial’ was used in the definitions of ‘Commercial training and
coaching’, ‘Commercial training and coaching centres’ and ‘taxable service’.
6.2
The use of the word ‘commercial’ in these definitions has led to
certain unintended consequences. A view has been taken that the term
’commercial’ appearing in various definitions implies that the institute
must be run with a profit motive to fall under the taxable service. A
number of taxpayers resisted paying tax on this ground. In order to
clarify the legislative intent, the definition of the taxable service is being
suitable amended, through insertion of an Explanation, to clarify that
the word ‘commercial’ means any training or coaching that is provided
for a consideration irrespective of the presence or absence any profit
motive. This amendment is being carried out retrospectively (from July
2003) so as resolve the disputes pending at different levels of the dispute
settlement system.
(emphasis provided)
4.9
Thus, I find that the meaning of word “commercial” stands clarified as
above, as any training or coaching that is provided for a consideration
irrespective of the presence or absence any profit motive. This amendment
is being carried out retrospectively (from July,2003 so as to resolve the
disputes pending at different levels of the dispute settlement system.
4.10 Further, with regard to the applicability of the meaning assigned to the
word “commercial” as mentioned in para 6.2 of the aforesaid D.O. letter, the
intention of the Government is very clear that the said meaning is not
exclusively defined for the service of “Commercial training and coaching centres’
but can also be applied in the cases wherever the word “commercial” have been
used in the statue i.e. Finance Act,1994.
4.11 What transpires form the above is (i) the “commercial” means any
activities which is carried out for a consideration is considered to be
commercial activities, and the presence or absence of any profit motive either of
service provider or service recipient it is not at all relevant and (ii) information
has to be gathered with regard to usage of the construction in question from
the approved plan of the building or civil construction for deciding taxability of
the services rendered by the service provider to the recipients of the services.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
5.
Page 23 of 43
In light of the aforesaid position I now examine factual position with
regard to the taxability of the service rendered under individual contract as
under.
5.1
RIL (Retail Outlet)
5.1.1
With regard to the service tax demanded at Sr. No. 1 of the table
for the year 2005-2006 of the show cause notice, against RIL (Retail Outlet)
it is submitted by the said service provider that the said receipt is towards the
service rendered under contract was related to, the works of counter for PA
block for Reliance Industries Limited (Retail out-let); that these works had been
for supplying furniture for counters in restaurants attached to the Petrol
pumps of RIL, for already constructed buildings and was in any case in the
nature of furniture items, no Service-tax liability under commercial or
industrial construction service category would arise. In this regard I had gone
through the text of the said work contract enclosed with their submission. I
agree that it was related to supply of the furniture for counters in restaurants
attached to the Petrol pumps of RIL. However, from the text of the contract it is
evident that the supply of furniture in already constructed building, however, it
was not a mere supply, but fixing of the same at the proper place etc. This is
post construction activity.
5.1.2
In this regard I would like to have look at the decision cited as
2010(20) STR129 (Tri-Bang) delivered by Hon’ble CESTAT, South Zonal
Bench, Banglore in the case of SPANDREL Versus COMMISSIONER OF C.
EX., HYDERABAD/KOCHI in their Final Order Nos. 798-800/2010, dated 6-52010 in Appeal Nos. ST/47,
41/2007 & ST/400/2008 wherein, the party’s
appeal was allowed. In the said decision, it was the case of the department that
the activities of False ceiling, partitions, flooring, modular system, painting,
carpeting, wall paneling and interior furnishing undertaken in banks and other
firms by the said service provider was alleged to be liable to service tax under
Interior Decorator Services. The matter, when reached to the CESTAT, while
delivering the decision in the matter it was observed by the
CESTAT that
Statutory definition of Interior Decorator service requiring advice, consultancy
and technical assistance and planning and design but execution of work not
included - Impugned activities brought under Commercial or Industrial
Construction service from 16-6-2005 and not covered under Interior Decorator
service before. Tribunal decision holding services brought under a category not
liable under other categories before specified date, applicable - Impugned
orders set aside - Sections 65(25b) and 65(59) of Finance Act, 1994. The
relevant paras 2, 7, 8 and 9 of the said decision are as under.
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2. The relevant facts of the case for consideration in all these appeals are
that the appellants herein were undertaking interior works such as pest
control, demolition & dismantling, masonry work, wall preparation viz. cement,
plaster, POP punning; flooring & cladding, works like wall paneling, false
ceiling, interior furnishing, partitioning of Banks, Financial Institutions and
other firms, etc. It was noticed by the lower authority that the appellants have
provided these services to their clients, mostly software companies, Banks,
etc., but were not discharging the service tax liability on such services. The
lower authorities felt that the services rendered by the appellants fall under the
category of ‘Interior Decorator Service’ as defined under Section 65 (59) of the
Finance Act, 1994. Coming to such a conclusion, show cause notices were
issued to the appellants herein, demanding service tax and seeking imposition
of penalty and also levying interest on the tax liability. In the case of M/s.
Spandrel and M/s. Premier Agencies, the adjudicating authority confirmed the
demands and imposed penalties and sought recovery of the same, while M/s.
Delta Projects, the adjudicating authority dropped the proceedings, but the
Commissioner as reviewing authority under Section 84(1), passed the Revision
Order confirming the demand which has been raised in the show cause notice.
7. On perusal of the Orders-in-Original in two cases (M/s. Spandrel and M/s.
Premier Agencies) and the Revision Order in one case (M/s. Delta Projects), we
find that the lower authorities had recorded clearly the activities undertaken
by the appellants. The summarize the activities undertaken by the appellants,
it seems that the appellants are engaged in works such as false ceiling,
partitions, flooring modular systems, painting, carpeting, electrical connections;
works like wall paneling, false ceiling, interior furnishing, partitioning of
Banks, Financial Institutions and other firms and supply & fixing of various
furniture, etc. This portion of the findings of the lower authorities is not
challenged by both sides. It is also undisputed that the appellants, in all these
cases, have executed these works based upon the orders placed by the
customers to them. With this factual matrix, it would be necessary to reproduce
the definition of term Interior decorator services’ under Section 65(59) of the
Finance Act, 1994 which reads as under :“Interior decorator means any person engaged, whether directly or indirectly,
in the business of providing by way of advice, consultancy, technical
assistance or in any other manner, services related to planning, design or
beautification of spaces, whether man-made or otherwise and includes a
landscape designer.”
It can be seen “from the above reproduced definition that ‘Interior Decorator’
gives advice, consultancy and technical assistance or in any other manner,
services related to planning, design or beautification of spaces. In the entire
records before us, the adjudicating authority has never recorded a finding that
the appellants herein were giving advise, consultancy and technical assistance
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 25 of 43
or planning work and designing. The adjudicating authority in this case has
held that the words appearing in the definition would encompass the execution
of the work which has been done by interior decoration. We are not impressed
by the said findings or the observations made by the lower authority for the
simple reason that the definition of interior decoration service’ clearly
envisages advice, consultancy and technical assistance and also planning and
design and nowhere includes execution of work to be done as would fall under
the category of ‘interior decorator service’.
8. On the other hand, we find that the amendments which were brought in
the Finance Act, 2005 with effect from 16-6-2005 to the services “Commercial
or Industrial Construction” under Section 65(25b) of the Finance Act, read as
under :(25b) “commercial or industrial construction service” 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 filling, 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)
used, or to be used, primarily for; or
(ii) 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.”
It can be seen from the above clause (c), services which have been rendered
brought for the first time in the definition - “Commercial or Industrial
Construction Service”. If it is so, the insistence of Revenue that the services
rendered by the appellants would fall in the ‘Interior Decorator Service’ is
incorrect. We also find that the Board vide letter dated 27-7-2005 which was
issued for clarifying the Scope of ‘Commercial or Industrial Construction
Service’ (after amendment), has categorically clarified as under :“(2) Post construction completion and finishing services such as glazing,
plastering, painting, floor and wall tiling, wall covering and wall papering,
wood and metal joinery and carpentary, especialy if undertaken as an isolated
or stand alone contract, are also specifically included. Thus post construction
completion and finishing services are specifically included in the definition of
commercial or industrial construction service.”
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 26 of 43
It can be seen from the above that the activities which had been undertaken,
as enumerated in the clarification, have now been specifically included. This
would indicate that prior to 16-6-2005, these were not included in the category
of ‘interior decorator service’. In a series of decisions of the Tribunal which laid
down law that if the category of services is brought into service tax net from a
specific date, such services would not be covered under any other category of
services. For this purpose, we find that the Coordinate Bench in the case of
Chennai Telephones (BSNL) v. Commissioner of C. Ex., Chennai [2006 (3)
S.T.R. 227 (Tri. - Chennai) = 2004 (169) E.L.T. 222 (Tri.)] has very clearly held
that levy of leased circuit service was introduced only from 16-7-2001 and it is
not proper to demand service tax on said service for an earlier period under the
category of ‘telephone service’. In yet another case of Jet Airways (India) Ltd. v.
Commissioner of Service Tax, Ahmedabad [2008 (11) S.T.R. 645 (Tri. - Ahmd.)]
on a similar issue as to scope of new entries in Service Tax net, the Coordinate
Bench, held as under which we may reproduce :
“9.
We also agree with the appellant’s contention that once the new entry is
introduced with effect from the date without disturbing already existing
entries, it has to be held that the new entry was not covered by the previous
entry. The reference in this regard is made to the Tribunal decision in the case
of Board of Control For Cricket in India v. C.S.T., Mumbai - 2007 (7) S.T.R. 384
(Tri. - Mumbai).”
5.1.3
Thus, from the aforesaid decision I find that the activities of
providing
modular furniture
and fixing of the same at the constructed
building as carried out by the said service provider at the premises of service
recipients is clearly classifiable under the category of “Commercial or Industrial
Construction service and accordingly the receipt towards the providing said
service is liable to service tax. Hence, service tax of Rs.52,228/- is required to
be confirmed.
5.2
DAE, Pune :
5.2.1 With regard to demand of service tax at serial No. 2 and 1 of the tables
for year 2005-2006 and 2006-2007 in respect of activities carried out for
laboratory building and hostel for DAE, Pune, it is the submission of the said
service provider that in the said activities was carried out by hem under a
contract
which was entered into with President of India, through the
Department
of
Atomic
Energy,
Government
of
India,
Directorate
of
Construction services and Estate Management, Anushaktinagar, Bombay. The
work is for construction of NCCS (National Centre for Cell Science) Office
Complex at Pune University campus, Pune. In this regard it was contended by
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 27 of 43
the said service provider that construction of laboratory, building and hostel by
them was against work order issued to them by NCCS for the above works of
laboratory, building and hostel.
When the above institute has been an
educational and research centre of the Department of Atomic Energy,
Government of India; it is clear that the construction for laboratory building,
hostel etc., for this institute could not be considered to be industrial or
commercial construction activity. These works fall in the excluded categories
as clarified by the Central Government vide the above referred Circular and
therefore, demand of Service-tax for these works is without any jurisdiction
and justification.
5.2.2 In this regard I find that the construction in question carried out by the
said service provider is for a body which was constituted by the Government of
India. Further, from perusal of the a copy of the work order enclosed with
their submission issued to them by NCCS for the above works of laboratory,
building and hostel, I find that when the above institute has been an
educational and research centre of the Department of Atomic Energy,
Government of India; it is clear that the construction for laboratory, building,
hostel etc., for this institute can not be considered to be industrial or
commercial construction activity in light of the aforesaid circular. Therefore, I
find that the works carried out by the said service provider on behalf of body
formed under Department of Atomic Energy falls in the excluded categories as
clarified by the Central Government vide the above referred Circular. Hence,
demand of service tax of Rs.9,59,688/- for these service is not sustainable and
required to be dropped.
5.3.
Shri Ramchandra Mission:
5.3.1
With regard to demand of service tax at serial Nos.3 and 4 of the
tables for years 2005-2006 and 2006-2007 of the show cause notice, servicetax demand is made with respect to Shri Ramchandra Mission. It is the
submission of the said service provider that as is stated in column 3 of the
tables in paragraphs 3 and 4 of the show cause itself, these works had been for
meditation
hall,
dormitory
building,
and
apartment
building
for
Shri
Ramchandra Mission. It is a matter of common knowledge and information
that Shri Ramchandra Mission is a religious, spiritual, non-profitable
organization.
Donations to the mission are granted exemption from Income
Tax under Section 80G of the Income Tax Act, 1961. It propagates meditation
and they have constructed for them a Meditation Hall and allied building on
Sarkhej- Gandhinagar Highway near Adalaj Police Station. The buildings are
for religious and meditation purpose and there is no commercial use.
The
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 28 of 43
buildings are complete and are in use. However, a copy of the works order and
also a copy of the registration/order issued by the Income Tax authorities as
regards Section 80G of the Income Tax Act for this organization are enclosed by
them. They further submitted that it would be appreciate that the construction
of Meditation Hall and also of buildings where the people interested in
meditation and other religious/spiritual activities would stay, could never be
considered to be industrial or commercial activities. The works for this
organization also fall under the exclusions clarified by the Central Government
vide the above referred Circular and therefore, the demand of Service-tax for
these activities do not call for any consideration.
5.3.2
In this regard I find that the construction in question carried out
by the said service provider is for Shri Ramchandra Mission registered under
Section 80G of the Income Tax Act. These works have been for meditation hall,
dormitory building, and apartment building for Shri Ramchandra Mission.
From their website www.srcm.org, I observe that the Shri Ramchandra Mission
is a religious, spiritual, non-profitable organization. Donations to the mission
are granted exemption from Income Tax under Section 80G of the Income Tax
Act, 1961. It propagates meditation and they have constructed for them a
Meditation Hall and allied building on Sarkhej-Gandhinagar Highway near
Adalaj Police Station. The buildings are for religious and meditation purpose
and there is no commercial use. The buildings are complete and are in use.
From the details submitted by the said service provider, Shri Ram Chandra
Mission is a religious and spiritual organization, the following details are
noteworthy,
which
are
extracted
from
their
website,
namely
htpp://www.srcm.org.
Shri Ram Chandra Mission (SRCM) was registered in India in the year
1945. The Mission is a non-profit spiritual organization in India, and in all the
countries where it is registered.
Over the years, the Mission has grown enormously, and now has more than 1000
centres in India, and is present in 90 countries spread over all the continents.
The Mission now has more than 2,00,000 abhyasis worldwide practicing the
Sahaj Marg system of meditation.
They submitted that the Mission does not charge any fees of any kind for
this spiritual training.
Therefore, from the details available on record as well as said website and
submission made by the said service provider, I find that the activities of
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 29 of 43
construction carried out by the said service provider is not having commercial
use.
5.3.3
order,
Under the circumstances, as analyzed by me in para 4 of this
I hold that the construction carried out in this regard is not classifiable
under the category of “Commercial or Industrial Construction and accordingly,
the demand of Service tax of Rs. 7,15,287/- is not sustainable and liable to be
dropped.
5.4.
GERMI: (Pandit Deen Dayal University):
5.4.1
With regard to demand of service tax at serial No.2 of the table for
year 2006-2007 of the show cause notice it is the submission of the said
service provider that, service-tax demand is made for works executed by them
for Gujarat Energy Research and Management Institute (GERMI), which is also
known as “Pandit Deen Dayal University” registered as a Society under the
Societies Registration Act. The institute is set up by the Government of Gujarat
and it has established a Petroleum University named as Pandit Deen Dayal
Petroleum
University,
located
on
Sarkhej
–
Gandhinagar
road,
near
Gandhinagar; that they have constructed the building, which is complete and
the said University is functioning. It is an educational institution and there is
no commercial or industrial use. You may verify the facts and produce any
evidence of commercial or industrial use, if you have, or find any. When
one
considers the details of GERMI on their websites, namely – www.pdpu.ac.in
and www.germi.org. the details shown therein clearly indicate that it is an
educational institution and it is not engaged in any industrial or commercial
activities. They enclosed
the extracts from website of GERMI and also the
extracts from the Annual Report for year 2007-08 for your consideration.
Further, the description of the works in column 3 of the tables in the show
cause notice also clarifies that the construction was for academic and
administrative block of Pandit Deen Dayal University and therefore, these
works would also fall outside the purview of commercial and industrial
construction service. The Central Government has clarified under the above
referred Circular that even the offices, administrative buildings etc., used by
Government
organizations
or
the
organizations
engaged
in
religious,
educational and similar activities were not liable for Service-tax under this levy.
In this view of the matter, demand of service tax for the works executed by us
for GERMI is wholly illegal.
5.4.2
In this regard I find that the courses conducted by the said service
provider on behalf of “Pandit Deen Dayal University” registered as a Society
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 30 of 43
under the Societies Registration Act. The institute is set up by the Government
of Gujarat and it has established a Petroleum University named as Pandit Deen
Dayal Petroleum University, located on Sarkhej – Gandhinagar road, near
Gandhinagar, however from the said web site I find that the said University is
charging hefty fees from the students who are enrolled for study. For example
the details of 4 year B.Tech Programme the details downloaded from their
website reveals the said facts.
Courses offered by Pandit Deendayal Petroleum University
B.Tech (Petroleum Technology)
The 4 Year B.Tech Programme in Petroleum Engineering is based on integrated approach of
relevant basic sciences and engineering and Oil & Gas industry technology operations and
emphasis in the application of these knowledge base to exploration, drilling, production and
reservoir engineering.
Eligibility:- The minimum academic qualification for admission is 10+2 or its equivalent with
Mathematics, Physics and Chemistry.
Admission Criteria:- Admission through All India Engineering Entrance Examination
(AIEEE) Score Merit List
Fees:- Rs. 88,500/- per year
Under the circumstances as analyzed by me in para 4 of this order, I find that
the construction carried out by the said service provider is used for commercial
purpose and I am unable to accept their submission that the said receipt by
the said service provider against providing construction of Commercial or
Industrial Service is not taxable on the ground on which they pleaded.
5.4.3
Under the circumstances, I hold that the activities of construction
on behalf of “Pandit Din Dayal University
classifiable under the
by the said service provider is
category of “Commercial or Industrial Construction
Service’ and accordingly is liable to service tax. Therefore, the demand of
Service tax of Rs. 15,64,760/- is liable to be confirmed as alleged in the show
cause notice.
5.5
Gujarat State Petroleum Corporation (GSPC):
5.5.1
With regard to demand of service tax at serial No.3 of the table for
year 2006-2007 of the show cause notice, it is the submission of the said
service provider that service-tax demand is made for works executed by them
for GSPC. These works were for Gujarat State Petroleum Corporation, a State
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 31 of 43
Government Corporation; and the works was for strengthening of culvert on
road near Kanawara village in Anand District. A copy of the work order issued
to us by GSPC was enclosed. A perusal of the above works order shows that
the work was for culvert strengthening i.e. strengthening of a road bridge; and
thus, this was works for public benefit. Strengthening of culvert has not been
works of any commercial or industrial nature and therefore, there was no levy
of Service-tax for these works either. Therefore, the demand of Service-tax for
this public utility activity is also illegal.
5.5.2
In this regard I would like to have look at the definition of
“Commercial or Industrial Construction” as defined under section 65(25a) of
the Finance Act,1994 which is as under;
(25b) [“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)
used, or to be used, primarily for; or
(ii)
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;]
The said service is table service as defined under section 65(105)(zzq) of the Finance Act, as
under.
(zzq) to any person, by [any other person], in relation to [commercial or industrial
construction [* *
*];
[Explanation. — For the purposes of this sub-clause, the construction of a new building
which is intended for sale, wholly or partly, by a builder or any person authorised by the
builder before, during or after construction (except in cases for which no sum is received
from or on behalf of the prospective buyer by the builder or the person authorised by the
builder before grant of completion certificate by the authority competent to issue such
certificate under any law for the time being in force) shall be deemed to be service
provided by the builder to the buyer;]
5.5.3 From the aforesaid definition, I find that it does not include such services
provided in respect of roads, airports, railways, transport terminals, bridges,
tunnels and dams]. As per their submission they had carried out the activities
of culvert strengthening. The meaning of “culvert” is found to be “septic tank”,
“open drain” or “gutter”. As per Oxford Advanced Learner’s Dictionary the
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 32 of 43
“Culvert” means “a tunnel that carries a river or pipes for water under a road.”
Whereas, it is their contention that the said activities is
strengthening of a
road bridge is not acceptable. This is misrepresentation of the facts just to have
benefit of exclusion clause available with regard to construction of road and
bridges in the definition of the “Commercial or Industrial Construction” service.
The activities of culvert strengthening i.e. strengthening of “septic tank”, “open
drain” or “gutter” is not excluded from the said definition. Apart from this, M/s
GSPC is a commercial concern and not the non commercial establishment.
Therefore, I find that their submission is not acceptable.
5.5.4
Under the circumstances, I hold that the activities of construction
on behalf of M/s GSPC carried out by the said service provider is classifiable
under the
category of “Commercial or Industrial Construction Service’ and
accordingly is liable to service tax. Therefore, the demand of Service tax of Rs.
34,483/- is liable to be confirmed as alleged in the show cause notice.
5.6
RRDT, Gokul Gram Yojana:
5.6.1
With regard to demand of service tax at serial No.6 of the table for
year 2006-2007 of the show cause notice,
it is the submission of the said
service provider that the works in question has been for construction of
Community Halls under Gokul Gram Yojana of Reliance Rural Development
Trust (RRDT). Gokul Gram Yojana is a prestigious scheme of the Government
of Gujarat.
This scheme was started in 1995.
To support this scheme,
Government of Gujarat announced the incentive policy stating that an
industrial undertaking setting up an industrial unit in an industrially
backward area with the project cost of more than Rs.10 crores and eligible to
avail sales tax incentives, shall have to contribute 2% of sales tax incentives
availed of in case of exemption, and 3% of deferred amount in case of sales tax
deferment. Reliance availed the tax incentives as per Gujarat Governments
industrial policy and donated Rs. 51.00 lakhs to this bhandol. They enclose
extracts of Gokul Gram Yojana, the work under this scheme and related
matters obtained from the website, namely – ruraldev.gujarat.gov.in. The
purpose for which the works was executed by them, namely – construction of
Community Halls is also clearly not that of commercial or industrial nature.
Since this has also been the works for benefit and upliftment of downtrodden
people at large and the works having been executed under a public scheme of
the State Government, no commercial or industrial motive was involved.
Therefore, these works also fall outside the purview of Service-tax and no
liability to pay Service-tax on them for any of these works would arise and
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 33 of 43
therefore, the proposals leveled in this show cause notice do not hold any
water.
5.6.2
In this regard I find that the construction in question carried out
by the said service provider is for Gokul Gram Yojana of Reliance Rural
Development Trust (RRDT) was launched by the Government of Gujarat and
the purpose of the Government is not commercial one.
5.6.3
Under the circumstances, as analyzed by me
in para 4 of this
order the service provider the said construction is for Government body can not
be considered for commercial usage and the benefit of the said circular as
analyzed and discussed by me in para supra is admissible for such activities.
Therefore, I hold that the construction carried out in this regard is correctly
falls under excluded category of “Commercial or Industrial Construction as per
the said circular. Accordingly, demand of Service tax of Rs.1,08,971/- is not
sustainable and liable to be dropped.
5.7
Sant Hirdram Swami Basantram Sewa Trust; Mandir and
Prayer Hall.
5.7.1
With regard to demand of service tax at serial No.5 of the table for
year 2006-2007 in the show cause notice, it is the submission of the said
service provider that the works in question relates to construction of temple.
The description of the works in column 3 of the table itself shows that it was a
Mandir (temple) and prayer hall. Sant Hirdram Swami Basantram Sewa Trust
has been a registered charitable Trust.
The construction of the temple and
prayer hall has been undertaken at C-75/76, Kubernagar, Ahmedabad and is
complete and in use.
They enclose copy of the work order for these works.
However, it is needless to emphasize that construction of a temple and a prayer
hall for a religious Trust would never fall within the taxable category of
commercial and industrial construction service. The demand of service-tax for
these works is therefore, wholly illegal.
5.7.2
In this regard I find that the construction in question carried out
by the said service provider is for Sant Hirdram Swami Basantram Sewa Trust
has been a registered charitable Trust. The said works in question relates to
construction of temple and it was a Mandir (temple) and prayer hall. In this
regard I find that such construction in no way can be considered as having
commercial usage.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
5.7.3
Page 34 of 43
Under the circumstances, as analyzed by me
order, I find that the said construction on behalf of
in para 4 of this
Sant Hirdram Swami
Basantram Sewa Trust can not be considered having commercial usage and
accordingly, service provider to such body can not be considered as “
Commercial or Industrial Construction” . Therefore, I find substance in the
submission of the said service provider in light of the said circular. Accordingly,
I hold that demand of service tax of Rs. 54,529/- is liable to be dropped.
6.
Thus, out of the total demand of service tax of Rs.34,89,946/- I
confirm demand of Service Tax of Rs. 16,51,471/- and Drop the demand for
Rs. 18,38,475/-tabulated as under.
Sr.
No.
Name of the
Party
Amt. on
which S.
Tax not
paid
Work Done
Taxable
value after
abatement
(33%)
S.Tax
@
S.Tax Amt.
(Rs.)
AMOUNT
CONFIRM
ED
AMOUN
T
DROPP
ED
2005-06
1
2
3
RIL (retail
outlet)
DAE, Pune
Counter of PA Block
1551634
512039
10.2
52228
52228
0
Lab, Building, Hostel
1173082
387117
10.2
39486
0
39486
Shri
Ramchandra
Mission
Meditation Hall,
Dormitory Building,
apartment Building
4143264
1367277
10.2
139462
0
139462
2006-07
1
DAE, Pune
Lab, Building, Hostel
22781801
7517994
12.24
920202
0
920202
2
GERMI
Academic &
Administrative Block
(Pt. Deen Dayal
University)
38739367
1278399
12.24
1564760
1564760
0
3
GSPC
Strengthening of
Culvert
853720
281728
12.24
34483
34483
0
4
Shri
Ramchandra
Mission
Meditation Hall,
Dormitory Building,
apartment Building
14255911
4704451
12.24
575825
0
575825
5
Sant Haridaram
Swami
Basanram
Sewa Trust
Mandir & Prayer Hall
1350000
445500
12.24
54529
0
54529
6
RRDT
Gokul Gram Yojana
2697845
890289
12.24
108971
0
108971
87546624
17384794
3489946
1651471
1838475
TOTAL
7.
With regard to Suppression of Facts and Penalty.
7.1
As discussed above the entire demand is sustainable on merits, it
was the duty of the said service provider to declare such activities, and receipt
towards the same in their ST-3 returns filed by them from time to time. ST-3
returns are prescribed under the statute so that department can form view
with regard to the taxability of the services. I find that the said service provider
was failed to provide the same to the department. Not only that I also find that
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 35 of 43
when the very basic document on the basis of which the usage of the
construction carried out should have been verified had not even produced by
them to the officer who were deployed for audit nor had produced before the
undersigned. The demand of service tax on the services rendered by the said
service provider is found to be sustainable on merit as discussed above. The
said service tax is not discharged by them as provided under section 68 of the
Finance Act, 1994. Further, the circular cited by the said service provider is
grossly mis quoted. Had they looked in the manner analyzed in this order one
would have been convinced that their service is liable to tax. Therefore, I find
that it is an intentional effort by the said service provider not to interpret the
said circular which unambiguously provides that the verification with regard to
“commercial” usage
has to be verified on the basis of approved plan of the
construction. When any service provider intend to avail benefit of the said
circular, they should discharge their onus stipulated in the said circular.
Under the circumstances, I find that they suppressed material facts with intent
to evade service tax, and I find that the demand of service tax is also
sustainable on limitation. Therefore, their claim in this regard is not
acceptable. I have also gone through the various citations made by the said
service provider in this regard, however I find that as discussed above, the said
are not relevant to the present facts of the case and are distinguishable.
Accordingly, I find that these citations do not come in their rescue.
7.2
I find that the charge of suppression of material facts with intention to
evade service tax has been conclusively established herein above. Had the
department not been audited, the said taxable value would have been
escaped assessment and might have resulted in non payment of service tax.
They were aware of the facts regarding payment of service tax on the above
services rendered by them but have not paid/short paid or have not
disclosed before the department. The suppression with an intent to evade
payment, on part of the assessee, is proved beyond doubt and proviso to
Section 73(1) of the Finance Act, 1994 has rightly been applied in the
instant case and therefore, by their such act of omission and commission,
the assessee has rendered themselves liable for penalty. Further, how the
extended period is to be computed has been clarified by various judgments.
In this regard, I rely on the decision delivered by Hon’ble Supreme Court of
India in the case of appeal filed by the department in the case of M/s Mehta
& Co.
cited as 2011(264) ELT 481 (SC) where in identical issue was decided
reversing the decision of CESTAT. Relevant para is reproduced below:-
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 36 of 43
“24. The cause of action, i.e., date of knowledge could be attributed to the appellant in the
year 1997 when in compliance of the memo issued by the appellant and also the summons
issued, the hotel furnished its reply setting out the details of the work done by the
appellant amounting to Rs. 991.66 lakhs and at that stage only the department came to
know that the work order was to carry out the job for furniture also. A bare perusal of the
records shows that the aforesaid reply was sent by the respondent on receipt of a letter
issued by the Commissioner of Central Excise on 27-2-1997. If the period of limitation of
five years is computed from the aforesaid date, the show cause notice having been issued
on 15-5-2000, the demand made was clearly within the period of limitation as prescribed,
which is five years.”
I further rely on the following judgments of Hon’ble Supreme
Court & Tribunals ;
 Mathania Fabrics Vs CCE, Jaipur reported in 2008 (221) ELT 481
(SC)
 CCE, Ahmedabad I Vs M Square Chemicals reported in 2008 (231)
ELT 194 (SC)
 Salasar Dyg & Ptg. Mills (P) Ltd., Vs CCE, Surat reported in 2009
(235) ELT 93 (Tri-Ahmd.)
 Associated Cement Companies Ltd., Vs CC reported in 2001 (128)
ELT 21 (SC)
Hon’ble High Court of Gujarat in the case of CCE, Surat – I Vs
Neminath Fabrics Pvt. Ltd., reported at 2010 (256) ELT 369 (Guj),
while deciding the similar issue in Central Excise, has held that proviso can
not be read to mean that because there is knowledge, suppression which
stands established disappears – concept of knowledge, by no stretch
imagination, can be read into
of
provisions – suppression not obliterated,
merely because department acquired knowledge of irregularities. The
relevant para is reproduced below ;
“20. Thus, 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. The
period cannot by reason of any decision of a Court or even by
subordinate legislation be either curtailed or enhanced. In the present
case as well as in the decisions on which reliance has been placed by
the learned advocate for the respondent, the Tribunal has introduced a
novel concept of date of knowledge and has imported into the proviso
a new period of limitation of six months from the date of knowledge.
The reasoning appears to be that once knowledge has been acquired
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 37 of 43
by the department there is no suppression and as such the ordinary
statutory period of limitation prescribed under sub-section (1) of
Section 11A would be applicable. However such reasoning appears to
be fallacious inasmuch as once the suppression is admitted, merely
because the department acquires knowledge of the irregularities the
suppression would not be obliterated.”
7.3
In view of the above, I find that extended period for demand of
service tax under the proviso to section 73(1) of the Finance Act, 1994 was
rightly invoked and the SCN is sustainable on limitation. Therefore demand of
Service tax of Rs. 16,51,471/- ( Rupees sixteen lacs fifty one thousand four
hundred seventy one only.) is recoverable from the said service provider along
with Interest as provided in proviso to Section 73(1) of the Finance Act, 1994
read with Section 75 of the Act ibid.
8.
Since the said service provider had not discharged service tax
liability on the amount of taxable value received demanded under the show
cause notice and therefore, they have contravened the provisions of Section 67,
68, of the Finance Act, 1994 and thereby rendered themselves liable to penal
action under Sections 76, 77 & 78 of Finance Act 1994 as discussed below.
9.
Penalty under Section 76:
9.1
I further observe that during the relevant period M/s N.J.Devani
Builders Pvt. Ltd.
had defaulted in payment of service tax which has been
established as not paid, in accordance with the provisions of section 68 of the
Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, and thereby
rendered liable to pay mandatory penalty under the provisions of Section 76 of
the Finance Act, 1994 for default in payment of service tax on time till the final
payment. It has come to my notice that till date M/s N.J.Devani Builders Pvt.
Ltd. had not paid the service tax, hence imposition of mandatory penalty under
Section 76 is once again justified.
9.2
Accordingly, I hold that M/s N.J.Devani Builders Pvt. Ltd.
are
liable to imposition of penalty under Section 76 of the Finance Act, 1944. My
conclusion is also based on various decisions of Hon’ble High Courts &
Tribunals as mentioned below ;
 CCE & ST Vs First Flight Couriers Ltd reported at 2007(8) STR 225
(Kar.)
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 38 of 43
 UOI Vs Aakar Advertising, reported at 2008 (11) STR.5 (Raj.)
 UOI Vs Shiv Ratan Advertisers reported at 2008 (12) STR 690 (Raj.)
 Shiv Network Vs CCE, Daman reported at 2009 (14) STR 680 (TriAhmd)
 CCE, Vapi Vs Ajay Sales Agencies reported at 2009 (13) STR 40 (Tri–
Ahmd)
 Siddhi Motors Vs CCE, Rajkot reported at 2009 (15) STR 422 (TriAhmd)
9.3
I further observe that the Hon’ble CESTAT in a recent judgment in
the case of M/s Gujarat Industrial Security Force Society Vs CST, Ahmedabad,
vide order No. A/1110/WZB/AHD/2010 dated 05.08.2010, has held that no
lenient view can be taken under section 76 of the Finance Act, 1994. The
relevant paras are reproduced below;
“2.
After hearing both the sides, I find that in this case, the assessee
was registered more than 6 years back and no explanation has been given
by them for delayed filing of return and delayed payment of service tax.
Under these circumstances, I am not finding fault in stand taken by the
lower authority that penalty is imposable under section 76 and once it is
held that penalty is imposable under section 76, the amount fixed as per
the provision of section 76 is required to be imposed. Under these
circumstances, even though the Ld. Advocate submitted that the appellant
is a non profit organization, no lenient view can be taken in view of the
provisions of law.
3.
9.4
Accordingly, the appeal is rejected.”
Hon’ble High Court of Gujarat in the case of CCE & Cus. Vs Port
Officer, reported at 2010 (19) STR 641 (Guj) has now settled the issue of
penalty under Section 76. The relevant para is reproduced below ;
“10. A plain reading of Section 76 of the Act indicates that a person who is
liable to pay service tax and who has failed to pay such tax is under an
obligation to pay, in addition to the tax so payable and interest on such
tax, a penalty for such failure. The quantum of penalty has been specified
in the provision by laying down the minimum and the maximum limits with
a further cap in so far as the maximum limit is concerned. The provision
stipulates that the person, who has failed to pay service tax, shall pay, in
addition to the tax and interest, a penalty which shall not be less than one
hundred rupees per day but which may extend to two hundred rupees for
everyday during which the failure continues, subject to the maximum
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 39 of 43
penalty not exceeding the amount of service tax which was not paid. So far
as Section 76 of the Act is concerned, it is not possible to read any further
discretion, further than the discretion provided by the legislature when
legislature has prescribed the minimum and the maximum limits. The
discretion vested in the authority is to levy minimum penalty commencing
from one hundred rupees per day on default, which is extendable to two
hundred rupees per day, subject to a cap of not exceeding the amount of
service tax payable. From this discretion it is not possible to read a further
discretion being vested in the authority so as to entitle the authority to levy
a penalty below the stipulated limit of one hundred rupees per day. The
moment one reads such further discretion in the provision it would amount
to re-writing the provision which, as per settled canon of interpretation, is
not permissible. It is not as if the provision is couched in a manner so as to
lead to absurdity if it is read in a plain manner. Nor is it possible to state
that the provision does not further the object of the Statute or violates the
legislative intent when read as it stands. Hence, Section 76 of the Act as it
stands does not give any discretion to the authority to reduce the penalty
below the minimum prescribed.”
9.5
The Hon’ble High Court of Gujarat has further confirmed the above
view in the case of CCE Vs S J Mehta & Co., reported at 2011 (21) STR 105
(Guj.) and CCE Vs Bhavani Enterprises reported at 2011 (21) STR 107
(Guj.).
10.
Penalty under Section 77
I further find that the assessee have failed to file their ST-3 returns
correctly for the period covered under the impugned show cause notice &
hence they are liable for penalty under Section 77 for non filing of ST-3 returns
correctly for the period in dispute.
11.
11.1
Penalty under Section 78
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
N.J.Devani Builders Pvt. Ltd. , has been established beyond doubt as discussed
and concluded in the earlier part of this order. Accordingly, I hold that M/s
N.J.Devani Builders Pvt. Ltd. is also liable to penalty under the provisions of
Section 78 of the Finance Act, 1994.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
11.2
Page 40 of 43
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.
11.3
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 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.
11.4
I further observe that recently 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.)
12.
12.1
Penalty under Section 76 & 78 justified.
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
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 41 of 43
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 N.J.Devani
Builders Pvt. Ltd. has committed default with mens rea, the decision of the
tribunal is squarely applicable.
12.2
Therefore, I am of the view that in the facts and circumstances of the
case, it is justifiable, if the penalty is imposed 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/ 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.)
13.
In light of the aforesaid discussions and findings I hold that the service
tax amount of Rs. 16,51,471/- 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.
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
14.
i.
Page 42 of 43
Accordingly, I pass the following order:I confirm
the demand of Service Tax
amounting to Rs. 16,51,471/-
(Rupees sixteen lacs fifty one thousand four hundred seventy one
only) short paid/not paid on “Commercial or Industrial Construction
Service”, during 2005-06 to 2006-07 and ordered to recover the same
from them under section 73(2) of Finance Act, 1994.
ii
I drop the demand of Rs. 18,38,475/- (Rupees eighteen lacs thirty
eight thousand four hundred seventy five only) on “Commercial or
Industrial Construction Service during the period 2005-06 to 200607.
iii
I direct M/s N.J.Devani Builders Pvt. Ltd. to pay the interest as
applicable on the amount of their service tax liability for the delay in
making the payment under Section 75 of the Finance Act, 1994.
iv
I impose a penalty of Rs.200/- (Rupees Two Hundreds Only) upon them
per day or at the rate of 2% of the service tax amount per month,
whichever is higher, under the provisions of Section 76 of the Finance
Act, 1994, as amended, for failure to pay Service Tax and Education Cess
within the stipulated period as required under the provisions of Section
68(1) of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules,
1944, as amended. As the actual amount of penalty could be depending
on actual date of payment of service tax, however, as per Section 76 of
the Finance Act, 1994, penalty will be restricted to the above confirmed
amount of service tax liability.
v
I impose penalty of Rs. 5,000/- (Rupees five
thousand only) under
Section 77 of the Finance Act, 1994 for failure to file prescribed Service
Tax Returns within the stipulated time.
vi
I also impose a penalty of Rs. 16,51,471/- (Rupees sixteen lacs fifty
one thousand four hundred seventy one only) upon them under
Section 78 of the Finance Act, 1994 for suppressing the value of taxable
services provided by them before the Department with intent to evade
OIO. NO. 55 /STC-AHD/ADC(MKR)/11-12
Page 43 of 43
payment of service tax under the category of Commercial or Industrial
Construction Service. If the service tax amount is paid along with
appropriate interest as applicable, within 30 days from the date of receipt
of this order, then the amount of penalty under Section 78 shall be
reduced to 25% of the service tax amount, provided if such penalty is
also paid within such period of 30 days.
-Sd-
(Dr. Manoj Kumar Rajak)
Additional Commissioner
Service Tax, Ahmedabad
F.No.STC-11/O&A/SCN/NJD/JC/R-15/D-III/10-11
Date : 13/01/2012
BY RPAD
To,
N.J. Devani Builders Private Limited,
B/h Ishwar Bhuvan,
Nr. Kailash Flats, Navrangpura,
Ahmedabad-380009.
Copy to:
i.
ii.
iii.
iv.
v.
The Commissioner, Service Tax, HQ., Ahmedabad ( Attn. Review Cell ).
The Assistant Commissioner (Audit) Service Tax, Ahmedabad
The Assistant Commissioner, Service Tax, Division-III, Ahmedabad.
The Superintendent, Range-XV, Div-III, Service Tax, Ahmedabad along
with an extra copy of OIO to be delivered to the assessee and submit the
acknowledgement to this office.
Guard File