1
BRIEF FACTS OF THE CASE:
M/s M. V. Omni Projects (India) Ltd., located at 74, New York Tower “A”. S.G.
Highway, Thaltej, Ahmedabad-380051(here-in after referred to as “M/s MVOPL” for the sake
of brevity) is registered vide Service Tax Registration No- AABCM1155AST001 under the
categories of
a. Construction of Residential Complex Service (CON),
b. Erection, Commissioning & Installation Service, Commercial and Ind. Construction
Service (CCS) and
c. Management, Maintenance & Repairs Service
2.
During the course of CERA audit of the records of M/s MVOPL for the period 2006-07
to 2010-2011, it was noticed that:
i.
NON PAYMENT OF SERVICE TAX ON JNNURM PROJECTS: M/s MVOPL
had provided Construction of Residential Complex Service under JNNURM
(Jawaharlal Nehru National Urban Renewal Mission) and did not discharge any
Service Tax liability on the services provided by them.
ii.
NON PAYMENT OF SERVICE TAX ON COMMERCIAL CONSTRUCTION:
M/S MVOPL undertook the construction work of a “Construction of NBCC
Centre at plot No.2, Community Centre, Okhla Phase-I, New Delhi” for National
Buildings Construction Corporation Limited (NBCC) vide acceptance letter of
NBCC dated 23.08.2010. The community center was a commercial building but
did not discharge the service tax liability on the services provided by them under
the category of “Commercial Construction service”.
iii.
EXCESS UTILISATION OF CENVAT CREDIT: M/s MVOPL was provider of
taxable as well as exempted service. They used to take full CENVAT credit of
17 input services mentioned at Rule 6(5) ibid as well as of other input services
like telephones, traveling expenses, advertisement, courier etc. But were not
maintaining separate accounts for the CENVAT credits of input services. During
scrutiny of records of M/s MVOPLfor the period 2006-07 and 2007-08, it was
found that M/s MVOPLwas liable to pay service tax of Rs.31,18,433/- (including
EC & SHEC) for which they were eligible to utilize CENVAT credit only to the
tune of Rs. 6,23,689/- against which they actually utilized CENVAT credit of
Rs.22,28,587/-. This resulted in excess utilization of CENVAT credit of Rs.
16,04,898/-.
iv.
WRONG AVAILMENT OF CENVAT CREDIT: M/S MVOPL had received the
services from M/s. Infra Craft Engineering & Projects, Hyderabad for trenching,
2
Ducting, OFC Pulling & other works at Eluru- T.P.Gudem (order No.
11408401332) during the period 2008-09. However, no payment was made by
them to M/s. Infra Craft Engineering & Projects, Hyderabad against the RA bills
received by them from M/s. Infra Craft Engineering & Projects, Hyderabad
during the year 2008-09. Inspite of this, M/s MVOPL had availed service tax
credit to the tune of Rs.15,75,258/- same were utilized against the payment of
service tax during 2008-09.
3.
NON PAYMENT OF SERVICE TAX ON JNNURM PROJECTS
M/s MVOPL was engaged in providing services falling under the category of
“Construction of Residential Complex Service” under JNNURM between 2007-08 & 2010-11
vide Work Order No. JNNURM Cell/248 dated 24.05.2007, No-70 dated 06.08.2007 and
Order No. JNNURM Cell/2690 dated 27.02.2009 for projects at Vadodara, Ahmedabad and
Vadodara respectively.
3.1
The scope of the work covered under the said project was :
-
Construction of Housing Block of G.F.+3 RCC Frame structure
having 32 units in each block.
3.2
-
internal water supply, sewerage
-
coordination/ liasioning for connection
-
release of electricity in each unit
Apart from the above, the infrastructure services like water supply, sewerage, street
light, and road and storm water drainage outside building and within the plots were also
covered under the project.
3.3
M/s MVOPL was also liable to supply materials required for the execution of the
project and pay VAT on the supply of such materials.
3.4
The projects were intended for construction of more than 12 residential units. Thus, the
project work executed by M/s MVOPLwas taxable under the “Construction of Residential
Complex Service” for the services provided till 30.06.2010.
3.5
M/s MVOPL received a sum of Rs. 70, 13, 97,082/- (including TDS) for the three
projects. After allowing abatement of Rs. 41,73,71,417/- (as admissible under Notification
No.1/2006-S.T.) M/s MVOPL was liable to pay Service Tax of Rs. 1,85,58,542/- including EC
and SHEC on the taxable value of Rs. 20,55,71,000/- as detailed below, which has not been
discharged by M/s MVOPL.
3
Particulars
AMC
VMSS BAP
Total amount received
34,12,11,956
13,36,77,574
22,65,07,552
70,13,97,082
Less: Abatement
Taxable value including S.T
Taxable value excluding S.T
S.T including EC & SHEC
18,51,16,589
9,11,76,828
8,21,30,504
90,46,324
8,95,63,975
4,41,13,599
4,16,13,791
24,99,808
14,26,90,853
7,02,80,573
6,32,68,163
70,12,410
41,73,71,417
20,55,71,000
18,70,12,458
1,85,58,542
3.6
VMSS Kisanwadi
Total
This resulted in non-payment of Service Tax Rs. 1,85,58,542/- (statement enclosed)
which is required to be recovered under proviso to Section 73(1) along with interest under
Section 75 of the Finance Act, 1994.
3.7
Service Tax on “Construction of Residential Complex Service” was levied under sub –
section (105) (zzzh) of section 65 of the Finance Act, 1994 with effect from 16.06.2005.
Section 65(30a) of the Finance Act,1994 defines “ Construction of Complex” as:
(a)
Construction of a new residential Complex or a part thereof,
(b)
Completion and finishing services in relation to residential complex such as
glazing, plastering , painting, floor and 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
activities; or
(c)
Repair, alteration, renovation or restoration of or similar services in relation
to residential complex
3.7.1 Section 65 (91a) of Finance Act defines “ residential complex” as :
Any complex comprising of
(i)
a building or buildings , having more than twelve residential
Units;
(ii)
a common area; and
(iii)
any one or more of facilities or services such as park, lift, parking space ,
community hall, common water supply or effluent treatment
system,
located in a premises and the layout of such premises is approved by an
authority under any law for the time being in force, but does not include a
complex which is constructed by a person directly engaging any other
person for designing or planning of the layout, and the construction of
such complex is intended for personal use as residence by such person.
3.7.2 Further as per Notification No. 28/2010- ST dated 22.06.2010, Service Tax on
construction of complex service, when provided to Jawahar Lal Nehru National Urban
Renewal Mission (JNNURM) and Rajiv Awaas Yojana was exempted w.e.f. 01.07.2010.
4
3.8
It is thus evident from para 3.7 supra that the services provided by M/s MVOPL under
the category of “Construction of Residential Complex Service” under JNNURM Project were
taxable upto 01.7.2010. M/s MVOPL received Rs. 701397082/- towards the services provided
by them during the period upto 1.7.2010. After allowing abatement of Rs. 41,73,71,417/- , M/s
MVOPL was required to pay Service Tax amounting to Rs. 1,85,58,542/- (including Edu. Cess
and Sec. Edu. Cess) on the taxable value of Rs. 20,55,71,000/- . The worksheet for Service
Tax not paid is appearing in Annexure A to this Show Cause Notice
4
NON
PAYMENT
OF
SERVICE
TAX
ON
COMMERCIAL
CONSTRUCTION:
4.1
M/s MVOPL undertook the construction work of a “Construction of NBCC Centre at
plot No.2, Community Centre, Okhla Phase-I, New Delhi” for National Buildings
Construction Corporation Limited (NBCC) vide acceptance letter of NBCC dated 23.08.2010.
The community center was a commercial building. As per special condition No.3 of the
contract, the contractor was liable to submit regular invoice/bill under Rule 4A of the Service
Tax Rules, 1994 and produce proof of deposit of service tax to the NBCC as and when
demanded. It also stipulates that the contractor should draw the bill as (Value of work
executed + Service Tax). Thus, the contractor was liable to pay the service tax over and above
the value of works done.
4.2
Perusal of the bills raised by M/s MVOPL revealed that Service Tax was not charged in
the RA Bills raised to NBCC.
4.3
As per Section 65(105) (zzq), services provided or to be provided by a person to any
other person in relation to commercial or industrial construction is taxable w.e.f. 10.09.2004.
4.3.1 Section 65(25b) defines “Commercial Or Industrial Construction” as
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 —
5
(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.
4.4
It is thus evident from the above that the services provided by M/s MVOPL under the
category of “Commercial Or Industrial Construction” are taxable.
4.5
On scrutiny of ledgers Folio relating to NBCC in the books of accounts of M/s
MVOPL , for the year 2010-11 and RA-Bills No.1 to 4 drawn by M/s MVOPL it was noticed
that M/s MVOPL received an amount of Rs. 5,29,57,483/- excluding amount withheld and
including VAT, TDS, other advances etc. during the period. However, Service Tax liability on
the same was not discharged.
4.6
A worksheet has been prepared for calculation of Service Tax not paid on the services
provided by M/s MVOPL under the category of “Commercial Or Industrial Construction”. The
said worksheet is appearing as Annexure B to this Show Cause Notice. As per the worksheet,
M/s MVOPL received Rs. 5,29,57,483/- on account of construction work of a “Construction of
NBCC Centre at plot No.2, Community Centre, Okhla Phase-I, New Delhi. After allowing
abatement of Rs. 3,70,70,237/- , M/s MVOPL was required to pay Service Tax amounting to
Rs. 16,36,388/- (including Edu. Cess and Sec. Edu. Cess) on the taxable value of Rs.
1,58,87,246/- .
5.
EXCESS UTILISATION OF CENVAT CREDIT
5.1
M/s MVOPL is provider of taxable services of construction of “Residential Complex
Service”, “Commercial Or Industrial Construction Service” etc. They also provide services
falling under the category of “Construction Of Commercial Or Industrial Construction
Services” in relation to construction of
Roads and Railways. These services have been
specifically excluded from the definition of the “Commercial Or Industrial Construction
Service” as stated under Section 65(25b) of the Finance Act, 1994.
5.1.1 Similarly, they also provided construction of complex service to Defence Department
under ‘Married Accommodation Schemes” which were to be utilized by the Defence
Department itself. Thus, the services provided by them fell under the purview of personal use
and hence, such projects were not taxable service under the category of “construction of
complex service” when rendered for personal use.
6
5.2
Rule 2(e) of the CENVAT Credit Rules, 2004, stipulates that “exempted services”
means taxable services which are exempt from the whole of the service tax leviable thereon,
and includes services on which no service tax is leviable under Section 66 of Finance Act.
5.3
Rule 6 (2) of the CENVAT Credit Rules, 2004 stipulates that :
Where a manufacturer or provider of output service avails of CENVAT credit in respect
of any inputs or input services, and manufactures such final products or provides such output
service which are chargeable to duty or tax as well as exempted goods or services, then, the
manufacturer or provider of output service shall maintain separate accounts for receipt,
consumption and inventory of input and input service meant for use in the manufacture of
dutiable final products or in providing output service and the quantity of input meant for use
in the manufacture of exempted goods or services and take CENVAT credit only on that
quantity of input or input service which is intended for use in the manufacture of dutiable
goods or in providing output service on which service tax is payable.
5.4
Rule 6(3)(i) of the CENVAT Credit Rules, 2004, stipulates that
“Notwithstanding anything contained in sub-rules (1) and (2), the manufacturer of
goods or the provider of output service, opting not to maintain separate accounts, shall follow
either of the following options, as applicable to him, namely:(i)
the manufacturer of goods shall pay an amount equal to five per cent. of value of
the exempted goods and the provider of output service shall pay an amount
equal to six percent. of value of the exempted services;
5.5
As per CENVAT Credit Rule 6(3 A) for determination and payment of amount
payable under clause (ii) of sub-rule (3), the manufacturer of goods or the provider of output
service shall follow the following procedure and conditions namely:(a) while exercising this option , the manufacturer of goods or the provider of output
service shall intimate in writing to the Superintendent of Central Excise giving the following
particulars namely:(i) name, address and registration no.of the manufacturer of goods or provider of output
service;
(ii) date from which the option under this clause is exercised or proposed to be
exercised.
(iii) description of dutiable goods or taxable services;
(iv) description of exempted goods or exempted services;
7
(v) CENVAT Credit of inputs and input services lying in balance as on the date of
exercising the option under the condition.
5.6
Rule 6(5) of the Rules ibid stipulates that notwithstanding anything contained in sub-
rules (1), (2) and (3), credit of the whole of service tax paid on taxable service as specified in
sub-clause (g), (p), (q), (r), (v), (w), (za), (zm), (zp), (zy), (zzd), (zzg), (zzh), (zzi), (zzk), (zzq)
and (zzr) of clause (105) of section 65 of the Finance Act shall be allowed unless such service
is used exclusively in or in relation to the manufacture of exempted goods or providing
exempted services.
5.7
As per Rule 6(2) of CENVAT credit Rules Rule 2004 it is provided that:-While exercising the option for availing CENVAT credit a manufacturer or output
service provider shall maintained separate account for receipt, consumption and inventory of
input and input service meant for use in the manufacture of dutiable final products or in
providing output service and the quantity of input meant for use in the manufacture of
exempted goods or services and take CENVAT credit only on that quantity of input or input
services which is intended for use in manufacture of dutiable goods or in providing output
service on which service tax is payable
5.8.
Sub Rule(3A) (a), the manufacturer of goods or provider of out put service shall
intimate in writing to the Superintendent of
Central Excise for availing the facility for
exempted as well as dutiable services.
5.9
In the instant case, M/s MVOPL is providing taxable as well as exempted service and
have availed and utilised the CENVAT Credit on common inputs and input services. They
have not maintained any separate accounts for receipt, consumption and inventory of input
services as required as per rule 6(2) of the CENVAT Credit Rules, 2004. M/s MVOPL has not
intimated about availing the facility for dutiable and exempted service. Hence, as per the
provisions made under rule 6(3)(i) of the CENVAT Credit Rules, 2004 for the period upto
31.3.2008 the provider of output service shall utilize credit only to the extent of an amount not
exceeding twenty per cent of the amount of service tax payable on taxable output service and
for the period 01.04.2008 depending on the period the service provider is required to pay an
amount equal to 8% or 6% on the value of exempted services provided by them.
5.10
During scrutiny of records of M/s MVOPLfor the period 2006-07 and 2007-08, it was
found that M/s MVOPLwas liable to pay service tax of Rs.31,18,433/- (including EC &
SHEC) for which he was eligible to utilize CENVAT credit only to the tune of Rs. 6,23,689/-
8
against which he actually utilized CENVAT credit of Rs.22,28,587/-. This resulted in excess
utilization of CENVAT credit of Rs. 16,04,898/- as shown below (detailed statement attached)
which is required to be recovered along with interest under Rule 14 of the CENVAT Credit
Rules, 2004 read with proviso to Section 73 of the Finance Act, 1994. The details have been
worked out in the worksheet appearing as Anneuxre C to this Show Cause Notice.
5.10.1 Further, with regard to recovery of amount calculated @ 8% or 6% on the total
exempted/non taxable value of services provided by Ms/ MVOPL for the period 1.4.2008 on
wards, M/s MVOPL were asked to provide the details of total amount received by them on
account of exempted/non taxable services provided by them to their clients vide letter F.No.
STC/AR-XV/MV Omni/11-12 dated 21.10.2011 issued by the Jurisdictional Superintendent
of Service Tax. Since, they have not provided the data nor the same is available in the ST-3
returns filed by them, the same has not been covered in the present Show Cause Notice. M/s
MVOPL have vide their letter dated 21.10.2011 have requested for 15 days time to provide the
required details.
WRONG AVAILMENT OF CENVAT CREDIT
6.
Scrutiny of records of input credit of the assessee, revealed that M/s MVOPL had
received the services from M/s. Infra Craft Engineering & Projects, Hyderabad for trenching,
Ducting, OFC Pulling & other works at Eluru- T.P. Gudem (order No. 11408401332). M/s
MVOPL had issued RA bills to M/s MVOPL. Eventhough, no payment was made against
the said RA Bill during the year 2008-09 M/s MVOPL had availed the service tax credit to the
tune of Rs.15, 75,258/- as shown below and same were utilized against the payment of service
tax.
RA
Bill
No.
RA-01
RA01A
RA-02
RA02A
RA-04
RA-03
Date
22-06-2008
30-10-2008
Service Ed.
SHEC Total
Date of credit
tax
Cess
taken
credit
5121203 614544 12291 6145 632981
22-06-2008
536932
64432 1289
644
66365
30-10-2008
30-10-2008
30-10-2008
4998995
1508937
15-02-2009
15-02-2009
Amount
of Bill
599879 11998
181072 3621
5999
1811
617876
186505
12166068 1459928 29199 14599 1503726
435026
52203 1044
522
53769
143709
17245
345
172
17762
578734
69448 1389
694
71532
12744802 1529376 30588 15294 1575258
30-10-2008
30-10-2008
28-02-2009
28-02-2009
9
6.1
As per Rule 9 of the CENVAT Credit Rules, 2004, CENVAT credit shall be taken by
the manufacturer or the provider of output service or input service distributor as the case may
be on the basis of certain specified documents which includes bills/invoices/challans etc.
6.2
Further, Rule 4(7) of the CENVAT Credit Rules, 2004, the CENVAT credit in respect
of input service shall be allowed, on or after the day which payment is made of the value of
input service and the service tax paid or payable as is indicated in invoice, bill or, as the case
may be, challan referred to in rule 9.
6.3
Thus, it is evident from the above discussion that M/s MVOPL had wrongly availed
CENVAT credit and subsequently its utilization for payment of service Tax resulted in short
payment of service tax of Rs. 15,75,258/- during the year 2008-09. The same is required to be
recovered under Rule 14 of the CENVAT Credit Rules, 2004. The worksheet showing the
CENVAT credit wrongly availed is appearing as Annexure D to this Show Cause Notice.
7.
In this regard, vide letter dated 28.06.2011 Range Superintendent asked M/s MVOPLto
pay up the amount of service tax as pointed out by the CERA Audit and in response to the
letter M/s MVOPL vide their letter dated 12.07.2011 replied that
-
in case of work done and income earned from the JNNURM Project was
exempted under Notification No. 16/2005 for personal use.
-
Regarding work done for National Building Construction Corporation Limited
(NBCC) they relied on Notification No. 80/2004 issued for Commercial &
Industrial Construction Service, which Exempted construction work of Govt.
Concern & Institution and therefore they have not discharged service tax liability
on that income.
-
In case of excess utilization of CENVAT Credit M/s MVOPLreplied that they
have taken CENVAT credit on 17 services U/R 6(5) of CCR-2004 and have
opted for rule 6(2) &(3) of CCR-2004 and availed full credit of 17 services and
added that the demand of service tax was unjustifiable;
-
that in case of CENVAT credit availed on the basis of service received from M/s
Infracraft Engg. & Projects they requested to drop the issue as at the time of
CERA Audit invoices were not available and now submitted.
7.1
Thereafter the Range Officer vide letter F. No. STC/AR-15/CERA/ MV.Omni/11-12
dated 01.08.2011 further directed M/s MVOPL to pay up the dues as the Noti. No. 16/2005
was not relevant for their activity.
10
7.1.1.
In response to the above letter M/s MVOPL vide their letter dated 03.08.2011
submitted that
-
they relied on Notification No. 15/2005 dated 07.06.2005 for the construction of
residential complex service.
-
7.2
their records were under investigation with the service tax Preventive Section.
Summons dated 22.09.2011 was issued to M/s MVOPL under Section -14 of CEA,1944
asking them to be present for recording of statement. In response to summons Shri Pinkesh B.
Sharma, Manager (Finance) and authorized person of M/s MVOPL appeared on 23.09.2011 to
give his statement but he could not clarify the issue involved in the audit and requested for
some time. Therefore further summons was issued to the assessee on 28.09.2011 asking them
to give their statement in details and in response to the summons Shri Pinkesh B. Sharma,
Manager (Finance) and authorized person of M/s MVOPL appeared on 13.10.2011 and his
statement was recorder under Section 14 of the CEA, 1944 read with Section 83 of the Finance
Act, 1994.
7.2.1
Shri Pinkesh B. Sharma, Manager (Finance) and authorized person of M/s MVOPL
has in his statement interalia stated that
-
their
company main object was to carry out the Construction activities for State
Government, local Authorities and for Central Government.
-
He was shown the LAR-107/11-12, dated 15.07.2011 issued from file no. CERA
(hqrs)/LAR/ST/107/11-12/02-143. After perusing the same he stated that he has already
submitted his reply vide letter their dated of 12.07.2011.
7.2.1.1
The remaining statement was recorded in question and answer form. In reply to
the questions asked, Shri Pinkesh B Sharma has stated as follows:
Q.
The JNNURM projects were exempted as per notification no. 28/2010 dt. 22/06/2010
with effect from 01/07/2010, it is noticed that prior to 01.07.2010 your company has
not discharge the service tax liabilities on the income under the scheme for the
period from the year 2007-08 up to 30/06/2010? Please explain. (Revenue Para-1)
A.
Our company is of view that as per the Notification No. 16/2005 the income generated
for the construction from JNNURM is exempted from the ambit of Service Tax.
Q.
Please peruse the Notification No 16/2005 dated 16.06.2005 and please show the
relevant para which exempt the income for construction of residential for personal
use.
11
A.
In token of having perused the said Notification, I have put my dated signature. In this
regard I state that as per the said Notification the construction of complex service,
when provided to Jawaharlal Nehru National Urban Renewal Mission (JNNURM) is
not exempted under the said Notification. The said Notification exempts the
construction of port or other port only. Therefore I admit that during the period 200708 to 2010-11 ( 30.06.2010), the construction done by our company falls under the
ambit of Service Tax liability.
Q.
After perusal of the above Notification, it is clear that the project discussed herein
above is not exempted from the Service Tax. Do you want to add anything more in
your support?
A.
I already admitted that the project discussed herein above is not exempted from
Service Tax in regard of the Notification No. 16/2005 dated 16.06.2005. But the same
is exempted as per explanation (a) of the Notification No 15/2005 dated 07.06.2005,
the same is exempted.
Q.
Please peruse the per explanation
(a) of the Notification
No 15/2005 dated
07.06.2005 which reads as under:
“(a)
“ personal use” includes permitting the complex for use as residence by
another person on rent or without consideration:
A.
I have perused the said explanation, but the said explanation is regarding the personal
use of the residence by another person on rent or without consideration which is not the
case regarding the construction under taken by our company. I further state that as per
Notification NO. 15/2005 dated 22.06.2010 w.e.f 01.07.2010; the service undertaken of
JNNRUM is exempted from the ambit of Service Tax. Therefore, prior to 22.06.2010,
the construction undertaken by our company was within the ambit of Service Tax.
Q.
Please provide the details of the income and the contracts under taken from
JNNRUM prior to 01.07.2010.
A.
In this regard, I mentioned the details for the same are as under
Particulars
AMC
VMSS BAP
VMSS
Total
Kisanwadi
Amount 34,12,11,956 13,36,77,574 22,65,07,552 70,13,97,082
Total
Received
0 1,35,36,129
Value Received after 6,49,18,540
01.07.2010
Gross
Value 27,62,93,416 13,36,77,574 21,29,71,423
received
upto
30.06.2010
18,51,16,589 8,95,63,975 14,26,90,853
Less: abatement
Taxable
Value 9,11,76,827 4,41,13,599 7,02,80,573
inclusive of S.T
7,84,54,669
62,29,42,413
41,73,71,417
20,55,70,999
12
Taxable
Value
exclusive of S.T.
S.T. including EC &
SHEC
Q.
8,21,30,504
4,16,13,791
6,32,68,163
18,70,12,458
90,46,324
24,99,808
70,12,410
1,85,58,542
You have undertaken constructions work of a “Constructions of NBCC Centre Plot
No. 2, Community Centre, Okhla, Phase 1, New Delhi “for NBCC but you have not
paid the Service Tax on the same. Please explain.(Revenue Para-2)
A.
The CERA Audit para pertains to the non payment of service tax on the income of the
construction work done under National Buildings Construction Corporation Ltd
(NBCC). In this regard I rely upon the Letter No. F. No. 332/16/2010-TRU., dated 245-2010 of the Central Board of Customs and Excise in reference to National Building
Construction Corporation Limited (NBCC). The Para 3 of the said letter is reproduced
below:
“3. As per the information provided in your letter and during discussion, the
Ministry of Urban Development (GOI) has directly engaged the NBCC for
constructing residential complex for central government officers. Further, the
residential complexes so built are intended for the personal use of the GOI which
includes promoting the use of complex as residence by other persons (i.e. the
Government officers or the Ministry). As such the GOI is the service receiver and
NBCC is providing service directly to the GOI for its personal use. Therefore, as for
the instant arrangement between Ministry of Urban Development and NBCC is
concerned, the service tax is not liable. It may, however, be pointed out that if the
NBCC, being a party to a direct contract with GOI, engages a sub-contractor for
carrying out the whole or part of the construction, then the sub-contractor would be
liable to pay service tax as in that case, NBCC would be the service receiver and the
construction would not be for their personal use”.
In this regard further I want to draw your attention to the letter issued by the
Municipal Corporation inviting tenders. The tender starts with words “Tenders are
invited on behalf of the President of India”. Further, we also find that the guarantee
executed by the contractor and agreement entered by the contractor have been
accepted by Municipal corporation for and on behalf of the President of India.
Further, since on behalf of the President of India contractors are entered
into, agreements are entered into and bonds are accepted, Govt. of India is treated
as “Person”. For ready reference, definition of Construction of Complex Services is
reproduced:(a) Construction of a new residential complex or a part thereof; or
13
(b) Completion and finishing services in relation to residential complex such as
glazing, plastering, painting, floor and wall tiling, wall covering and wall
preparing, wood and metal joinery and carpentry, fencing and railing,
construction of swimming pools, acoustic applications or fittings and other
similar services; or
(c) Repair, alteration, renovation or restoration of, or similar services in relation to,
residential complex]
The definition of residential complex service has been given under clause
(91a) of Section 65 as under;
“Residential complex” means any complex comprising of(i) a building or buildings, having more than twelve residential units;
(ii) a common area; and
(iii)
any one or more of facilities or services such as park, lift, parking space,
community hall, common water supply or effluent treatment system, located
within a premises and the layout of such premises is approved by an authority
under any law for the time being in force, but does not include a complex which
is constructed by a person directly engaging any other person for designing or
planning of the layout, and the construction of such complex is intended for
personal use as residence by such person.
Explanation - For the removal of doubts, it is hereby declared that for the
purposes of this clause —
(a)
“Personal use” includes permitting the complex for use as residence by
another person on rent or without consideration;
(b)
“Residential unit” means a single house or a single apartment intended
for use as a place of residence.”]
Residential complex constructed by us are meant for use by the Municipal
Corporation to provide the same on rent/lease basis to the urban poor family and
therefore, it is clearly covered by the explanation given for “Personal use” in the
definition. In this case the Municipal Corporation has engaged us for construction of
residential complex for giving it on rent/lease to the urban poor and therefore this
service cannot be included in the definition of residential complex services. It is
basically the case of one department taking the help of another department to get the
14
work done basically because of specialization of that department in preparing
documents and get the work executed. So we have not paid service tax on the above
income.
On being specifically asked regarding S.T. liability on construction work for
the NBCC okhla project, for the construction of community centre, I state that vide
Circular No. 80/10/2004 dated 17.09.2004 issued for the category ‘Commercial &
Industrial Construction Service’ exempt construction work of govt. concern &
institution. So, work carried out by them for NBCC (i.e. govt. concern) are exempt for
service tax, so they have not discharge service tax liability on that.
Q:
You have referred to the Letter No. F. No. 332/16/2010-TRU., dated 24-5-2010 of the
Central Board of Customs and Excise in reference to National Building Construction
Corporation Limited (NBCC). The para No. 3 of the said letters interalia says that “It
may, however, be pointed out that if the NBCC, being a party to a direct contract with
GOI, engages a sub-contractor for carrying out the whole or part of the construction,
then the sub-contractor would be liable to pay service tax as in that case, NBCC
would be the service receiver and the construction would not be for their personal
use”. What you have to say on that?
A.
On perusal of the above, it appear that the sub-contractor will be required to pay the
Service Tax on such construction. On being specifically asked I produce the working
given in the CERA Audit Report which is as under:
Particulars
Value of Service
AMC
5,53,28,712
23,71,229
VAT Payable
Gross Value
5,29,57,483
Less: Abatement
3,70,70,237
Taxable Value including S.T.
1,58,87,246
15,88,724
S.T.
EC
31,775
SHEC
15,889
Total Payable
Q.
16,36,388
You are providing taxable Service as well as Non taxable/exempted service but you
have not maintained separate account for utilization of the CENVAT Credit. As per
provisions of the Rules you were permitted to utilize CENVAT Credit not exceeding
twenty percent of the Service Tax payable. (Revenue Para-3)
15
A.
On being asked regarding CENVAT credit taken for 17 services under rule 6(5) of CCR
– 2004, I state that it is true that we are providing taxable services as well as non
taxable services together to our various clients. On being further asked as to why we
have not maintained separate account of CENVAT credit. I state that we have opted for
Rule 6(2) & (3) of CCR – 2004, by which we have availed full credit of 17 – services
defined in rule 6(5) of CCR – 2004 & utilized proportionate credit for the remaining
S.T. credit as per rule 6(2) & (3) of CCR-2004. Hence we have availed CENVAT credit
correctly, and hence, demand of service tax credit by the CERA audit party was
unjustifiable.
Q.
It has been observed by the CERA Audit that you have availed CENVAT Credit
without having any invoice for the same. Please explain. (Revenue Para-4)
A.
It has been alleged that we have not produced certain CENVATable invoices to the
CERA party as well as the proof of payments. In this regard I state that we maintain
invoices at respective sites and at the time of Audit we had informed the CERA party
that all the invoices can be produced before them if we are given sufficient time to get
the documents couriered from the sites. But no such time was allowed to us. Now,
herewith, we are producing copy of bill and RA bills as mention audit para along with
the relevant ledgers showing the proof of payment.
Q.
But the bills/invoices produced by you are not tallying with the bills/invoices pointed
out by the CERA Audit. Please explain.
A.
Sir, in this regard I state that the mistake on our part was we had taken the credit
before the receipt of the bills from M/s Infracraft Engineering & project due to some
clerical mistake. The bills as mentioned in CERA report are not available with us
presently. I further state that we had taken CENVAT credit only once.
8.
It is evident from the above discussion that:
a.
the services provided by M/s MVOPL under the Jawahar Lal Nehru National
Urban Renewal Mission (JNNURM) project were taxable upto 30.6.2010 (vide
Notification No. 28/2010- ST dated 22.06.2010) . However, no service tax was
paid by M/s MVOPL on the the services provided by them under the category of
“Construction of Residential Complex Service “ under JNNURM scheme. They
have not paid Service Tax amounting to Rs. 1,85,58,542/-
b.
M/s MVOP did not pay Service Tax on the construction work of a “Construction
of NBCC Centre at plot No.2, Community Centre, Okhla Phase-I, New Delhi”
for National Buildings Construction Corporation Limited (NBCC) vide
acceptance letter of NBCC dated 23.08.2010. The services provided by them fell
16
under the category of “Commercial Construction service” and hence taxable.
They have not paid Service Tax amounting to Rs. 16,36, 388/-.
c.
M/s MVOPLwas provider of taxable as well as exempted service. They used to
take full CENVAT credits of 17 input services mentioned at Rule 6(5) ibid as
well as of other input services like telephones, traveling expenses, advertisement,
courier etc. But they were not maintaining separate accounts for the CENVAT
credits of input services. Hence, were required to utilize credit only to the extent
of an amount not exceeding twenty per cent of the amount of service tax payable
on taxable output service (till 31.03.2008). However, the utilized CENVAT
credit much more than permissible limit. They have utilized excess CENVAT
credit amounting to Rs. Rs. 16,04,898/-.
M/s MVOPL availed CENVAT credit on the strength of RA Bills on which they
d.
had not made any payment. They have wrongly availed CENVAT credit
amounting to Rs. 15,75,258/- during the year 2008-09.
9.
The above mentioned non payment of Service Tax, excess utilization of CENVAT
credit and wrong availment of CENVAT Credit have not been declared in the ST-3 returns
filed by M/s MVOPL. These detections would not have been possible on the basis of
documents submitted by MVOPL to the department. This was possible only because of CERA
Audit. Infact, MVOPL have filed a single ST-3 return for period 2006-07 to 2008-09.
10.
Thus, it appears from the foregoing discussion that M/s. MVOPL, have contravened the
provisions of:
(i)
Section 67 of the Finance Act, 1994 in as much as, they have failed to determine
the correct value of taxable services provided by them.
(ii)
Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules,
1994 in as-much-as M/s MVOPL have failed to pay the service tax as mentioned
in foregoing paras on the service provided by them under the category of
“Construction
Service-Residential
Complex
Service”
and
“Commercial
Construction Service” to the credit of the Government within the stipulated time
limit. They have also wrongly availed CENVAT Credit as discussed in foregoing
paras. The act of contravention of the provisions of Section 68 of the Finance
Act, 1994 as amended read with Rule 6 of the Service Tax Rules, 1994 appears
to be punishable under the provisions of Section 76 of the Finance Act, 1994.
(iii)
According to Section 70 of the Finance Act, 1994, every person liable to pay
service tax is required to himself assess the tax due on the services provided by
him and thereafter furnish a return to the jurisdiction Superintendent of Service
Tax by disclosing wholly and truly all material facts in the ST-3 returns. In the
instant case M/s MVOPL have contravened the provision under Section 70 of
the said Act as they have not filed the ST-3 returns within the time limit as
17
prescribed under the provisions of Section 70 of Finance Act read with Rule 7(1)
and 7 (2)
of Service Tax Rules, 1994 and has thus contravened the said
provisions. Also, they did not pay the late fees for the delay in filing the ST-3
returns.
11.
As already discussed in foregoing paras, M/s MVOPL has evaded/short paid Service
tax on account of discharging only a part of Service tax declared by them in their ST-3 returns
and by not disclosing full and correct information about value of the services provided by
them. They have also utilized CENVAT credit which is much more than the permissible limit
under under rule 6(3)(i) of the CENVAT Credit Rules, 2004 and wrongly availed CENVAT
credit. All these facts have not been declared by them to the department. Thus, it appears that,
there is deliberate withholding of essential information from the department about service
provided and value realized by them. It appears that all these material information have been
concealed from the department deliberately, consciously and purposefully to evade payment of
service tax. Therefore, in this case all essential ingredients exist to invoke the extended period
in terms of Section 73(1) of Finance Act, 1994 to demand the service tax short paid.
12.
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 (as such rate not below ten per cent and not exceeding thirty six per cent per
annum, as is for the time being fixed by the Central Government, by Notification in the
Official Gazette) for the period by which such crediting of the tax or any part thereof is
delayed.
13.
From the evidence, it appears that M/s MVOPL has not taken into account the incomes
received by them for rendering taxable services for the purpose of payment of service tax and
thereby escaped their tax liabilities. The deliberate efforts to not declare the value of taxable
service to the department and not submitting proper ST-3 returns and not paying the service
tax in utter disregard to the requirements of law and deliberate breach of trust deposed on them
such outright act in defiance of law appears to have rendered themselves liable for stringent
penal action as per Rule 15 of the CENVAT Credit Rules, 2004 and the provisions of Section
76, 77 and 78 of Finance Act 1994 for suppression or concealment or furnishing inaccurate
value of taxable service with intent to evade payment of service tax.
14.
Now therefore, M/s M.V. Omni Projects (India) Ltd, 74, New York Tower “A”, S.G.
Highway, Thaltej, Ahmedabad-54 was issued show cause notice from F.No. STC/4-
18
89/O&A/11-12 on 21.10.2011 where upon they were asked to Show Cause to the
Commissioner, Service Tax as to why:i. the total value of Rs. 70,13,97,082/- received during the Financial Year 2007-08 &
2010-11 under the category of “Construction Service-Residential Complex
Service” should not be considered as taxable value as discussed hereinabove
and service tax amounting to Rs. 1,85,58,542/- should not be demanded and
recovered from them under the proviso to Section 73 (1) read with Section 68 of
the Finance Act, 1994, invoking the larger period of five years.
ii. the total value of Rs. 5,29,57,483/- received during the Financial Year 2010-11 under
the category of “Commercial Construction Services” should not be considered
as taxable value as discussed hereinabove and service tax amounting to Rs.
16,36,388/- should not be demanded and recovered from them under the proviso
to Section 73 (1) read with Section 68 of the Finance Act, 1994, invoking the
larger period of five years.
iii. the CENVAT Credit amounting to Rs. 16,04,898/- availed in excess should not be
demanded and recovered from them under Rule 14 of the CENVAT Credit
Rules, 2004 read with the proviso to Section 73 (1) of the Finance Act, 1994,
invoking the larger period of five years towards rendering of taxable services.
iv. the CENVAT Credit totally amounting to Rs. 15,75,285/- wrongly availed/utilized by
them, which resulted in short payment/ non payment of Service Tax should not
be demanded and recovered from them under Rule 14 of the CENVAT Credit
Rules, 2004 read with the proviso to Section 73 (1) of the Finance Act, 1994,
invoking the larger period of five years towards rendering of taxable services.
v. Interest as applicable rate on the amount of Service Tax liability as above should not be
charged and recovered from them, under Section 75 of the Finance Act, 1994.
vi. Penalty as per Rule 15 of the CENVAT Credit Rules, 2004 should not be imposed on
them for wrongly availing CENVAT credit and for wrong utilization of
CENVAT credit as per the Rule 6(3) of the CENVAT Credit Rules, 2004;
vii.
Penalty should not be imposed upon them under Section 76 of the Finance Act
1994, for the failure to the make the payment of Service Tax in prescribed time
limit.
19
viii.
Penalty should not be imposed upon them under Section 77 of the Finance Act
1994, for the failure to submit correct ST-3 return under section 70 of the
Finance Act 1994.
ix. Penalty should not be imposed 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 payment of Service Tax.
DEFENCE REPLY FILED BY M/S MVOPL:
15.1
WRITTEN SUBMISSION DATED 31.01.2012 and 20.12.2012:
M/s MVOPL have in their submission contended as follows:
-
They vehemently object to the proposal of demand of service tax and interest since they
have not violated any of the provisions of the Act or the rules made there under.
-
The SCN is based on presumptions and assumptions and is issued in sheer disregard of
the facts on record, legal provisions, decided case laws and departmental instructions.
-
There is no fraud or collusion or willful mis-statement or suppression of facts or
contravention of any of the provisions of the Act or the rules made thereunder with an
intent to evade payment of service tax.
-
the SCN is vague in its content as it straight away alleges and states in para 14 that “A”
without in any manner stating or substantiating any positive act of fraud , collusion,
willful misstatement, suppression or intent to evade payment of service tax on their
part. They were registered with the department under “Commercial and Industrial
Construction Service” and were accordingly filing ST-3 returns on regular basis. Hence
their activity was always in the department’s knowledge. The SCN
issued on
21.10.2011 covered the period 1.4.2007 to 31.3.2011 and hence was time barred.
-
They had provided service to Municipal Corporation (Govt. of India) which in turn
provided residential units to urban poor on lease rent. Thus, they fell under the
exclusion clause of ‘construction of complex services’ in as much as the services
provided by them fell under the category of ‘personal use’.
-
Since the tenders were issued by the Municipal Corporation on behalf of the President
of India, Govt. of India should be treated as ‘Person’. Hence, they were covered under
the explanation given for “Personal Use” in the definition of “Residential Complex”.
They further relied upon the case: M/s Macro Marvel Projects Ltd. V/s Commissioner
of Service Tax, Chennai: 2008-TIOL-1927-CESTAT-MAD. They also relied on the
following judgements:
a. 2011(21) STR 487 (Commr. Appeal) in respect of Aban Power Company
Ltd.
20
b. 2011(2) STR 179 (Tri-Chennai) SIMA Engg. Constructions Vs Commr. Of
C.Ex Trichy.
c. 2011(2) STR 115 (Tri-Ahmd.) Khurana Engineering VsCommr. Of C.Ex,
Ahmedabad.
-
The Residential complex constructed under JnNURM project did not include any one or
more of facilities or services such as park, lift, parking space, community hall, common
water supply or effluent treatment system. As a documentary evidence to the said
contention they attached a certificate issued by the City Engineer (Project), JnNURM
Project, Municipal Corporation,an Certified Urban Planners and Architects.
-
In terms of Section 65 A i.e Classification of Services, the services provided by them
fell under the category of “Works Contract Service” and not under “Construction of
Complex Service” as proposed by the department and hence the proceeding against
them needs to be dropped.
-
They are involved in undertaking composite contracts for construction and are
discharging applicable VAT on the transactions under taken by them. They relied upon
the following judgements in support to their contention:
o Daelim Indsutrial Co. Vs. CCE 2003 (155) EL T 457 (Tri.Del)
o Fire Pro Systems Pvt Ltd Vs. Commissioner of Service tax 2008 (1 0)STR36
o (Tri.Bang)
o Commissioner of Central Excise Vs. Indian Oil Tanking Ltd 2008 (10)STR
11 (Tri.LB)
o S.P.Sharma Vs. Commissioner of Central Excise 2008 (9) STR572 (Tri.Del)
o Emerson Process Management Power & Water Solution Inc. Vs.
Commissioner of Central Excise 2006 (3) STR 508 (Tri. Del)
o Commissioner of Central Excise Vs. Flex Engineering Ltd 2006
(1)STR208(Tri.Del).
o Commissioner of Central Excise Vs. Shappo~i Pallonji & Co. Ltd.
2006(1)164 (Tri. Del).
o Diebold Systmes (P) ltd. Vs Commissioner of Service Tax 2008(9) STR 546
(Tri. Mad)
o BSBK Pvt. LTd Vs Commr. Of C.Ex 2009(013) STR-026 (Tri. Del)
o Air Liquide Engg. India P Ltd Vs C.C and C.Ex 2008(9) STR 486 (Tri.
Bang)
o Jyoti Ltd. Vs Commr. Of C.Ex 2008 (() STR 373 486 (Tri. Abad)
o L&T Ltd. Vs Commr. Of C.Ex 2007 (7) STR 224 (Tri. Abad)
o Alstom Projects India LTd. Vs Commr. Of Service Tax , Delhi 2009(13)
STR 525 (Tri-Del)
21
o Newton Engg. & Chem LTd. Vs Commr of C.Ex & Cus, Vadodara –II
2009(15) STR 303 (Tri-Amd)
o BHEL Vs Commr. Of C.Ex Bhopal 2009(15) STR 239 (Tri-Del)
o Commr. Of C.Ex Vs BSBK P Ltd 2009 (13) STR 26 (Tri-Del)
-
As regards service tax liability on construction of Auditorium as per the contract
awarded to them by NBCC, New Delhi, they relied upon the letter F.No. 332/16/2010TRU dated 24.5.2010 issued by Central Board of Customs and Excise to National
Builiding Construction Corporation Limited.
As per the information provided in your letter and during discussions, the Ministry
of Urban Development (GOl) has directly engaged the NBCC for constructing
residential complex for central government officers. Further, the residential
complexes so built are intended for the personal use of the GOI which includes
promoting the use of complex as residence by other persons (i.e. the Government
officers or the Ministers). As such the GOl is the service receiver and NBCC is
providing services directly to the GOl for its personal use. Therefore, as for the
instant arrangement between Ministry of Urban Development and NBCC is
concerned, the service tax is not leviable. It may, however, be pointed out that if
the NBCC, being a party to a direct contract with GOl, engages a sub-contractor
for carrying out the whole or part of the construction, then the sub-contractor
would be liable to pay service tax as in that case, NBCC would be the service
receiver and the construction would not be for their personal use.
- There was no excess utilization of service tax credit as they followed rule 6(3) and 6(5)
of CCR-04 and hence availed full cenvat credit on inputs, input services and capital
goods consumed in providing both taxable and exempted services. The balance input
credit was was utilized as per Rule 6(1) and 6(3) of CCR, 2004. They have relied upon
the following citations:
a. 2009 (235) ELT 858 (Tri-Del) in case of Idea Cellular Ltd. Vs Commr. Of
Central Excise, Rohtak.
b. 2008(222) ELT 589 (Commr. Appl.)
Commr. Of C.Ex and Customs
(Appeals) in respect of Asia Pacific Hotels Ltd.
c. 2010 (18) STR 642 (Tri-Chennai) Tidel Park Ltd. Vs Commission of Service
Tax , Chennai
d. 2010 (18) STR 136 (Commr. Appl.) Commissioner of C.Ex (Appeals) PuneII in respect of Bank of Rajasthan Ltd.
e. 2008 (10) STR 609 (Tri-Mum) Commissioner of C.Ex, Mumbai Vs V M
Salgaonkar & Bros P Ltd.
-
Cenvat credit availed by them on the basis of RA bills was a genuine mistake. Since
they had made the payment at a later date, there were at most liable to pay interest for
the period .
-
They have not suppressed any information from the department as they clearly
indicated in ST-3 returns that they were availing the benefit of circular 80/2004-ST .
22
However, since during the impugned period there were no such columns in ST-3 for
claiming material value deduction, they did not show the same in the returns.
-
The present case was not a case of fraud, suppression, willful mis statement of facts ext
and hence penalty under section 78 of the Act cannot be imposed on them. In this
regard they placed their reliance on the judgement passed by the Hon’ble High court of
Gujarat in case of Steel Cast Ltd., 2011 (21) STR 500 (Guj).
-
Penalty could not be imposed on them under Section 76 of the Finance Act, 1994 as
there was no short payment of service tax. In this regard they placed their reliance on
the following judgements:
a. Hindustan Steel Ltd. Vs The State of Orissa reported in AIR 1970 (SC) 253
b. Kellner Pharmaceuticals Ltd. CCE, reported in 1985(20) ELT 80
c. Pushpam Pharmaceuticals Co. Vs CCE reported in 1995(78) ELT 401 (SC)
d. CCE Vs Chemphar Drugs and Liniments reported in 1989 (40) ELT 276
-
penalties under section 76 and 78 of the Act cannot be simultaneously imposed.
Penalties under section 76 and 78 are mutually exclusive. Section 78 is applicable if the
non-payment of service tax is due to reasons specified therein with an intention to
evade payment of service tax. Section 76 is applicable in cases other than those covered
under section 78 of the Act. Reliance is placed on the following cases:
i. The Financers v. CCE, Jaipur ·2007 (8) STR 7 (Tri. Del)
ii. Commissioner of Central Excise, Ludhiana v. Pannu Property Dealer 2009 (14) S.T.R. 687 (Tri .• Del.).
iii. COMMISSIONER OF C. EX., CHANDIGARH Vs CITY MOTORS
2010 (19) S.T.R. 486 (P & H)
iv. CCEC, Chandigarh Vs MIs Cool Tech. Corporation (Service Tax Appeal
No 47 of 2010) (P & H)
v. C C E, Commissionerate Vs MIs FIRST FLIGHT COURIER L TO 2011
(22) STR 622 (P&H)
(2) The above view is reinforced by the proviso to Section 78 as is extracted
below:
"Provided also that if the penalty is payable under this section, the provisions
of section 76 shall not apply. [Inserted vide Finance Bill 2008, w.eJ. 16th
May,2008”
(Emphasis supplied)
-
The issue involved in the present case is of interpretation of statutory provisions. For
that reason also, penalties cannot be imposed. It is a settled principle of law that if a
dispute is arising out of interpretation of the provisions of statute or exemption
23
notification, no penalty can be levied. If at all it is held that the service tax is payable as
demanded by the Show Cause Notice, then also it can be said that it is a dispute arising
out of interpretation of the provisions of the law and not because of any intentional
avoidance of tax. They placed reliance on the following case laws in this regard:
a)
Bharat Wagon & Engg. Co. Ltd. v. Commissioner of C. Ex., Patna, (146)
ELT 118 (Tri. - Kolkata),
b)
Goenka Woollen Mills Ltd. v. Commissioner of C. Ex., Shillong, 2001 (135)
ELT 873 (Tri. - Kolkata).
c)
Bhilwara Spinners Ltd. v. Commissioner of Central Excise, Jaipur, 2001
(129) ELT 458 (Tri. - Del.)
-
Section 80 will be applicable in their case as there was a reasonable case of failure on
their part to file service tax returns and pay service tax. In this regard, reliance is placed
on the following judgments:
(i)
ETA Engineering Ltd. vs. CCE, Chennai, 2004 (174) E.L. T 19 (TLB)
(ii)
Flyingman Air Courier Pvt. Ltd. vs. CCE 2004 (170) ELT 417 (T)
(iii)
Star Neon Singh vs. CCE, Chandigarh, 2002 (141) ELT 770 (T)
SUBMISSIONS MADE AT THE TIME OF PERSONAL HEARING
13.
The personal hearing, granted to M/s. MVOPL was attended by Shri Vipul Kandhar,
Chartered Accountant. During the course of hearing, M/s. MVOPL reiterated the submissions
made in their reply to SCN and gave a written submission in addition to reply dated 31.1.2012.
They have during the course of personal hearing requested to consider their case favorably.
They agreed to give copies of tender and breakup of cenvat details shown in their ST-3
returns.
13.1
M/s. MVOPL have vide their letter dated 21.12.2012 submitted copy of ST-3 returns
with cenvat details for the period 1.4.2006 to 31.3.2011 and copy of tender documents of
JnNURM projects.
DISCUSSION AND FINDINGS:
14.
I have carefully gone through the show cause notice, the defence replies filed by M/s
MVOPL, submissions made by them during the course of personal hearing and evidences on
records.
14.1
I find that the subject show cause notice was issued to M/s. MVOPL on four issues
namely:
24
a.
Non-payment of service tax on the services provided by them under the category
of “Construction of Complex Service” which related to construction of houses
for Economic Weaker Section (EWS) under the JnNURM scheme during the
period prior to 1.7.2010.
b.
Non-payment of service tax on the services provided by them under the category
of “Construction Of Complex Service” which related to construction of “NBCC
Center” at Plot No. 2, Community Center, Okhla Phase:1, New Delhi.
c.
Excess utilization of Cenvat Credit by way of contravention of the provisions
as laid down under Rule 6 (3)(i) of the Cenvat Credit Rules, 2004.
d.
Wrong availment of Cenvat credit on documents namely R A Bills which are not
the specified documents in terms of Rule 9 of Cenvat Credit Rules, 2004.
In order to adjudicate the present case, I take up the issues individually as below:
15.
CONSTRUCTION OF HOUSES FOR ECONOMIC WEAKER SECTION (EWS)
UNDER THE JNNURM SCHEME DURING THE PERIOD PRIOR TO 1.7.2010
15.1
M/s MVOPL executed various projects under the JnNURM scheme. All the projects
executed by M/s. MVOPL under the JnNURM scheme pertained to construction of houses for
Economic Weaker Section (EWS). The projects under JnNURM scheme were executed by
M/s. MVOPL at Ahmedabad and Vadodara. The details of the work orders under which the
said projects were executed are as follows:
i.
Work Order No. JNNURM Cell/248 dated 24.05.2007 at Vadodara for
Vadodara Mahanagar Sewa Sadan (VMSS).
ii
Work Order No. 70 dated 06.08.2007 at Ahmedabad for Ahmedabad Municipal
Corporation (AMC).
iii
Work Order No. JNNURM Cell/2690 dated 27.02.2009 at Vadodara for
Vadodara Mahanagar Sewa Sadan (VMSS)
15.1.1 Further, the scope of work covered under the said projects was “Construction of
Housing Block of G.F+3 RCC Frame Structure having 32 units in each block , internal water
supply, sewerage, etc..”. Apart from the above, the infrastructure services like water supply,
sewerage, street light and road and storm water drainage outside building and with the plots
were also covered under the projects. They were also liable to supply materials required for the
execution of the project and pay VAT on the supply of such materials.
25
15.2
Service Tax on “Construction of Complex Service” was levied under sub –section (105)
(zzzh) of section 65 of the Finance Act, 1994 with effect from 16.06.2005. Section 65(30a) of
the Finance Act, 1994 defines “Construction of Complex” as:
(d)
Construction of a new residential Complex or a part thereof,
(e)
Completion and finishing services in relation to residential complex such as
glazing, plastering , painting, floor and 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
activities; or
(f)
Repair, alteration, renovation or restoration of or similar services in relation
to residential complex
15.2.1 Further, Section 65 (91a) of Finance Act defines “residential complex” as:
Any complex comprising of
(i)
a building or buildings , having more than twelve residential
Units;
(ii)
a common area; and
(iii) any one or more of facilities or services such as park, lift, parking space
, community hall, common water supply or effluent treatment
system, located in a premises and the layout of such premises is
approved by an authority under any law for the time being in force,
but does not include a complex which is constructed by a person
directly engaging any other person for designing or planning of the
layout, and the construction of such complex is intended for
personal use as residence by such person.
Explanation – For the removal of doubts, it is hereby declared that for the
purpose of this clause,(a) “personal use” includes permitting the complex for use as residence by
another person or rent or without consideration;
(b) “residential unit” means a single house or a single apartment intended for
use as a place of residence.
15.3
It is evident from para 15.1 above, that construction of residential complex
service would generally cover construction service in respect of a building over 12 residential
parts or units; such residential complexes are normally constructed after obtaining approval
from statutory authority for their layout. For the purpose of this levy, residential complex
means-
26
i.
Any complex of a building or buildings, having more than twelve residential
units within the said premises.
ii.
iii.
Having common areas (stair case, road etc)
Having common facilities or services (park, lift, community hall etc.)
However the definition of residential complex specifically excludes a complex which is
constructed by a person directly engaging any other person for designing or planning of the
layout, and the construction of such complex is intended for use as residence by such person.
Further an explanation provides, personal use includes permitting complex for use as residence
by another person on rent or without consideration.
15.3.1 In the present case, Ahmedabad Municipal Corporation (AMC) and Vadodara
Mahanagar Sewa Sadan (VMSS) gave contracts for building homes for economically weaker
sections (EWSs) under Jawaharlal Nehru National Urban Renewal Mission (JNNURM). M/s.
MVOPL happened to be one of the contractors who were given the contract for construction of
homes. As a contractor, M/s. MVOPL was only required to construct the residential quarters
on the basis of the design and plan prepared by the nodal agencies which is quite evident from
the Housing Project under JnNURM (BSUP) report presented by Shri I P Gautam, Municipal
Commissioner, Ahmedabad during the workshop on Shelter Security and Social Protection for
Urban Poor and Migrants in Asia held at Ahmedabad on February 11-13, 2009
(http://www.socialprotectionasia.org/pdfdoc/ IPGautam.pdf) and the tender documents
submitted by M/s MVOPL.
15.3.2 M/s. MVOPL constructed more than 12 dwelling units in a premises and the houses for
EWS constructed under JnNURM were later on sold at subsidized prices to people falling
under EWS and not given on rent as claimed by M/s MVOPL. These houses were meant for
people falling under EWS (Economically Weaker Sections) and not for use by AMC or VMSS
as explained in the succeeding paras. It is thus evident that the services provided by M/s.
MVOPL to AMC and VMSS in the shape of construction of homes for economically weaker
sections (EWSs) clearly fall under the category of “Construction of Complex Service”.
15.4
It is a fact that the residential scheme was carried out by the government through the
bodies i.e. municipal corporation, board & govt. institutions. Construction work of residential
house was for the philanthropic purposes, which government sold on subsidized prices to the
poor people. However, no specific provision have been laid down for granting exemption of
service tax on the services provided by the service providers to such projects for the period
upto 30.6.2010. The service provided under the category of ‘construction of complex service’
provided to Jawaharlal Nehru National Urban Renewal Mission (JnNURM) and Rajiv Awaas
27
Yojana became exempted only after Notification No. 28/2010 dated 22.6.2010 was issued
by the Government of India. The said notification is reproduced herein below for reference:
New Delhi, the 22nd June, 2010
Notification No. 28/2010 - Service Tax
G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93
of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the
Central Government, on being satisfied that it is necessary in the public interest so to
do, hereby exempts the taxable service of construction of complex referred to in subclause (zzzh) of clause (105) of section 65 of the Finance Act, when provided to
Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awaas Yojana, from the
whole of the service tax leviable thereon under section 66 of the Finance Act.
2.
This notification shall come into force on 1st day of July, 2010.
[F. No.334/03/2010 -TRU]
15.4.1 It is evident from the above notification that the services provided under the category of
“Construction of
Complex Service” to JnNURM Projects became exempted only from
1.7.2010. In other words
the service provided under the category of “Construction of
Complex Service” to JnNURM Projects was taxable up to 01.7.2010.
15.5
M/s. MVOPL have contended that the services provided by them did not fall under
“Residential Complex Service” but fell under the “Works Contract Service”. In this regard,
before discussing the actual classification of the services, I take up definition of “Works
Contract Service” as follows:
15.5.1 According to Section 65(105) (zzzza), taxable service means any services provided or to
be provided to any person, by any other person in relation to the execution of a works contract,
excluding works contract in respect of roads, airports, railways, transport terminals, bridges,
tunnels and dams.
Explanation.—For the purposes of this sub-clause, "works contract" means a contract
wherein:
(i)
transfer of property in goods involved in the execution of such contract is leviable to
tax as sale of goods, and
(ii)
such contract is for the purposes of carrying out:
28
(a) erection, commissioning or installation of plant, machinery, equipment or
structures, whether pre-fabricated or otherwise, installation of electrical and
electronic devices, plumbing, drain laying or other installations for transport of
fluids, heating, ventilation or air-conditioning including related pipe work, duct
work and sheet metal work, thermal insulation, sound insulation, fire proofing or
water proofing, lift and escalator, fire escape staircases or elevators; or
(b) construction of a new building or a civil structure or a part thereof, or of a pipeline
or conduit, primarily for the purposes of commerce or industry; or
(c) construction of a new residential complex or a part thereof; or
(d) completion and finishing services, repair, alteration, renovation or restoration of,
or similar services, in relation to (b) and (c); or
(e) turnkey projects including engineering, procurement and construction or
commissioning (EPC) projects;
Further, works contract in respect of specified infrastructure projects namely roads,
airports, railways, transport terminals, bridges, tunnels and dams are specifically excluded
from the scope of levy of service tax.
15.5.2 It is evident from the above that the construction of residential complex is also included
in works contract service. The liability under service tax in the hands of the contractor would
depend on the substance of the contract. If the contract is for a service i.e involving no
movement of goods, then the said service contract is liable to tax under ‘Construction Service’
whereas on the other hand, if the contract involves both material and labour, then the said
contract is liable to tax under ‘Works Contract’. Thus, either way the services provided by a
contractor for construction of residential complexes are taxable.
15.5.3 M/s. MVOPL have vide their letter dated 21.12.2012 submitted the tender documents of
the projects executed by them. Perusal of the tender document of AMC and VMSS reveal that
the same pertained to construction of houses for urban poor by a contractor. Since, MVOPL
was one of the bidders and also one of the contractors who got the contract for construction of
houses, the services provided by M/s. MVOPL to AMC and VMSS is for construction
residential complexes falling under the category of “Construction Of Complex Service”. Had
there been a confusion regarding categorizing the services provided by the contractors engaged
in construction of houses under the JnNURM project, the Government would not have come
out with Notification No. 28/2010 dated 22.6.2010 exempting only the services falling under
the category of “Construction of Complex Service” referred to in Section 65(105)(zzzh) of
Finance Act, 1994 from 1.7.2010. The claim by M/s. MVOPL that the services provided by
them do not fall under the category of “Construction of Complex Service” would make the
29
services provided by them liable to service tax even today as except for services provided
under “Construction of Complex Service” under Section 65(105)(zzzh) of Finance Act, 1994
to Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awaas Yojana no other
service is exempted.
15.6
Perusal of the tender documents submitted by M/s. MVOPL reveals that there were
clear instructions to the contractor to quote rates which were inclusive of Service Tax and
other Government taxes. The said relevant pages are scanned herein below for reference:
PAGE:82 of Tender for Package-3 of Vadodara Mahanagar Sewa Sadan:
PAGE: 83 of Tender for Package-3 of Vadodara Mahanagar Sewa Sadan
30
PAGE: GCC-31 of Tender for Package-4 of Vadodara Mahanagar Sewa Sadan
PAGE: GCC-32 of Tender for Package-4 of Vadodara Mahanagar Sewa Sadan
31
It is evident from the above documents that M/s. MVOPL were fully aware of the fact that
they were supposed to pay service tax on the services provided by them to AMC and VMSS
15.7
As per section 65(91a) of Finance Act, 1994, “residential complex” does not include a
complex which is constructed by a person directly engaging any other person for designing or
planning of the layout, and the construction of such complex is intended for personal use as
residence by such person. Further, as per CBE&C circular No. 108/02/2009-ST dated 29-12009, if the ultimate owner enters into a contract for construction of a residential complex with
a promoter/builder/developer, who himself provides service of design, planning and
construction, and after such construction the ultimate owner receives such property for his
personal use, then such activity would not be subjected to service tax, because this case would
fall under the exclusion provided in the definition of residential complex. However, if service
of contractor, designer or similar services are received, then such person will be liable to
service tax. M/s. MVOPL were engaged by AMC and VMSS to construct residences for EWS
under the JnNURM project. The residences constructed by them were meant for people falling
under the category of E.W.S and not for their personal use (AMC and VMSS) and hence does
not fall under the category of ‘Personal use’ as claimed by M/s MVOPL. Also, the residences
constructed by them were not provided free of cost but sold at subsidized rates.
15.8. Shri Shri Pinkesh B Sharma, authorized person of M/s MVOPL appeared on
13.10.2011 and his statement was recorded. He has in his statement stated that since the
activity of construction of residences under JnNURM carried out by them was noncommercial and covered under ‘personal use’ they did not consider the same as taxable is
32
contrary to the details mentioned in the tender documents. As per the tender documents the
contractors were required to quote rates which were inclusive of Service Tax and other govt.
taxes. This means that M/s MVOPL have already recovered Service Tax from AMC and
VMSS but have failed to pay the same to the department.
15.9
In view of the above discussions, M/s. MVOPL are rightly covered under services
definition “Construction of Complex Service” under sub –section (105) (zzzh) of section 65
of the Finance Act, 1994. Service Tax has rightly been demanded from 1.4.2006 to 30-062010. There are no exceptions/exemption to service tax in respect of “Construction of
Complex
Service”
where
the
services
are
provided
to
state
governments/
municipalities/corporations. The only exemption provided in vide Notification
No.28/2010 dated 22.06.2010 is in respect of construction of complexes when provided
to Jawaharlal Nehru National Urban Renewal Mission and Rajiv Awaas Yojana which
specifically states that the notification comes into force from 01.07.2010. Hence, the
service provided during the period prior to this notification is clearly taxable. Thus, I find
M/s. MVOPL liable to pay service tax on the services provided by them under the category of
"Construction of Complex Service” to VMSS and AMC for constructing residences for E.W.S
under JnNURM project. M/s. MVOPL collected an amount of Rs. 70,13,97,082/- during the
period 1.4.2006 to 30-06-2010 from VMSS and AMC towards the services provided by them
under the category of "Construction of Complex Service". They are accordingly liable to
pay Service Tax amounting to Rs.1,85,58,542/- on the taxable amount of Rs. 20,55,71,000/after allowing abatement @67% on Rs. 70,13,97,082/- .
16.
CONSTRUCTION OF NBCC CENTER AT PLOT NO.2 COMMUNITY
CENTRE, OKHLA, PHASE:1, NEW DELHI:
M/s MVOPL got the contract for construction of NBCC Center vide acceptance letter
of NBCC dated 23.08.2010. Perusal of the special condition No.3 of the contract reveals that
the contractor was liable to submit regular invoice/bill under Rule 4A of the Service Tax
Rules, 1994 and produce proof of deposit of service tax to the NBCC as and when demanded.
It also stipulates that the contractor should draw the bill as Value of work executed + Service
Tax. Thus, the contractor was liable to pay the service tax over and above the value of works
done. The said pages are scanned herein below for reference:
33
16.1
M/s MVOPL have in their defence reply submitted that the non –payment of service
occurred owing to wrong interpretation of letter F.No.332/16/2010-TRU dt. 24.05.2010. They
have in their defence reply mentioned that they have already deposited the service tax with
interest. However, they have failed to provide the documentary evidences towards the same. A
34
mere statement that they have paid service tax with interest does not suffice.
16.2
Accordingly, I confirm the demand for service tax amounting to Rs. 16,36,388/- on
services provided by M/s MVOPL under the category of
“Commercial or Industrial
Construction” towards construction of NBCC Center, New Delhi.
17. EXCESS UTILISATION OF CENVAT CREDIT
It has specifically been stated in the subject SCN that:
-
M/s MVOPL is provider of taxable services of construction of “Residential Complex
Service”, “Commercial or Industrial Construction Service” and “Construction of
Commercial or Industrial Construction Services”.
-
M/s MVOPL have apart from providing taxable services have also provided exempted
services in shape of construction of Roads and Railways, construction of complex
service to Defence Department under ‘Married Accommodation Schemes” which were
to be utilized by the Defence Department itself etc. which fall under the purview of
personal use . Thus, M/s MVOPL is providing taxable as well as exempted service and
have availed and utilized the CENVAT Credit on common inputs and input services.
-
They have not maintained any separate accounts for receipt, consumption and inventory
of input services as required as per rule 6(2) of the CENVAT Credit Rules, 2004.
-
M/s MVOPL has not intimated about availing the facility for dutiable and exempted
service. Hence, as per the provisions made under rule 6(3)(i) of the CENVAT Credit
Rules, 2004 for the period upto 31.3.2008 the provider of output service shall utilize
credit only to the extent of an amount not exceeding twenty per cent of the amount of
service tax payable on taxable output service.
17.1
M/s MVOPL have in their defence submitted that they have followed rule 6(3)
and Rule 6(5) of CENVAT Credit Rule, 2004 and accordingly had availed full cenvat
credit on input services consumed in providing both taxable and non taxable services. They
had rightly utilize cenvat credit to the tune of Rs. 2228587/- as per CENVAT Credit
Rules, 2004 towards their liability of service tax amounting to Rs. 31,18,433/-.
17.2
In this regard, I find that during 2006-07 & 2007-08 there was no restriction on
availment of Cenvat Credit used for provision of both taxable as well as exempted service.
However, there was a condition that the service provider can utilise the Cenvat Credit for
discharging the Service Tax liability which was not to exceed 20% of the amount of
Service tax payable on taxable output service. M/s MVOPL was liable to pay service tax
amounting to Rs. 31,84,433/- (including EC and SHEC) during the period 2006-07 and
35
2007-08 . Thus, in terms of the provisions as laid down under Rule 6 of CENVAT Credit
Rules, 2004, as M/s MVOPL were not maintaining separate accounts for taxable and non
taxable services they were eligible to utilize cenvat credit to the tune of Rs. 6,23,689/- only
and not Rs. 22,28,587/- as pointed out by M/s MVOPL.
17.3
M/s MVOPL have in their defense replies only tried to play around with words
without actually addressing the issue. They have not provided any documentary evidences
such as details of input services on which cenvat credit was availed etc.. in support to their
defense. In absence of such evidences and a meaningful submission, I have no other option
but to confirm the fact regarding the excess utilization of cenvat credit amounting to Rs.
16,04,898/- by M/s MVOPL.
18. WRONG AVAILMENT OF CENVAT CREDIT
Scrutiny of records of input credit of the assessee, revealed that M/s MVOPL had
received the services from M/s. Infra Craft Engineering & Projects, Hyderabad for trenching,
ducting, OFC Pulling & other works at Eluru- T.P. Gudem (order No. 11408401332) and had
availed cenvat credit on the RA bills inspite of the fact that no payment was made against the
said RA Bill during the year 2008-09. They had availed Cenvat credit to the tune of Rs.15,
75,258/- as shown below and same were utilized against the payment of service tax. As per
Rule 9 of the CENVAT Credit Rules, 2004, CENVAT credit shall be taken by the
manufacturer or the provider of output service or input service distributor as the case may be
on the basis of certain specified documents which includes bills/invoices/challans etc. Further,
Rule 4(7) of the CENVAT Credit Rules, 2004, the CENVAT credit in respect of input service
shall be allowed, on or after the day which payment is made of the value of input service and
the service tax paid or payable as is indicated in invoice, bill or, as the case may be, challan
referred to in rule 9. Thus, M/s MVOPL
had wrongly availed CENVAT credit and
subsequently its utilization for payment of service tax resulted in short payment of service tax
of Rs. 15,75,258/- during the year 2008-09.
18.1
In their defence reply, M/s MVOPL confirmed the fact regarding wrong availement of
Cenvat credit but at the same time also brought to notice that they had subsequently made
payment of the bills with interest. However, they have failed to provide documentary
evidences regarding the payments made by them in respect of the R A Bills. They have also
not provided the details of interest amount paid by them them. The relevant para of their
defence reply is produced herein below for reference:
36
18.1.1 It is evident from the above submission made by M/s MVOPL that they had infact not
made any payments in respect of the R A Bills nor towards the interest amount. They have in
their reply not even mentioned the amount of interest paid. The column in the chart evidencing
actual payment is also kept blank. I therefore find that it was a mere statement made by them
that they had made bill payment and interest, had they made the payments they would have
provided documentary evidences towards the same. Hence, I have no other option by to
confirm the fact that they had contravened the provisions as laid down under Rule 9 and Rule
4(7) of the CENVAT Credit Rules, 2004 and accordingly had wrongly availed cenvat credit to
the tune of Rs.15, 75,258/-.
19.
In view of the above discussions I find that
a.
M/s. MVOPL has suppressed the value of taxable service and has not paid
service tax by reason of suppressing the fact with intent to evade payment of
service tax, and hence extended period has been correctly invoked in the show
cause notice. Invocation of extended period under proviso to Section 73(1) of
the Act in the case before me is fully justified. Service tax of Rs. 1,85,58,542/-
37
and Rs. 16,36,388/- not paid by them under “Construction of Complex Service”
and “Commercial or Industrial Construction Service” resp. is recoverable under
the proviso to Section 73(1) of the Finance Act, 1994 along with interest as
applicable under Section 75 ibid.
b.
M/s MVOPL, being a provider or both taxable and non taxable services, under
the category of “Construction of Commercial or Industrial Construction
Services” did not maintain separate accounts for the CENVAT credits of input
services. Thus, as per the provisions under Rule 6(3) of CENVAT Credit Rules,
2004 they utilized excess credit amounting to Rs. 16,04,898/- during the period
2006-07 to 2007-08 which is required to be recovered with interest under Rule
14 of CENVAT Credit Rules, 2004.
c.
M/s. MVOPL has contravened the provisions as laid down under Rule 9 and
Rule 4(7) of the CENVAT Credit Rules, 2004 and accordingly have wrongly
availed cenvat credit to the tune of Rs.15, 75,258/- during the period 2008-09.
The same is recoverable under Rule 14 of Cenvat Credit Rules, 2004 along with
interest as applicable under Section 75 ibid.
20.
As discussed in the foregoing paras, M/s MVOPL has not paid service tax under
“Construction of Complex Service” and “Commercial or Industrial Construction Service”
during the period from 2007-08 to 2010-11 within the stipulated time. This makes M/s.
MVOPL liable for penalty under Section 76 of the Finance Act, 1994.
23.
It has been M/s. MVOPL’s contention that service tax was not paid by them as the
service was provided to Municipal Corporation and the construction work was for
philanthropic purposes. I find that this plea of M/s. MVOPL is misleading. They were in
complete knowledge of the fact that Service Tax was leviable on the services provided by
them to VMSS AMC and NBCC as it was categorically mentioned in the tender documents
that the rates to be quoted for getting the contract should also include service tax and other
govt. levies. It is a clear case of suppression which came to light only after audit of records
was conducted at M/s MVOPL. It is thus clear that had the audit of records not taken place,
the service tax authorities would never had known about the provision of taxable service by
M/s MVOPL. Therefore, this is a case of deliberate suppression of facts with a willful
intention to evade payment of service tax. I find that as M/s. MVOPL has suppressed the facts
with intention to evade payment of service tax. Penalty under Section 78 of the Finance Act,
1994 is mandatorily imposable as has been held by the Apex court in the case of M/s
Dharmendra Textile Mills Ltd-2008 (231) ELT 3 (SC) and Rajasthan Spinning & Weaving
38
Mills Ltd-2009 (238) ELT 3 (SC). Therefore, I deem it a fit case to impose penalty on M/s
MVOPL under Section 78 of the Finance Act, 1994.
24.
As regards imposition of penalty under Section 77 of the Finance Act, 1994, I find that
M/s MVOPL have contravened the provision under Section 70 of the said Act as they have
not filed the ST-3 returns within the time limit as prescribed under the provisions of Section
70 of Finance Act read with Rule 7(1) and 7 (2) of Service Tax Rules. Also, they did not pay
the late fees for the delay in filing the ST-3 returns. All these contravention make M/s
MVOPL liable to penalty under Section 77 of the said Act.
25.
As regards imposition of simultaneous penalty under section 76 and 78 of the Finance
Act, 1994, I place my reliance on the judgment of Hon’ble High Court of Kerala in the case of
Assistant Commissioner of Central Excise v. Krishna Poduval as reported at [2006] 3 STT 96
(KER) which is aptly applicable to the present case. I find that the imposition of penalty under
sections 76 and 78 of the Act is for non payment of service tax and suppression of value of
taxable service respectively which are two distinct and separate offences attracting separate
penalties. I find that M/s MVOPL has committed both the offences and therefore penalties
under section 76 and 78 of the Finance Act, 1994 are imposable on the said service provider.
In view of the facts of the case, Section 80 of the Finance Act, 1994 cannot be invoked in this
case.
26.
I further find that the judgments quoted by M/s MVOPL in their defense reply
have no relevance with the instant case and hence the same have not been considered at
the time of adjudication.
27.
I, accordingly pass the following order:
ORDER
i. I consider the total value of Rs. 70,13,97,082/- received between the Financial Year
2007-08 & 2010-11 under the category of “Construction Service-Residential
Complex Service” as taxable value as discussed hereinabove and confirm the
demand for service tax amounting to Rs. 1,85,58,542/- under Section 73 (1) of the
Finance Act, 1994 by invoking the larger period of five years as per the proviso to
sub-section (1) of Section 73 of the Finance Act, 1994.
66ii.
I consider the total value of Rs. 5,29,57,483/- received during the Financial Year
2010-11 under the category of “Commercial Construction Services” as taxable
value as discussed hereinabove and confirm the demand for service tax amounting
39
to Rs. 16,36,388/- under Section 73 (1) of the Finance Act, 1994 by invoking the
larger period of five years as per the proviso to sub-section (1) of Section 73 of the
said act.
iii.
I confirm the demand for CENVAT Credit, availed in excess, amounting to Rs.
16,04,898/- under Rule 14 of the CENVAT Credit Rules, 2004 read with the
proviso to Section 73 (1) of the Finance Act, 1994, invoking the larger period of
five years towards rendering of taxable services.
iv.
I confirm the demand for CENVAT Credit totally amounting to Rs. 15,75,285/wrongly availed/utilized by them, which resulted in short payment/ nonpayment of
Service Tax under Rule 14 of the CENVAT Credit Rules, 2004 read with the
proviso to Section 73 (1) of the Finance Act, 1994, invoking the larger period of
five years towards rendering of taxable services.
v.
I demand interest at applicable rates on the amount of Service Tax liability as above
(sr. no.i, ii, iii and iv) under Section 75 of the Finance Act, 1994.
vi.
I impose penalty amounting to Rs.31,80,183/- (Rs.15,75,285/- + Rs. 16,04,898/-)
under Rule 15 of the CENVAT Credit Rules, 2004 on them for wrong availment
/utilization of CENVAT by them (sr.no. iii and iv, above), which resulted in short
payment/ non payment of Service Tax
vii.
I impose Penalty of Rs. 200/- ( Rupees Two hundred only) for every day during
which such failure continues or at the rate of 2% of such tax per month, whichever
is higher, for the period upto 10.05.2008 starting with the first day after the due date
till the date of actual payment of the outstanding amount of service tax upon them
under Section 76 of the Finance Act, 1994, provided further that the total amount of
the penalty payable in terms of this section shall not exceed the amount of Service
Tax due as on 10.5.2008.
viii. I impose of penalty of Rs.5000/- under Section 77 of the Finance Act, 1994 as M/s
MVOPL have contravened the provision under Section 70 of the said Act as they
have not filed the ST-3 returns within the time limit as prescribed under the
provisions of Section 70 of Finance Act read with Rule 7(1) and 7 (2) of Service
Tax Rules, 1994 and have also not paid late fees for the delay in filing the ST-3
returns.
ix.
I impose penalty of Rs. 2,01,94,930/- on them under Section 78 of the Finance Act,
1994 for suppressing and not disclosing the value of the taxable service provided by
them before the department with intent to evade payment of Service Tax (sr. no. i
40
and ii, above). In the event of the said service provider opting to pay the amount of
service tax along with all other dues as confirmed and ordered to be recovered,
within thirty days from the date of communication of this order, the amount of
penalty liable to be paid by them under section 78 of the Finance Act, 1994 shall be
25% of the above amount. However, the benefit of reduced penalty shall be
available only if the amount of penalty is also paid within the period of thirty days
from the communication of this order, otherwise full penalty shall be paid as
imposed in the above order.
(Tejasvini P. Kumar)
Commissioner,
Service Tax, Ahmedabad.
F. No STC/4-89/0&A/11-12
Date:
/01/2013
BY R.P.A.D.
To,
M/s M. V. Omni Projects (India) Ltd.,
74, New York Tower “A”.
S.G. Highway,
Thaltej, Ahmedabad-380051
Copy forwarded to:
1.
2.
3.
4.
5.
The Chief Commissioner, Central Excise and Service Tax, Ahmedabad Zone,
Ahmedabad.
The Deputy Commissioner of Service Tax, Division-III, Ahmedabad,
The Superintendent of Service Tax, AR.XV, Division-III, Ahmedabad.
The Deputy Commissioner (Prev.), Service Tax, Ahmedabad.
Guard file.