OIO No. 08/JC/2012
Dated 25.01.2012
lhek “kqYd ,oa dsUnzh; mRikn “kqYd vk;qDrky;]
dsUnzh; mRikn “kqYd Hkou]
jsl dkslZ] fjax jksM jktdksV-360001
OFFICE OF THE COMMISIONER OF CUSTOMS & CENTRAL EXCISE
RACE COURSE RING ROAD, RAJKOT-360001
By RPAD/HAND DELIVERY
F.No V.ST/15-51/Adj./2009
Ekwy vkns”k Lka.
Order in Original NO.
08/JC/2012
vkns”k dh frfFk
25.01.2012
Date of Order:06.02.2012
tkjh djus dh frfFk
Date of Issue:-
vkns”kdrkZ dk uke :
Passed by:
,e- KkulqUnje
संयक्
ु त आयक्
ु त
ds0 m-0 “kqYd vk;qDrky;]
jktdksV
ds lanHkZ esa :
M/s Kaveri Buildcon,
A-7-B, Ist Floor, Ranjit Tower,
In the matter of
Near Lal Bunglow,
JAMNAGAR
dkj.k crkvksa uksfVl la- V.ST/AR-JMR/JC/132/2010 dated 07.06.2010
&frfFk
Show Cause Notice No. & Date.
1gSA
;g izfrfyfi ml O;fDr dks futh mi;ksx ds fy, fu%'kqYd nh xbZ gSA ftls ;g tkjh fd;k x;k
1.
This copy of order is granted free of charges to the person to whom it is issued.
2-
bl vkns'k ls ;fn dksbZ O;fDr vlarq"V gS rks bl vkns'k ds fo:) fuEufyf[kr dks vihy dj
ldrk gSA&vk;qDr ¼vihy½ lhek ,oa dsUnzh; mRikn 'kqYd] jsl dkslZ fjax jksM jktdksVA
2.
Any person deeming himself aggrieved by this order may appeal against this order to the Commissioner
(Appeals), Customs & Central Excise, Central Excise Bhavan, Race Course Ring Road, Rajkot.
vihy dk QkeZ ,l-Vh-&4 nks izfr esa Hkjk tk, ,oa mlds lkFk fu.kZ; dh izfrfyfi ;k lsokdj
fu;e] 1994 dh dye 8 esa fofufnZ"V vuqlkj vkns'k ds fo:) vihy dh izfrfyfi gksuh pkfg,A
3-
3.
The Appeal should be filed in form ST-4 as per Rule 8 of Service Tax Rules, 1994 and it shall be signed by
the person as specified in Rule 3 (2) of the Central Excise (Appeals) Rules, 2001.
ikVhZ }kjk bl vkns'k dks O;fDrxr izkIr fd, tkus dh rkjh[k ls ;k Mkd }kjk izkfIr dh rkjh[k
ls rhu eghus ds vanj vihy Qkby dh tkuh pkfg,A
4-
4.
The appeal should be filed within three months from the date of receipt of this order. [Section 85 of the
Finance Act, 1994].
5.
5.
blds lkFk fuEufyf[kr dkxtkr gksuh pkfg,A
The appeal should be accompanied by:
¼v½ ,slk vkns'k dh izfrfyfi ;k nwljs dh d izfrfyfi ftl ij uhps n'kkZ, v?khu fu/kkZfjr dksVZ
dh Qhl LVsEi gksuh pkfg,A
(a)
Copy of this order which should bear court fee stamp as prescribed under Schedule 1 of Article 6 of the
Court Fee Stamp Act, 1870, as under:
(i) ;fn lCtsDV eSVj dh jde ;k ewY; ;k ewY; 50 :i; ;k 50 :i;s ls de gks rks :i;s 00-25 gksA
(i) If the amount or value of subject matter is rupees fifty or less, then Rs.0.25;
(ii) ;fn lCtsDV eSVj dh jde ;k ewY; ;k ewY; 50 :i; ;k 50 :i;s ls v/khd
(ii) If such amount exceed Rs.50, then, Rs.0.50 paisa.
gks rks :i;s 00-50 gksA
¼c½ vihy izfrfyfi ftl ij :i;s 2-50 dh dksVZ Qh LVsEi gksuh pkfg,A
(b) A copy of the appeal should also bear a court fee stamp of Rs.2.50.
6.
lsok dj ]naM ¼isuYVh½ vkfn ds Hkqxrku dk izek.k A
Page 1 of 17
OIO No. 08/JC/2012
Dated 25.01.2012
6. Proof of payment of duty, penalty etc., should also be attached to the original form of appeal.
Brief Facts of the Case:
Acting on an intelligence that M/s Kaveri Buildcon, A-7-B, Ist Floor,
Ranjit Tower, Near Lal Bungalows, Jamnagar (hereinafter referred to as the
“noticee”) were engaged in providing ‘Construction of Residential Complexes’
service to M/s Essar Steel Ltd., Surat on behalf of M/s Essar Constructions
Ltd. Hazira, Surat as per their work orders from time to time, an enquiry
was initiated. It appeared that the noticee were carrying out
the above
construction work since long without obtaining registration, as required
under the Finance Act, 1994, and without payment of due service tax.
2.
A Summons was issued on 28-12-2006 directing them to appear
before the Superintendent, Service tax Division, Rajkot on 08-01-2007 along
with the information/relevant documents i.e. the details of services provided
to M/s Essar Construction Ltd., Hazira, Surat during the year 2004-2005 and
2005-2006, Service Tax Registration and payment particulars of service tax
and copies of annual report/general ledger accounts etc. for the purpose of
further investigation. The noticee vide their letter No. Nil dated 3-01-2007
requested to fix another date as due to prior engagement it was not possible
for them to appear on 08-1-2007. Accordingly, the next date for appearance
was fixed on 12-01-2007. They, vide their letter dated 12-01-2007,
produced documents:1.
2.
3.
4.
3.
Copy
Copy
Copy
Copy
of
of
of
of
Audit Report for the financial year 2004-2005 & 2005-2006.
work order for the year 2004-2005 & 2005-2006.
invoices for the year 2004-2005 & 2005-2006.
Partnership deed.
However, they delayed the personal appearance on one reason or the
other and finally, Shri Navinbhai Hirabhai Jivrajani, partner of the noticee
appeared before the Superintendent of Service Tax, Division-Rajkot on
09-05-2007. His statement was recorded on 09-05-2007 under Section 14 of
the Central Excise Act, 1944 made applicable to
Service Tax matter vide
Section 83 of the Finance Act, 1994 wherein he inter alia stated that he was
one of the partners in M/s Kaveri Buildcon since its inception; that there is
no other office/offices of the noticee except the one situated at Jamnagar
under the name of ‘M/s Kaveri Buildcon’ and they were engaged in
construction work; that they were doing construction work of Gokul Gram
Page 2 of 17
OIO No. 08/JC/2012
Dated 25.01.2012
Yojna of Reliance at Jamnagar and at Surat; that they were engaged in the
construction work of M/s Essar Steel Limited and construction work of M/s
Essar Township; that they were doing the construction work since last 3 to
4 years. Regarding the type/nature of construction work provided to M/s
Essar Steel Ltd., he stated that for the construction of Township of M/s Essar
Steel Ltd, Surat they had contacted above Public Limited company and had
received work orders from them; that whenever M/s Essar Steel Ltd was in
need of Township construction work, they had carried out their construction
work, repairing work, renovation, fittings and all other work related to
construction; that the work carried out by them were according to the work
orders; that for all the construction work, they were purchasing building
materials, managing required manpower and on completion of work, they
were submitting bills to M/s Essar Steel Ltd., and later on M/s Essar Steel
made payment to them. On being further asked as to whether they had
obtained registration for Service Tax, he stated that, they believed that their
construction works were not covered under the regulations of the Act and as
such they had not obtained service tax registration. He further stated that
they were doing residential construction work for Essar Township and
employees of Essar were staying there; that on completion of work, they
were preparing and submitting bills and thereafter they were getting
remuneration; that they believed that as per Notification No. 15/2005 dated
7-6-2005 effective from 16-6-2005, the construction work being carried out
by them were not taxable as the work done by them were not covered under
the explanation of Service Tax and they were not responsible to pay service
tax and accordingly they had not taken Registration and not paid any
Service Tax. He produced copies of work orders bills/invoices for the year
2006-2007 during the course of recording of his statement.
4.
During scrutiny of the documents produced by the noticee, it was
observed that the details of payments received by them from M/s. Essar
Construction Ltd., Surat, M/s. Essar Steel Ltd., Surat and M/s.Reliance Rural
Development Trust, Jamnagar for the work executed by the noticee were not
provided.
Therefore, they were asked vide letter No.V.6-34/STax/06-07
dated 14.09.2007 to provide the said details in the proforma enclosed with
the said letter. It was further observed that certain clients had provided
construction materials to them free of charge. Therefore they were asked to
provide the details of such “free issue materials” in the given proforma and
to state as to whether the value of such materials was included in the gross
amount charged by them or otherwise and they were also asked to produce
Page 3 of 17
OIO No. 08/JC/2012
Dated 25.01.2012
the copy of Tender Notice/ Tender Acceptance Order issued by the above
mentioned firms with reference to their work orders. The noticee vide their
letter No. nil dated 12.10.2007 provided the information in the given
proforma in respect of work done by them and amount received firm wise.
They reported that they were not having details regarding any “free issue
materials” and the materials were provided by the companies as and when
required and as regards the gross amount charged by them, they included
cost of labour charges and cost of the materials procured by them for use in
the construction related services. They further stated vide letter dated
17.12.2008 that in case of M/s Reliance Rural Development Trust, Jamnagar
they had provided construction related services like Construction of Schools,
Primary Health Centers, and Panchayat Buildings etc. to them under ‘Gokul
Gram Yojna’ of Gujarat Government and before that these were not taxable
under
‘Commercial
‘Construction
of
or
Industrial
Complex
Construction
Services’.
Further,
Services’
vide
their
or
letter
under
dated
20.01.2009 they provided the details of work carried out for the period
01.04.2007 to 31.03.2008 in case of M/s Essar Construction Limited, M/s
Essar Steel Limited and M/s Essar Logistic Limited and also stated that no
works were carried out after 31.03.2008.
5.
The above
work orders awarded to the noticee by the aforesaid
companies and bills raised
by the noticee
to the aforesaid companies
revealed that the said noticee were engaged in the construction of
residential complex by providing & doing PCC & reinforced controlled cement
concrete with sand and coarse aggregate including vibrating, finishing,
curing etc, providing and laying of 150 MM Dia pipe with necessary jointing
materials, clamps, anchor fasteners, scaffoldings supply and installation of
40 AMP MCB of Anchor make complete with all labour, tools, plants and
consumables as per drawings, providing and laying of 230 MM brick masonry
work with 1: 4 cement mortar, providing and fixing of kitchen shutter of
particle board both side laminate 18 MM thick self including hardware
fittings, auto hinges, handle, magnet, wooden frame, paining of framing,
Supply and fixing of ceramic tiles, cutting fixing granite slab, making full
round moulding in kota stone including polish, providing and fixing aluminum
partitions made of aluminum section with novapan, glass, including doors
and windows all complete job, providing & fixing gypsum false ceiling India
make, material fixing including excavating trench in ground, supply and
installation of Switch socket with MS switch Board of requisite size with Mica
sheet top, including connection with single core, supply and fixing of light
Page 4 of 17
OIO No. 08/JC/2012
Dated 25.01.2012
fittings, providing and applying one coat of synthetic enamel paint including
patch work, providing and fixing double wall sintex tank, excavation in soft
soil, providing and doing concrete, pouring of concrete of different grades in
pile cap pedestals walls etc. using concrete pump, cleaning of pipes after
concreting & stacking of same in safe custody after completion of work,
backfilling in foundations, trenches & plinth in layer of 15 cm. including
watering and ramming ,providing and fixing form work, straightening,
cutting, bending, transporting and fixing of reinforcement including binding
wire with or without using/bending machine including transportation of steel
from store and cutting/bending yard loading unloading and transporting to
job site etc., providing and doing 100 MM thick brick bat Khoba, providing
and doing 100 MM thick. Brick Bat Khoba including compaction, providing
and doing 12MM thick. Plaster, providing and fixing Ghana teak wood frame
for door, window, A/C opening, ventilator etc. all complete job. Supply,
installation and commissioning of 5A point wiring with PVC insulated PVC
sheathed copper wire in 25 MM PVC casing and capping from switch to
individual light/fan points in common/individual MS switch Board of requisite
size with Mica sheet top, supply and installation of 5A Piano type switch,
ceiling
rose,1.5
SQMM
PVC
Copper
wire
etc.
including
testing
and
commissioning with all material, labour tools, plants and consumables as per
drawing/specification, supply and installation, testing and commissioning for
sub man wiring etc.
6.
The
service
tax
on
construction
of
residential
complexes
was
introduced with effect from 16-06-2005 vide notification No. 15/2005 dated
07-06-2005. Under Section 65 (30a), the definition of the construction of
residential complex services reads as under:“Construction of complex” means:(a) construction of a new residential complex or a part thereof; or
(b) completion and finishing services in relation to
residential
complex 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 application or fittings and other similar services ; or
(c) repair, alteration, renovation or restoration of, or similar services in
relation to, residential complex;
Sub-clause (zzzh) of Clause (105) of Section 65 of the Finance Act,
1994 defines taxable service as “Taxable service means any service provided
or to be provided to any person by any other person, in relation to
construction of complex.”
Page 5 of 17
OIO No. 08/JC/2012
Dated 25.01.2012
Clause (91 a) of Section 65 of Finance Act, 1994 defines the
“residential complex” as “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
lay out, and the construction of such complex is intended
for personal use as residence by such person.
7.
Whereas the noticee had constructed residential complex for M/s Essar
Steel Township, Surat. The construction of the complex was brought under
the ambit of Service Tax with effect from 16-06-2005. As per Section 65
(30a) of the Finance Act, l994, construction of a complex means construction
of a new residential complex or a part thereof, completion and finishing
services in relation to residential complex such as glazing, plastering,
painting , wood and metal joinery and carpentry, fencing and railing, repair,
alteration and renovation etc.
The term residential complex is defined in
Section 65 (91a) of the Finance Act, 1994 as follows:- “residential complex”
means any complex comprising of a building or buildings having more than
12 residential units located within the premises. Further, Section 65 (105)
(zzzh) defines the taxable service as any service provided or to be provided
to any person, by any other person in relation to construction of a complex.
Thus, services rendered by the noticee towards the construction of
residential complex for the Essar Steel Township is chargeable to service tax
under the head “construction of a complex” as defined under Section 65
(30a) of the Finance Act, 1994.
It was revealed that the noticee had
received a total/gross amount of Rs.1,48,37,628/- (including TDS) from M/s
Essar Construction Ltd., M/s Essar Steel Ltd. and M/s Essar Logistic Limited
during the period from 16-06-2005 to 31-3-2006, 1-4-2006 to 31-3-2007
and 1-4-2007 to 31-3-2008. The noticee in his statement stated that for all
the construction work, they were purchasing building materials, managing
the required manpower and arranging the same for the construction work
and on completion of work, they were raising their bills to M/s Essar Steel
Ltd., and later M/s Essar Steel used to make payments to them.
It,
therefore appeared that they were eligible for abatement of 67% on the
gross amount charged under the erstwhile notification No. 18/2005-ST dated
07-06-2005 and prevailing Notification No. 1/2006-ST dated 01-03-2006.
Page 6 of 17
OIO No. 08/JC/2012
Dated 25.01.2012
The said noticee had submitted summary of bills raised by them for the
above mentioned work executed during the period from 01-04-2005 to 313-2006 , 1-4-006 to 31-3-2007 and 1-4-2007 to 31-3-2008 and had not
paid the service tax including Education Cess of Rs. 5,85,366/- as detailed
below:-
ESSAR STEEL LTD.
Sr.
No.
Bill Date
1
2
3
4
5
6
7
8
Bill
No.
06.11.2006/15.11.2006
14.12.2006
05.01.2007
15.01.2007
20.02.2007
23.04.2007
01.05.2007
04.10.2007
Total
1
2
1
3
4
1
5
1
Gross
Amount
charged
(Rs.)
1018050
1254915
39000
750686
651193
266000
1223755
66436
5270035
Assessable
Value (33% of
Gross amount
(Rs.)
335957
414122
12870
247726
214894
87780
403839
21924
1739112
Rate of S.
tax
including
cess
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.36%
service
tax/ cess
payable
Rate of S.
tax
including
cess
10.20%
10.20%
10.20%
10.20%
10.20%
10.20%
10.20%
10.20%
10.20%
10.20%
10.20%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
12.24%
service
tax/ cess
payable
(Rs.)
61
283
6467
20929
38
3540
3741
3788
6216
432
6848
112169
1397
4423
15958
5219
1739
563
50399
12302
5573
7004
1446
3607
23687
10763
3697
454
246
206
1082
4048
41121
50689
1575
30322
26303
10744
49430
2710
2,12,894
ESSAR CONSTRUCTION LTD.
Sr.
No
Bill Date
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
21.06.2005
05.07.2005
07.07.2005
07.07.2005
19.07.2005
27.09.2005
20.10.2005
27.10.2005
20.12.2005
27.01.2006
24.03.2006
25.06.2006
07.07.2006
10.07.2006
20.07.2006
01.09.2006
29.09.2006
13.11.2006
25.11.2006
15.12.2006
20.12.2006
29.01.2007
29.01.2007
02.02.2007
02.02.2007
05.02.2007
23.02.2007
23.02.2007
27.02.2007
16.03.2007
27.03.2007
02.04.2007
Bill
No.
3
3
2
1
2
2
1
1
2
2
3
1
7
1
2
2
3
3
2
1
4
1
1
1
2
1
3
8
5
6
9
1
Gross
Amount
charged
(Rs.)
1800
8407
192131
621764
1122
105176
111132
112534
184684
12825
203444
2777009
34589
109500
395076
129200
43056
13950
1247745
304558
137979
173397
35795
89288
586424
266452
91537
11232
6083
5103
26785
100218
Assessable
Value (33% of
Gross amount
(Rs.)
594
2774
63403
205182
370
34708
36674
37136
60946
4232
67137
916413
11414
36135
130375
42636
14208
4604
411756
100504
45533
57221
11812
29465
193520
87929
30207
3707
2007
1684
8839
33072
Page 7 of 17
OIO No. 08/JC/2012
Dated 25.01.2012
33
34
35
36
37
38
39
40
41
20.07.2007
01.06.2007
20.07.2007
08.09.2007
08.09.2007
17.09.2007
29.09.2007
18.10.2007
28.11.2007
Total
3
1
2
4
4
7
3
4
5
82907
61935
184171
20460
6160
68515
461948
175375
76060
9277526
27359
20439
60776
6752
2033
22610
152443
57874
25100
3061584
12.36%
12.36%
12.36%
12.36%
12.36%
12.36%
12.36%
12.36%
12.36%
3382
2526
7512
835
251
2795
18842
7153
3102
3,64,720
Rate
of
S.tax
including
cess
12.36%
12.36%
service
tax/E.cess
payable
ESSAR LOGISTIC LIMITED
Sr.No.
1
2
8.
Bill Date
29.05.2007
06.06.2007
Total
Bill
No.
1
1
Gross
Amount
charged
(Rs.)
181000
9067
190067
Assessable
Value (33% of
Gross amount
(Rs.)
59730
2992
62722
7383
370
7752
Thus it appeared that the noticee had been providing the “construction
of complex services even prior to 16-06-2005. Service Tax on “Construction
of Complex Service” was introduced w.e.f. 16-06-2005. The noticee had
constructed residential quarters for M/s Essar Steel Township, Hazira – Surat
and had received the payments from them towards the construction of
complex, however the said noticee neither got themselves registered in
respect of “Construction of Complex Service” nor disclosed such payments to
the department and suppressed facts and there by contravened the
provisions of the Finance Act,1994 relating to levy and collection of Service
Tax and Rules made thereunder with intent to evade the payment of Service
Tax. Therefore, it appeared that the proviso to sub section (1) of Section 73
of the Finance Act, l994 was applicable to invoke the extended period of five
years for the recovery of Service Tax not paid.
9.
Based on above facts, it appeared that the noticee had contravened
the provisions of :(1) Section 68 of the Finance Act, l994, read with Rule 6 of the Service
Tax Rules, 1994, inasmuch as they failed to make the payment of
service Tax of Rs. 5,85,366/- to the credit of the Government;
(2) Section 69 of the Finance Act, 1994, and Rule 4 of the Service
Rules, 1994 inasmuch as they failed to obtain service tax registration
within the prescribed time limit of thirty days from the date of levy of
service tax on the construction of Complex service;
Page 8 of 17
OIO No. 08/JC/2012
Dated 25.01.2012
(3) Section 70 of the Finance Act, l994, read with Rule 7 of the Service
Tax Rules,1994 inasmuch as they had not declared the amount of
charges received by them, from their clients, in lieu of taxable service
rendered by them;
10.
Therefore, M/s Kaveri Buildcon, Jamnagar vide show cause notice no.
SCN No.V.ST/AR-JMR/JC/132/2010 dated 07.06.2010 were called upon to
show cause to the Joint Commissioner of Central Excise, Rajkot as to why:(i)
the service tax amounting to Rs. 5,85,366/- should not be
demanded and recovered from them under Section73(I) of
the Finance Act,1994;
(ii)
interest at the appropriate rate should not be charged in
terms of the provisions of Section 75 of the Finance Act,
l994;
(iii)
penalty under Section 76 of the Finance Act,1994 should not
be imposed on them inasmuch as they failed to pay service
tax within stipulated time frame as mentioned hereinabove;
(iv)
penalty under Section 77 of the Finance Act, l994 should not
be imposed on them inasmuch as they failed to file the
prescribed ST-3 Return/s with in the stipulated time in terms
of Rule 7 of the Service Tax Rules, l994 as amended;
(v)
penalty under Section erstwhile 75A (Now Section 77) of the
Finance Act, 1994 as amended from time to time, which was
in force at the material time should not be imposed on them
inasmuch as they have failed to obtain service tax registration
within stipulated period under Section 69 of the Finance
Act,l994 as amended from time to time ;
(vi)
penalty under Section 78 of the Finance Act, l994
as
amended should not be imposed on them for their various
acts/omissions as referred to in para supra and also for
suppressing and not disclosing the value of the said taxable
service provided by them before the department with an
intend to evade payment of Service tax as mentioned above.
DEFENCE SUBMISSION AND PERSONAL HEARING:
11.
The noticee filed reply to the show cause notice vide their letter dated
05.12.2012, wherein, it is inter alia, contended that
(i)
the impugned notice, contrary to the provisions of the Finance
Act is unsustainable in law.
Period of limitation cannot be
invoked under Section 73 of the said Act as the invocation of
Page 9 of 17
OIO No. 08/JC/2012
Dated 25.01.2012
extended period of time limit of five years can be done only if
there is short levy, non levy, short payment, non-payment or
erroneous refund of service tax due to fraud, collusion, willful
misstatement, suppression of facts and contravention of any of
the provisions of the act or rules made thereunder with any
intent to evade payment of service tax.
(ii)
they had not committed any fraud in the payment of service tax
because at the time of new levy of service tax, due to bonafide
belief & unknown about the facts of the law, they believed that
they were not liable for service tax under the category of service
tax. But when they had come to know about the actual liability,
they paid the total service tax along with interest at appropriate
rate under Section 75.
Hence, they had not committed any
fraud.
(iii)
the meaning of collusion is that ‘a secret agreement between
two or more parties for a fraudulent, illegal or a deceitful
purpose’. They were not engaged in any collusion to non levy,
short payment or non payment of service tax as they had
provided construction services with reference to work order
issued by the parties, hence they had not committed collusion.
(iv)
they had not done any act of falsifying, or making false,
counterfeiting, nor done any willful misrepresentation in making
payment of service tax alongwith interest while knowing the
actual liability.
Further, nothing has been pointed out by the
department stating that they had given a willful misstatement.
(v)
they had submitted all the documents whenever demanded viz.
submitting of copy of audit report for the F.Y 2004-05 & 200506, copy of the work order for the year 2004-05 & 2005-06,
copy of invoices for the year 2004-05 & 2005-06 and copy of
partnership deed. Further, the partner of the noticee appeared
on 9.5.2007 for giving his statement wherein he stated they
were doing construction work of gokul gram yojna of Reliance at
Jamnagar and the Surat, construction work of M/s Essar Steel
Ltd., Surat, construction work for Essar Township and he also
produced the copies of work orders, bills/ invoices.
They also
provided other details as asked by the department. Thus, they
had not suppressed the facts and all the facts known to them
had been stated during the proceedings as well as recording of
the statement.
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Dated 25.01.2012
(vi)
they had not made any contravention of any of the provisions of
the act or rules made thereunder with intent to evade payment
of service tax.
Further, as soon as they learned about the
service tax liability, they applied for registration and within 20
days paid the service tax alongwith the interest.
It was the
bonafide belief of the noticee that service tax was not applicable.
(vii) they also relied upon the decision of the Madras High Court in
case of CCE, Triuchirapalli vs Shri Suthan Promoters-2010 (06)
LCX 0024.
(viii) Since SCN itself was issued without the authority of law, and was
factually incorrect, proposal for imposition of penalty on them
was also premature and unsustainable in law.
(ix)
The reasonable cause for not depositing service tax within the
due date was already mentioned in statement of facts in view of
bonafide belief that law is not applicable. They draw attention
on Section 80 of the Finance Act, 1994 and also relied upon the
following case laws:
(x)
(i)
CCE vs. Impress Ad-aids & Display 2004 (137) (Bang-CESTAT)
(ii)
Shree Suthan Promoters vs CCE, Trichy-2009(11) LCX 0109
(iii)
V. Ravi vs CCE, Trichy 2008(12) LCX 0134
the default if any is on account of non-awareness, trivial and
venial in nature and they are sure that no penalty will be
imposed upon them as they had paid tax alongwith interest and
there is no loss to exchequer.
12.
Personal hearing in the matter was held on 7.12.2011, which was
attended by the authorised representative of the noticee who reiterated the
abovementioned submission dated 5.12.2011. They briefed the defence
reply and stated that they have paid the tax alongwith interest and
requested for non-imposition of penalty.
DISCUSSION AND FINDINGS:
13.
I have carefully gone through the entire case records, SCN issued and
defence put forth in writing as well as contentions raised during the personal
hearing. I find that the noticee have not contested the case on merits. I
also find that they have obtained Service Tax Registration bearing no.
AAEFK3184BSD001 on 6.8.2010 under the category of “Construction of
Residential Complex” and paid entire service tax of Rs.5,85,366/- on
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Dated 25.01.2012
16.08.2010, through various Challans, for the period under dispute
alongwith interest of Rs.2,80,911/-, as tabled below, hence I appropriate the
same against the demand.
Table
Sl.
No.
Period
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11
April to June-2005
July to Sept-2005
Oct to Dec-2005
Jan to March-2006
April to June-2006
July to Sept-2006
Oct to Dec-2006
Jan to March-2007
April to June-2007
July to Sept-2007
Oct to Dec-2007
Total
Date
Challan
of
16.08.2010
16.08.2010
16.08.2010
16.08.2010
16.08.2010
16.08.2010
16.08.2010
16.08.2010
16.08.2010
16.08.2010
16.08.2010
(Amt. in Rs.)
Amount paid
Service Tax
61
31256
13745
7280
153290
28735
119525
110390
74501
33616
12965
585366
Interest
40
19794
8254
4151
82168
14462
56236
48597
30249
12547
4415
280911
Hence the points to be decided in the present proceedings are:
(i)
Whether the show cause notice is barred by limitation or otherwise?
(ii)
Whether the noticee is liable for imposition of penalty under Section
76, 77 and 78 of the Finance Act, 1994 or otherwise?
14.
Regarding the show cause barred by limitation, it is contended by the
noticee that extended period of limitation cannot be invoked in their case as
under Section 73 of the Act, the invocation of extended period of time limit
of five year can be done only if there is short levy, non levy, short payment
or non-payment or erroneous refund of service tax due to fraud, collusion,
willful misstatement, suppression of facts and contravention of any of the
provision of the act or rule made thereunder with an intent to evade
payment of service tax.
The noticee have contested that they had not
committed any fraud in the payment of service tax, or indulged in any
collusion or given any misstatement. The noticee have also contested that
they have not suppressed the facts and all the facts known to them have
been stated during the proceedings as well as during recording of the
statement and hence they have not made any contravention of any of the
provisions of the act or rules made thereunder with an intent to evade
payment of service tax.
They have also submitted that once they learnt
about the service tax liability, they applied for registration and within 20
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Dated 25.01.2012
days paid the service tax alongiwith interest. They have also relied upon a
decision of Madras High Court in this regard.
15.
upon
On careful study of the circumstances of the case, it is seen that based
an
intelligence
that
the
noticee
were
engaged
in
providing
‘Construction of Residential Complex’ to M/s Essar Steel Ltd., Surat on behalf
of M/s Essar Construction Ltd. Hazira, Surat, an enquiry was initiated against
the noticee.
Accordingly, a summons was issued on 28.12.2006 directing
the noticee to appear before the Superintendent, Service Tax Division,
Rajkot on 8.1.2007 alongwith information/ relevant documents i.e. the
details of services provided to M/s Essar Construction Ltd., Surat during the
year
2004-2005
and
2005-2006,
S.
Tax
Registration
and
payment
particulars of service tax and copies of annual report/ general ledger
accounts etc. for the purpose of further investigation. The noticee thereafter
on 12.01.2007 produced the required documents to the department. Based
upon these documents as well as after recording the statement of the
partner of the noticee, the investigation arrived at the conclusion that the
noticee had during the period from 2005-06 (after 16.06.2005) to 2007-08
provided “Construction of Complex” service as they have constructed
residential quarters for M/s Essar Steel Township, Hazira, Surat and have
received payment from them towards the construction of complex. Had the
department not initiated the inquiry/investigation against the noticee, they
would have eluded the payment of service tax. Hence, I am not convinced
with the contention of the noticee that they have not suppressed the facts
from the department. They have come forward with the details only after
the investigation was initiated against them. Further, I also observe that the
noticee have obtained registration on 6.8.2010 under the category of
“Construction of Residential Complex” and paid tax on 16.08.2010 while the
inquiry / investigation was initiated against them in the year 2006. Hence, if
the noticee had a bonafide belief, they would have come forward to pay the
tax at the time of enquiry stage only. They have paid the tax after a long
gap of almost 4 years from the date of inquiry / investigation and hence
their act of non-payment of tax cannot be placed under the terminology of
‘bonafide belief’.
They have obtained service tax registration under this
category of service on 06.08.2010 and paid service tax on 16.8.2010 i.e.
after issuance of notice dated 7.6.2010 to them. This proves that they had
deliberately and knowingly not paid tax on the income generated by
providing ‘Construction of Residential Complex’. Further, the case cited by
them also does not support their contention as in that case no specific
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Dated 25.01.2012
findings was given with regard to whether the ingredients of fraud collusion
or willful mis-statement was applicable.
Moreover, in that case the party
had paid the tax alongwith interest before issuance of show cause notice.
Hence the facts are different vis-à-vis the present case and therefore the
same is distinguishable. Therefore, I hold that there is clear case of
suppression of facts in the present case and the noticee’s plea in this regard
does not hold water and extended period has been correctly invoked in their
case. When the noticee has not disclosed the facts of providing ‘Construction
of Complex’ service the only conclusion that can be arrived at is that the
noticee has certainly suppressed the facts from the department with an
intent to evade payment of appropriate tax. As per Section 73 of the Finance
Act, 1994 when there is a suppression of facts with intent to evade payment
of service tax, extended period is invokable. Hon. High Court of Gujarat, in
the case of CCE, Surat-I Vs. Neminath Fabrics Pvt. Ltd. – 2010 (256) ELT
369 (Guj.), held that -
“Demand - Limitation - Extended period - Knowledge of Department,
effect - Suppression admitted but Tribunal held demand as barred by
limitation importing concept of knowledge of Department, as submitted
- Proviso to Section 11A(i) of Central Excise Act, 1944 provides for a
situation whereunder provisions of sub-section (i) ibid recast by
legislature extending period within which SCN issued - Proviso cannot
be read to mean that because there is knowledge, suppression which
stands established disappears - Concept of knowledge, by no stretch of
imagination, can be read into the provisions - Suppression not
obliterated, merely because Department acquired knowledge of
irregularities. - What has been prescribed under the statute is that upon
the reasons stipulated under the proviso being satisfied, the period of
limitation for service of show cause notice under sub-section (1) of
Section 11A, stands extended to five years from the relevant date.
[paras 15, 16, 20]”
Section 73 of the Finance Act, 1994 and Section 11A of the Central
Excise Act, 1944 are pari material and hence the judgment is squarely
applicable to the present case.
In view of the above, I conclude that the suppression clause is
properly invoked in the present case and for the same reason, the noticee is
liable for imposition of penalty under section 78 of the Finance Act, 1994.
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16.
Since the noticee has delayed payment of service tax due, the noticee
appears liable to be penalized under section 76 of the Finance Act, 1994,
also.
The use of the words, “who fails to pay such tax, shall pay, in addition
to such ….… a penalty which shall not be less than two hundred rupees for
every day during which such failure continues….” in section 76, ibid indicates
that it was an in-built provision in the statute itself for payment of penalty at
a specified scale for every day for delay, in addition to the tax and interest,
leviable thereon under section 75 of the Finance Act, 1994. The words “shall
pay” as used in section 76 of the Finance Act, 1994, in regard to penalty on
account of non payment of tax within the stipulated time indicate that the
penalty there under has to be paid mandatorily by the tax payer.
17.
Regarding imposition of penalty under Section 77 of the Finance Act,
1994, I find that the noticee has not obtained Service Tax Registration on
the material time and also not filed ST-3 returns for the period under dispute
though they are well aware of the provisions of law, and for such
contraventions; penalty under erstwhile Section 75A (now Section 77) of the
Finance Act, 1994 is imposable
18.
I further find that Section 78, vide its fifth proviso provides that ‘if
penalty is payable under this section, the provisions of section 76 shall not
apply’. The proviso supra thus prohibits imposition of penalty under section
76 ibid, if the finding is that the concerned entity is liable to penal action
under section 78 ibid. However, the said fifth proviso to section 78 ibid was
inserted vide Finance Act, 2008, w.e.f. 10.05.2008. Since the acts of nonpayment of service tax due in accordance with the law in this case pertain to
the period prior thereto, the said fifth proviso to section 78 ibid can’t apply
to the case in hand and, as such, in accordance with the law prevalent at the
material time, the noticee is liable to penalty under section 76 as well as
section 78 of the Finance Act, 1994. For my above decision I rely upon the
following Case Laws:
(i)
Assistant Commissioner of Central Excise V/s. Krishna Poduval
reported at 2006 (1) S.T.R.185 (Ker)
(ii)
Commissioner of Central Excise, Chandigarh V/s. Grewal Trading
Company-2010 (18) STR 350 (Tri-Delhi)
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Dated 25.01.2012
In this case, since the noticee has failed to pay the tax within the due
date as indicated hereinbefore, penalty under Section 76, ibid, is imposable
on the noticee at the rate prescribed therein. Quantification of penalty
payable under Section 76 ibid is possible only when the noticee fully
discharges the service tax liability alongwith interest due on account of
delayed payment of tax. However, as specified in Section 76, ibid, penalty
payable thereunder shall not exceed the amount of service tax payable.
19.
In view of the above, I pass the following order:
ORDER
1.
I confirm and demand the Service Tax of Rs.5,85,366/- (Rupees
Five Lakh Eighty Five Thousand Three Hundred Sixty Six Only) from
M/s Kaveri Buildcon, Jamnagar under proviso to Section 73(1) of
the Finance Act 1994 and appropriate the amount of service tax of
Rs.5,85,366/- already paid by M/s Kaveri Buildcon, Jamnagar in this
regard.
2.
I order M/s Kaveri Buildcon, Jamnagar to pay interest on the
amount of service tax confirmed at Sl. No. 1 above, at the
appropriate rate under Section 75 of the Finance Act 1994 and
appropriate the amount of Interest of Rs.2,80,911/- already paid by
M/s Kaveri Buildcon, Jamnagar.
3.
I impose a penalty of Rs. 200/- per day or two percent per month on
the demand confirmed at Sl. No. 1 above, whichever is higher, on
the noticee M/s Kaveri Buildcon, under the provisions of Section 76
of the Finance Act, 1994 starting with the first day after the due
date till the date of actual payment of service tax, provided that the
total amount of the penalty payable in terms on this account shall
not exceed the service tax payable as confirmed at Sl. No. 1 above.
4.
I impose a penalty of Rs.5,000/- (Rupees Five Thousand Only) on
M/s Kaveri Buildcon under erstwhile Section 75 A (now Section 77)
of the Finance Act, 1994.
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Dated 25.01.2012
5.
I impose a penalty of Rs.5,85,366/- (Rupees Five Lakh Eighty Five
Thousand Three Hundred Sixty Six Only) on M/s Kaveri Buildcon
under the provisions of Section 78 of the Finance Act, 1994. If the
amount, as determined under Sr. No. 1 above, is paid within 30
days from the receipt of the order along with interest payable then
as per proviso to Section 78 the penalty will be only 25% of the
service tax determined at Sl. No. 2 above. The benefit of reduced
penalty shall be available only if the amount of penalty so
determined has also been paid within the period of thirty days from
the date of receipt of the order.
(M.GNANASUNDARAM)
JOINT COMMISSIONER
F.No. V.ST/15-51/Adj/09
To
M/s Kaveri Buildcon,
A-7-B, Ist Floor, Ranjit Tower,
Near Lal Bunglow,
JAMNAGAR.
Copy to :
1.
2.
3.
4.
5.
The Assistant Commissioner (RRA), Central Excise, Rajkot.
The Deputy Commissioner, Service Tax Division, Rajkot.
The Deputy Commissioner, Tax Recovery Cell, HQ, Rajkot.
The Superintendent, Service Tax Range-Jamnagar.
Guard file.
Page 17 of 17