VKJ Latest News Update

VKJ Law Offices of Vinay K. Jain Advocates & Solicitors

ST – Failure to deposit service tax – Benefit of cum tax is correctly allowed where assessee raised invoices without charging tax: CESTAT

2019-TIOL-2475-CESTAT-MAD

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH, CHENNAI

Appeal No. ST/611/2010

Arising out of Order-in-Appeal No.217/2010, Dated: 18.6.2010
Passed by the Commissioner of Central Excise (Appeals), Madurai

Date of Hearing: 27.02.2018
Date of Decision: 27.02.2018

M GOPAL

Vs

COMMISSIONER OF CENTRAL EXCISE
TIRUNELVELI

Appeal No. ST/559/2010

Arising out of Order-in-Appeal No.217/2010, Dated: 18.6.2010
Passed by the Commissioner of Central Excise (Appeals), Madurai

COMMISSIONER OF CENTRAL EXCISE
TIRUNELVELI

Vs

M GOPAL

Appellant Rep by: Ms Cynduja Krishnan, Adv.
Respondent Rep by: Shri K P Muralidharan, AC AR

CORAM: Sulekha Beevi C S, Member (J)
Madhu Mohan Damodhar, Member (T)

ST – “Management and Repair Services” – SCN issued to the appellant for failure to discharge ST – demand of ST of Rs.12.54 lakhs confirmed along with interest, penalties imposed under sections 76, 77 and 78 of the Finance Act, 1994 – on appeal, the Commissioner (Appeals) reduced the demand to Rs.5.01 lakhs, set aside the penalties imposed under sections 76 and 77 and reduced the penalty imposed under section 78 in accordance with the tax demand confirmed – appellant before CESTAT – revenue also before CESTAT aggrieved by the reduction of demand of ST as well as setting aside of penalty.

HELD: Main grievance of the appellant is that they have not been given the benefit of notification 12/2003-ST which allows deduction/exemption of value of the cost and materials sold by the service provider while rendering services -in the contract, the rate has been fixed including the cost of materials/labour charges and service charges – on such score, the appellant is definitely eligible for exemption of the value of the materials sold to the service recipient/client while undertaking the maintenance or repair service – the decision in the case of Safety Retreading Co. (P) Ltd. [2017-TIOL-28-SC-ST] will support the appellant on this issue – therefore, matter requires to be remanded for verification and extending the benefit of notification 12/2003-ST -the department has filed appeal contending that the Commissioner (Appeals) has wrongly given the benefit of cum-tax – even in the SCN, it is stated that the appellant has not collected ST – therefore, it is clear that the appellant has been raising invoices without charging ST – Commissioner (Appeals) has rightly allowed the benefit of cum-tax to the appellant – on this score, no merits found in the appeal filed by the department – Commissioner (Appeals) has rightly set aside the penalties observing that appellant has given reasonable explanation for failure to pay ST and this conclusion of the Commissioner (Appeals) does not require any interference- appeal of the appellant is partly allowed and partly remanded to the adjudicating authority for reworking the demand after extending the appellant the benefit of notification 12/2003 on production of documentary proof by the appellant – appeal filed by the department is dismissed : CESTAT [para5, 6, 7, 8]

Appeal of appellant partly allowed/partly remanded /Appeal of Revenue dismissed

Case law cited:

Safety Retreading Co (P) Ltd vs. Commissioner of Central Excise, Salem reported in 2017 – 2017-TIOL-28-SC-ST… Para 2

FINAL ORDER NOS. 40549-40550/2018

Per: Bench:

The issue involved in both these appeals arising from the same Impugned Order, they were heard together and are disposed by this common order. The parties are referred to as assessee and the Department as Revenue for the sake of convenience.

1. The brief facts are that the assessee is rendering services under the category “Management, Maintenance and Repair Service”. During the course of audit, it was noticed that the assessee has not collected service tax and was not paying the same on the services rendered by them. On scrutiny of the invoices/documents and after recording statements, it appeared to the department, that the appellant had provided Maintenance and Repair Services and has failed to discharge the service tax under the said category. Show Cause Notice was issued proposing to demand service tax, interest and also for imposing penalty. After due process of law, the original authority confirmed the demand of service tax of Rs.12,54,136/- for the period 1/7/2003 to 31/3/2008 alongwith interest and imposed penalty under section 76, 77 and 78 of the Finance Act, 1994. Aggrieved by the said order, the assessee filed an appeal before the Commissioner (Appeals) and vide order impugned herein the Commissioner (Appeals) reduced the demand to Rs.5,01,073/- alongwith interest and set aside the penalty imposed under section 76 and 77 and reduced the penalty imposed under section 78 in accordance with the tax demand confirmed. Accordingly the assessee has filed appeal ST/611/2010. The Department has filed ST/559/2010 aggrieved by the reduction of demand of service tax as well as setting aside of penalty.

2. On behalf of the assessee, the Ld.Councel, Ms.Cynduja Crishnan submitted that though the demand is confirmed under Management, Maintenance and Repair Service, the authorities below failed to extend the benefit of notification 12/2003 ST dt.20.6.2003 stating that the assessee has not produced any documentary proof indicating the value of the materials. It is also submitted by her that the Hon.Apex Court in the decision of Safety Retreading Co (P) Ltd vs. Commissioner of Central Excise, Salem reported in 2017 (48) STR 97 (SC) = 2017-TIOL-28-SC-ST has laid down that the benefit of Notification 12/2003 has to be extended when the materials are soid as part of providing services. She also argued on the ground of limitation. The assessee has furnished documents to the department and only on the basis of such documents, the department has issued the SCN. That therefore, the invocation of extended period alleging suppression of facts is without any basis.

3, The Ld.AR, Sh.K.P.Muralidharan reiterated the grounds of appeal. He submitted that the Commissioner (Appeals) has given the benefit of Cum-tax Benefit and thereby reduced the demand to Rs.5,01,073/-. The observation of the Commissioner (Appeals) that demand will not sustain on the entire receipts is erroneous. The appellant has collected charges like installation and other works. These will also fall within the ambit of maintenance and repair services and therefore these charges ought to have been included for arriving the demand of service tax. On the ground of limitation, he submitted that the appellant had not registered with the Department and was not filing any service tax returns. The evasion would not have come to light, but with the investigation conducted by the department. That therefore the invocation of extended period is correct and proper.

4. Heard both sides.

5. The assessee was undertaking Maintenance and Repair work in M/s.Kilburn Chemicals Ltd, Tuticorin on the basis of contract entered with them. The rate for the maintenance and repair work was fixed on agreement which include the cost of materials used, labour charges and service charges for organising the above works. The main grievance of the assessee is that they have not been given the benefit of Notification 12/2003 which allows deduction/exemption of value of the cost and materials sold by the service provider while rendering services. The above said notification provides that the service provider has to produce documentary proof indicating the value of goods and materials sold. In the contract, the rate has been fixed including the cost of materials/labour charges and service charges. On such score, the appellant is definitely eligible for exemption of the value of the materials sold to the service recipient/client while undertaking the maintenance or repair service. The decision in the case of Safety Retreading Co (P) Ltd vs. Commissioner of Central Excise, Salem reported in 2017 (48) STR 97 (SC) (supra) = 2017-TIOL-28-SC-ST will support the appellant on this issue. Therefore we are of the opinion that matter requires to be remanded for verification and extending the benefit of notification 12/2003.

6. The department has filed appeal contending that the Commissioner (Appeals) has wrongly given the benefit of cum-tax. Even in the SCN, it is stated that the appellant has not collected service tax. Therefore it is clear that the assessee has been raising invoices without charging service tax. In our view the Commissioner (Appeals) has rightly allowed the benefit of cum-tax to the assessee. On this score, we find no merits in the appeal filed by the department.

7. The Ld.Councel has also argued on the ground of limitation. She submitted that the assessee was not aware of the liability to pay service tax and that there was no intention to evade payment of tax, as the entire demand was made from the figures/documents produced by the assessee. The department countered this by stating that the assessee having not registered with the department and having not filed any service tax returns are not eligible to contend that they are not guilty of suppression of facts. After considering the facts of the case as well as the submissions made by both sides, we do not find any merit in the arguments put forward on the issue of limitation. The Commissioner (Appeals) has rightly set aside the penalties observing that assessee has given reasonable explanation for failure to pay service tax, and this conclusion of the Commissioner (Appeals) does not require any interference.

8. From the discussions above, the appeal ST/611/2010 is partly allowed and partly remanded to the adjudicating authority for reworking the demand after extending the assessee the benefit of Notification 12/2003 on production of documentary proof by the assessee. The appeal filed by the department is dismissed.

(Operative part of the order pronounced in open court)

Leave a Reply

Close Menu
%d bloggers like this: