Brief facts of the case
Notification No. 32/2007-Service Tax
Yüklə 161,82 Kb.
|
Notification No. 32/2007-Service Tax
G.S.R. (E). In exercise of the powers conferred by sections 93 and 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules, namely:- 1. Short title and commencement.– (1) These rules may be called the Works Contract (Composition Scheme for Payment of Service Tax) Rules, 2007. (2) They shall come into force with effect from the 1st day of June, 2007.
2. Definitions.– In these rules, unless the context otherwise requires,- (a) “Act” means the Finance Act, 1994 (32 of 1994); (b) “section” means the section of the Act; (c) “works contract service” means services provided in relation to the execution of a works contract referred to in sub-clause (zzzza) of clause (105) of section 65 of the Act; (d) words and expressions used in these rules and not defined but defined in the Act shall have the meanings respectively assigned to them in the Act.
3. (1) Notwithstanding anything contained in section 67 of the Act and rule 2A of the Service (Determination of Value) Rules, 2006, the person liable to pay service tax in relation to works contract service shall have the option to discharge his service tax liability on the works contract service provided or to be provided, instead of paying service tax at the rate specified in section 66 of the Act, by paying an amount equivalent to two per cent. of the gross amount charged for the works contract. Explanation.- For the purposes of this rule, gross amount charged for the works contract shall not include Value Added Tax (VAT) or sales tax, as the case may be, paid on transfer of property in goods involved in the execution of the said works contract.
(2) The provider of taxable service shall not take CENVAT credit of duties or cess paid on any inputs, used in or in relation to the said works contract, under the provisions of CENVAT Credit Rules, 2004. (3) The provider of taxable service who opts to pay service tax under these rules shall exercise such option in respect of a works contract prior to payment of service tax in respect of the said works contract and the option so exercised shall be applicable for the entire works contract and shall not be withdrawn until the completion of the said works contract. 24.4.6 I have gone through the ST-3 returns filed by the said service provider from time to time. I find that w.e.f. 1.06.2007 onwards the said service provider have discharged service tax on the 2 % of the value of work contract. In view of the aforesaid discussion, I am unable to accept their contention in this regard. Accordingly, I hold that they are not entitled to avail benefit of Notification No.32/2007 ST. In this regard also I find that show cause notice is sustained on merits.
24.5.1 I now examine their claim if none of the benefit as mentioned at (i) and (ii) above are considered, whether their claim under Notification No.12/2003 ST dated 20.06.2003 is admissible to them or not? 24.5.2 In this regard also I find that till the issue was raised, the said service provider have consciously exercised their option to avail benefit under Notification No.15/2004 ST or under Notification No. 1/2006 ST. For the purpose of availing the aforesaid benefit it was the condition prescribed under both the said notification that they should have not availed the benefit of Notification No. 12/2003 ST. In the present case the disputes arises only because of classification of their service under clause ( c) of the sub clause (25b) of section 65 of the Finance Act,1994, which I have already decided in the foregoing paras of this order. Further, the benefit of the said Notification No. 12/2003 ST is available subject to condition that there is documentary proof specifically indicating the value of the said goods and materials”. In this regard I find that if at all if they intend to avail benefit under the said Notification No. 12/2003 ST they should establish that the said materials have been purchased and sold and VAT etc., have been discharged by them at both the ends which they failed to produce. On the contrary they have produced a certificate from the Chartered Accountant wherein it was certified that “ This is to certify that M/s Crystal Metals Pvt. Ltd having Address, 706 Satkar, Opp. Bodyline, C G Road, Ahmedabad, 380006 , is in the business of execution of works contract at construction industry. They have Consumed Materials in execution of their Contracts. The detail list & cost of Materials Consumed for the period 16.06.2005 to 31.05.2007 Cost of Materials is Rs. 97,17,478/- & for the period from 1.06.2007 to 30.09.2007 cost of material is Rs.27,17,532/- enclosed which is in agreement with their books of accounts maintained. Further we have to certify that their gross Profit ratio for the F.Y. 2006-07 is 20.62% and for F.Y. 2007-08 is 21.60%” The meaning of the said certificate is that the material which is valued by the Chartered Accountant is consumed for providing service. I do not deny that material have not been consumed by the said service provider. The abatement availed by the said service provider under Notification No. 15/2004 ST and 1/2006 ST is on the said contention that the value of material have been included in the providing service. Further, on the date of discharging service tax under Notification No. 15/2004 ST and 1/2006 ST the notification No. 12/2003 was also available. Had it been their intention to avail benefit under Notification No. 12/2003 they would have filed even revised returns within stipulated time limit as prescribed under the law which they did do not . The assessment made by them during voluntarily compliance can not be re-opened as requested in their submission after initiation of the proceedings by the department by way of show cause notice. Therefore, I am unable to accept their claim in this regard also. With regard to no liability on work contract prior to 01.06.2007 24.6.1 It is further contention that theirs is a work contract service and service tax on the said service was introduced w.e.f. 01.06.2007 and prior to that no service tax was leviable thereon. I am unable to accept their contention in this regard. In this regard I find that in the case on hand it is not the case of demanding service tax on work contract service. It is the question of determining whether the abatement availed by the said service provider under Notification No. 15/2004 ST or 1/2006 ST for the service which they have classified under “Construction of Complex Service” and obtained registration for rendering service under the said service. I have also gone through the following decisions cited by the said service provider. Glaxo Smithkline Pharmaceuticals Ltd. - 2006 (003) STR 0711(Tribunal) = 2005 (188) ELT 0017 (Tri.), Board of Control for Cricket in India, 2007 (007) STR 0384 (Tri),
Diebold Systems (P) Ltd. - 2007(11)LCXOI37 Eq 2008 (009) STR O546 (Tri.). Indian National Ship owners Association v. D.O.I. [2009 (014) STR 0289 (Bom.) = 2009 (092) RL T 06S1 (Born.)], CCE, Raigad v. Indian Oil Tanking Ltd. - 2010 (018) STR 0577 (Tri. - Mumbai), 24.6.2 However, I find that facts and circumstances of the case mentioned in the aforesaid cases and that on hand and not at all relevant and accordingly I find that the said decisions are not applicable to present facts of the case hence I can not rely on the same
24.7.1 Further their contention with regard to para 6 of the notice that the clarification issued under Circular No. 98/l/2008-ST dated 04.01.2008 have been noted and it has been observed that a single composite service cannot be vivisected and classified under two taxable services depending upon time of receipt of consideration, that based on this observation, the notice proposes to deny benefit of composition scheme (para 11 of the notice refers) and it was submitted that that the observations are presumptuous and have been made without verification of facts, that they request that the facts be verified, that they are in process of gathering the details and shall submit in a short duration, that value of material is deductible irrespective of whether the service is classified under Construction Service or under Works Contract, that in view of Rule 2A (l) (i) of the Service Tax (Determination of Value) Rules, 2006 the value of the goods value of transfer of property in goods involved in the execution of the works contract, that text of the relevant portion of the rule is reproduced hereunder: 2A. Determination of value of services involved in the execution of a works contract: (1) Subject to the provisions of section 67, the value of taxable service in relation to services involved in the execution of a works contract (hereinafter referred to as works contract service), referred to in sub-clause (zzzza) of clause (105) of section 65 of the Act, shall be determined by the service provider in the following manner; (i) Value of works contract service determined shall be equivalent to the gross amount charged for the works contract less the value o(trans(er o(property in goods involved in the execution of the said works contract. and contended that, even if the benefit of composition scheme is disallowed to certain contracts, value of the goods consumed for the contract needs to be deducted from the gross value. Tax would be payable only on the value arrived after such deduction. 24.7.2 I find that aforesaid contentions of the said service provider is not correct. In fact non admissibility of benefit under works contract service have been discussed in detail in the para supra. I have also verified in the ST-3 returns filed from time to time and find that they have started to pay service tax on work contract service w.e.f.01.06.2007 onwards meaning thereby that they have vivisected the value of contract entered by them prior to 01.06.2007 though the same is not permissible for availing benefit under Notification No. 32/2007 ST and as clarified by the CBEC from time to time as discussed in para supra. Therefore, their contention in this regard is not acceptable. As regard to suppression and Penalty and their bonafide. 25.1 As regard the limitation for issuing the show cause notice it is their submission that the notice is barred by limitation. There was no intention to evade payment of tax. They believed bonafide that the tax was payable only at 33% of the contract value; and complete information was provided in the returns. The service tax on construction work was a new levy and there was lot of confusion among service providers as well as the department. In this regard I find that their contention is not correct. The construction service was introduced w.e.f. from 16.6.2005.It is the duty of the service provider to properly classify their service, to determine their tax liability, to exercise which option is beneficial and applicable to them and should accordingly opt for the scheme of valuation for the purpose of tax payment and compliance prescribed by way of notification and circulars applicable to them. What I find in the instant case that the service provider did not mention clause (c ) of sub section (25b) of section 65 of the Finance Act, 1995 though the same is required to be mentioned as prescribed in the ST-3 return. It is only mentioned as “Construction Service” in the name of Taxable Service column of ST-3 returns, did not mention the notification under which they have availed abatement. From, 1.06.2007 they started to discharge service tax under work contract service without taking care to exercise their option in the manner prescribed by the department or without taking care to consider the clarification given by the CBEC in this regard whether the said benefit was available in their case for the service rendered under contract entered prior to 1.06.2007. I find that such a behavior cannot be considered as bona fide. I find that the said action of the said service provider is with intention to evade service tax as alleged in the show cause notice for demand and I find that demand is not time barred and is rightly issued under extended period of limitation as prescribed under proviso to section 73(1) of the Finance Act, 1994. 25.2 Accordingly charge of suppression is convincingly established against them and I am unable to accept their claim of bona fide under section 80 of the Finance Act, 1994 25.3 In view of the aforesaid findings I find that they failed to determine their correct tax liability and failed to pay service tax demanded under the present show cause notice by the due date on which they are supposed to discharge the said service tax and held them liable to penalty under section 76 as well as under section 78 of the Finance Act, 1994 on the ground mentioned below. 26. Penalty under Section 78 26.1.1 As regards to imposition of penalty, I find that the said assessee failed to pay service tax on the correct taxable value of services provided by them. It can not be said that it was a new levy and a person providing such services was unaware of his service tax liability. It is, thus, clear that omission did not occur due to any misunderstanding of law or ignorance of law but non payment of service Tax was with intent of tax evasion. If they had any reasonable doubt regarding liability of service tax, they should have approached Service Tax department for immediate clarification and guidance. However, no such effort was made by the said service provider to resolve any such doubt. The evasion of service tax was detected by the department as a result of investigation. The circumstances of the case establish that the said service provider did not discharge their statutory obligations deliberately, with the intent to avoid payment of service tax. 26.1.2 As it is already proved that the service provider had suppressed the facts, the consequences shall automatically follow. Hon’ble Supreme Court has settled this issue in the case of U.O.I Vs Dharmendra Textile Processors reported in 2008 (231) ELT 3 (S.C) and further clarified in the case of U.O.I Vs R S W M reported in 2009 (238) ELT 3 (S.C). Hon’ble Supreme Court has said that the presence of malafide intention is not relevant for imposing penalty and mens rea is not an essential ingredient for penalty for tax delinquency which is a civil obligation. 26.1.3 They have rendered themselves liable to penalty under Section 78 of the Finance Act, 1994, as they were not paying service tax inspite of the facts that they were providing the taxable service. My above view gets support from below mentioned case laws ;
26.1.4 I further observe that recently hon’ble High Court of Punjab & Haryana, in the case of CCE Vs Haryana Industrial Security Services reported at 2011 (21) STR 210 (P&H), has also upheld the penalty equal to service tax imposed under Section 78 of the Finance Act, 1994. Hon’ble Karnataka High Court has also taken similar view in the case of CCE, Mangalore Vs K Vijaya C Rai reported at 2011 (21) STR 224 (Kar.). 26.2 Penalty under Section 76 26.2.1 Since the said assessee had not discharged service tax liability on time on the amount of taxable service demanded under the show cause notice and therefore, they have contravened the provisions of Section 67, 68, of the Finance Act, 1994 and thereby rendered themselves liable to mandatory penalty under Sections 76 of Finance Act 1994. 26.2.2 Accordingly, I find that M/s Crystal Metal , are liable to pay mandatory penalty under Section 76 of the Finance Act, 1994 for failure to pay Service Tax on time till final payment. My conclusion is also based on below mentioned decision of Hon’ble High Courts & Tribunals, which have settled the issue of imposition of penalty under Section 76;
26.2.3 I further observe that the Hon’ble CESTAT in a recent judgment in the case of M/s Gujarat Industrial Security Force Society Vs CST, Ahmedabad, vide order No. A/1110/WZB/AHD/2010 dated 05.08.2010, has held that no lenient view can be taken under section 76 of the Finance Act, 1994. The relevant paras are reproduced below ; “2. After hearing both the sides, I find that in this case, the assessee was registered more than 6 years back and no explanation has been given by them for delayed filing of return and delayed payment of service tax. Under these circumstances, I am not finding fault in stand taken by the lower authority that penalty is imposable under section 76 and once it is held that penalty is imposable under section 76, the amount fixed as per the provision of section 76 is required to be imposed. Under these circumstances, even though the Ld. Advocate submitted that the appellant is a non profit organization, no lenient view can be taken in view of the provisions of law. 3. Accordingly, the appeal is rejected.” 26.2.4 Hon’ble High Court of Gujarat in the case of CCE & Cus. Vs Port Officer, reported at 2010 (19) STR 641 (Guj) has now settled the issue of penalty under Section 76. The relevant para is reproduced below ; “10. A plain reading of Section 76 of the Act indicates that a person who is liable to pay service tax and who has failed to pay such tax is under an obligation to pay, in addition to the tax so payable and interest on such tax, a penalty for such failure. The quantum of penalty has been specified in the provision by laying down the minimum and the maximum limits with a further cap in so far as the maximum limit is concerned. The provision stipulates that the person, who has failed to pay service tax, shall pay, in addition to the tax and interest, a penalty which shall not be less than one hundred rupees per day but which may extend to two hundred rupees for everyday during which the failure continues, subject to the maximum penalty not exceeding the amount of service tax which was not paid. So far as Section 76 of the Act is concerned, it is not possible to read any further discretion, further than the discretion provided by the legislature when legislature has prescribed the minimum and the maximum limits. The discretion vested in the authority is to levy minimum penalty commencing from one hundred rupees per day on default, which is extendable to two hundred rupees per day, subject to a cap of not exceeding the amount of service tax payable. From this discretion it is not possible to read a further discretion being vested in the authority so as to entitle the authority to levy a penalty below the stipulated limit of one hundred rupees per day. The moment one reads such further discretion in the provision it would amount to re-writing the provision which, as per settled canon of interpretation, is not permissible. It is not as if the provision is couched in a manner so as to lead to absurdity if it is read in a plain manner. Nor is it possible to state that the provision does not further the object of the Statute or violates the legislative intent when read as it stands. Hence, Section 76 of the Act as it stands does not give any discretion to the authority to reduce the penalty below the minimum prescribed.” 26.2.5 The Hon’ble High Court of Gujarat has further confirmed the above view in the case of CCE Vs S J Mehta & Co., reported at 2011 (21) STR 105 (Guj.) and CCE Vs Bhavani Enterprises reported at 2011 (21) STR 107 (Guj.). 26.3 Both Penalty under Section 76 & 78 – Justified: 26.3.1 I also find that penalty under Section 76 ibid is provided for failure to pay service tax whereas penalty under Section 78 ibid is for suppressing value of taxable service. In the instant case, service tax liable to be paid in terms of Section 68 read with Rule 6 of the Service tax Rules, 1994, have not been found paid as well as service tax has not been paid / short paid by suppressing value of taxable service by reason of willful mis-statement and suppression of facts. Of course these two offences may arise in the course of same transaction, or from the same action of the person concerned. But the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act the penalty is imposable for ingredients of both offences, this aspect was also considered by the Hon’ble High Court of Kerala in the case of Assistant Commissioner, C.Ex. Vs Krishna Poduval – 2006 (1) STR 185 (Ker). I also find that the Hon’ble Mumbai Tribunal in the case of Golden Horn Container Services Pvt. Ltd. v/s Commr. of C. Ex., Raipur reported at 2009 (16) S.T.R. 422 (Tri.-Mumbai), has held that Section 76 provides for a penalty who commits default simpliciter in payment of the tax whereas section 78 is a more stringent penal provision, which provides harsher penalty who commits default with mens rea. Since in this case also, M/s Crystal Metal Private Limited has committed default with mens rea, the decision of the tribunal is squarely applicable. 26.3.2 Therefore, I am of the view that in the facts and circumstances of the case, it is justifiable, if the penalty is imposed under the provisions of Section 76 and 78 of the Finance Act, 1994, separately, following the decisions of Hon’ble Kerala High Court and Mumbai tribunal (supra). My views are also further supported by various decisions of tribunals in the cases of ;
26.4 Penalty under Section 77 26.4.1 I further find that the assessee has failed to file their ST-3 returns with in stipulated period as required covered under the impugned show cause notice thereby violated the provisions of section 70(1) read with rule 7 of the Service Tax Rules, 1994, and furnished incorrect information in the ST-3 returns filed [at later date along with penalty] with regard to declaration of ‘ Commercial or Industrial Construction Service and wrongly declared that their service is falls under works contract service, 27. Accordingly I find that penalty as proposed under section 76, 77 and 78 is squarely justified. Whatever information did they disclose were at time of investigation initiated by the department. At no point of time they seek any clarification in this regard from the department. Therefore, their claim for bonafide and allowing benefit of section 80 of the Finance Act, 1994 is not acceptable. Accordingly, I hold that demand of Service Tax amounting to Rs. 14,80,525/- is sustained on merits as well as on the limitation and is required to be confirmed. 28. In view thereof I pass following order. -: O R D E R :-
(II) I confirm the demand of Service tax amounting to Rs. 14,80,525/- (Rupees forteen lacs eighty thousand five hundred twenty five only) [Rs. 14,45,593/-(S.Tax) + Rs. 28,866/-(Ed.Cess) + Rs. 6,066/-(HEd. Cess)], short paid by the assessee, under Section 73 (2) of the Finance Act 1994 . (III) I order that the interest at the prescribed rate chargeable under the provisions of Section 75 of the Finance Act, 1994, is to be recovered on the said confirmed demand. (IV) I impose a penalty of Rs.200/- (Rupees Two Hundreds Only) upon them per day or at the rate of 2% of the service tax amount per month, whichever is higher, under the provisions of Section 76 of the Finance Act, 1994, as amended, for failure to pay Service Tax and Education Cess within the stipulated period as required under the provisions of Section 68(1) of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1944, as amended. As the actual amount of penalty could be depending on actual date of payment of service tax, however, as per Section 76 of the Finance Act, 1994, penalty will be restricted to the above confirmed amount of service tax liability.
(VI) I also impose a penalty of Rs. 14,80,525/- (Rupees fourteen lacs eighty thousand five hundred twenty five Only) upon them under Section 78 of the Finance Act, 1994. If the service tax amount is paid along with appropriate interest as applicable, within 30 days from the date of receipt of this order, then the amount of the penalty shall be reduced to 25% of the service tax amount, provided the penalty is also paid within such period of 30 days. The show cause notice bearing No. STC-80/O&A/ SCN/ JC/CM/08-09 dated 02.03.2010 is disposed of accordingly. -Sd-
Additional Commissioner Service Tax, Ahmedabad F.No.STC-80/O&A/SCN/JC/CM/08-09 Date : 30 -11- 2011 BY REGISTERED AD./HAND DELIVERY To M/s Crystal Metals Private Limited 706, Satkar Building, B/h. Swagat Building, Nr. Lal Bunglow, C.G. Road, Navrangpura, Ahmedabad 380009. Copy to :-
Yüklə 161,82 Kb. Dostları ilə paylaş:
|