Cce & St, Raipur vs Arora Construction

(Arising out of Order-in-Appeal No. 47(ST)/RPR-I/2012 dated 27.9.2012 passed by the Commissioner (Appeals), Customs & Central Excise, Raipur)

For Approval & Signature :

Honble Mr. Justice G. Raghuram, President

Honble Mr. R.K. Singh, Member (Technical)

1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of the order?

4. Whether order is to be circulated to the Department Authorities?

CCE & ST, Raipur Appellant

Vs.

Arora Construction Respondent

Appearance:

Ms. Suchitra Sharma, D.R. - for the Appellant

Shri A.K. Batra, C.A. - for the Respondent

Shri Varun Gaba, Advocate

Coram : Honble Mr. Justice G. Raghuram, President

Honble Mr. R.K. Singh, Member (Technical)

F. Order No.53149/2015

Per R.K. Singh :

Revenue filed this appeal against order-in appeal dated 27.9.2012 in terms of which the appellant was granted the benefit of 67% abatement under Notification No. 15/2004-ST, 1/2006-ST and also extended the benefit of Section 80 for setting aside penalties. Vide order-in-original dated 18.11.2011 demand of Rs.5,64,530/- along with interest was confirmed against the appellant under commercial or industrial construction service and construction of complex service inter alia denying the benefit of 67% abatement under Notification No. 15/2004-ST / 1/2006-ST and penalty was also imposed.

2. Revenue has contended that the respondent had not furnished any document to indicate that cost of construction material was included in the amount charged or same were supplied free of cost by service recipient and therefore the benefit of 67% abatement should not have been granted. It also contested the extension of benefit No. 15/2004-ST on the ground that Commissioner (Appeals) did not ascertain whether conditions of exemption were fulfilled. The respondent did not file ST-3 returns nor provide details of service rendered and so extended period is invocable.

3. The respondent on the other hand, pleaded that the abatement of 67% is available even if there was free supply material in the light of the CESTAT decision in the case of M/s Bhayana Builders Pvt. Ltd. Vs. CCE - 2013 (32) STR 49 (Tri.-LB) and that it was indeed under a bona fide belief that the work done for local Govt. body (Municipal Corporation) was not covered under commercial or industrial construction service and therefore was not liable to service tax and therefore the benefit of Section 80 is available.

5. We have considered the contentions of both sides. We find that the issue of availability of 67% abatement even when the cost of material supplied free of cost by service recipient is not included in the assessable value is no longer res integra in the light of the judgement of CESTAT in the case of Bhayana Builders (supra) wherein it has been held that even when the value of material supplied free by the service recipient is not included value in the assessable value, abatement of 67% under Notification No. 15/2004-ST, 1/2006-ST is available. That apart, the Commissioner (Appeals) has noted that there were no such free supplies. Obviously therefore the gross amount received by the appellant would have included the cost of material used in connection with construction of commercial shops for Municipal Corporation, Bilaspur. As regards extending the benefit of Section 80 of the Finance Act for setting aside the penalties we find that after allowing the 67% abatement the impugned demand would reduce to about one third of the amount confirmed by the primary adjudicating authority. Further while considering the eligibility of the appellant for the benefit of Section 80 the Commissioner (Appeals) has noted as under:

i) This is a case in the nature of interpretation of law.

ii) It is noticed that the appellant has done the work of Municipal Corporation belonging to local government. From the submissions of the appellant it is noticed that he was under bonafide belief that work has been awarded by the local government for allotment of weaker section, is not liable to service tax. Generally such government works are in the nature of amenity to weaker section of society. Hence the work allotted as the constructions for benefit of poor and weaker section of the society are for the welfare of specific categories of people as welfare scheme.

(iii) They were under bonafide belief that being government contract work and the shops were allotted to the unemployed people and it was a state sponsored scheme. Hence, they are not liable to pay the service tax.

(iv) Thus appellant not only has shown bonafide belief, but also explained the causes which constitute reasonable cause for not discharging service tax timely. In support of my conclusion, I refer to the Karnataka High Court judgement in the case of Commissioner of Service Tax, Bangalore Vs. Motor World  2012 (27) STR 225 (Kar.) wherein it was held that in cases of bona fide dispute whether tax is payable or not and whether a particular activity is taxable service, though imposition of penalty is provided for, it is coupled with discretion on authority not to impose it, if there is a reasonable cause for assessee not to pay tax in that view, even if ingredients of sections 76 and 78 of Finance Act, 1994 exist, imposition of penalty is not automatic, and in view of non-obstante clause in section 80 thereof, authority has to find out whether there was any reasonable cause for assessee for such failure to comply with the requirement of law, it is only thereafter that authority has been vested with power to impose penalty.

Revenue in its appeal has not been able to bring out any reasonable basis to counter the observations of the Commissioner (Appeals) based on which the benefit of Section 80 ibid was extended by Commissioner (Appeals). In the given circumstances inter alia involving relatively small amount of service tax extension of benefit of Section 80 ibid by Commissioner (Appeals) can scarcely be said to be arbitrary or unreasonable.

6. In the light of the foregoing analysis, we do not find any such infirmity in the impugned order in appeal as to warrant appellate intervention. Revenues appeal is therefore dismissed. Cross-objections are also disposed of

(Justice G. Raghuram)

President

(R.K. Singh)

Member (Technical)

RM

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