Cherry Hill Interiors Ltd vs C.S.T-Delhi

[Arising out of order-in-original no. 10-11/VKG/2009 passed by Commissioner of Service Tax, Delhi]

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?

Cherry Hill Interiors Ltd., Appellant

Vs.

C.S.T-Delhi Respondent

Appearance: Shri S.K. Pahwa, Advocate for the appellant.

Shri Amreesh Jain, DR for the respondent

Coram: Honble Shri Ashok Jindal, Member (Judicial)

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

Final Order No. 52137-52139/2015

Per: R.K. Singh

This order is in respect of Service Tax Appeals Nos. 426-427/2009 and 3945/2012. In respect of appeal No. ST/426/2009 demand of Rs. 4,65,88,061/- along with interest and penalty under Section 78 of Finance Act 1994 was confirmed vide impugned order-in-original dated 02.03.2009 for the period June 2005 to March 2007 under construction services (renamed as commercial or industrial construction service w.e.f. 16/6/2005) defined in Section 65 (25b) of the Finance Act 1994. In respect of Service Tax Appeal No. 427/2009, demand of Rs. 3,18,17,104/- was confirmed for the period April, 2007 to March, 2008 along with interest and penalty (under Section 76 ibid.) under the same service. Under Service Tax appeal No. 3945/2012, service tax demand of Rs. 4,76,461/- for the period April, 2008 to Sept, 2008 was confirmed under construction service along with interest and penalties and a demand of Rs. 2,68,218/- was confirmed on account of denial of adjustment of service tax paid in excess on the ground that it was done without following the proper procedure as required under Rule 6 (1 A) of the Service Tax Rules.

The impugned demands under construction service were confirmed on the ground that the appellant provided completion and finishing services in respect of buildings or similar structures or part thereof, and therefore, were not entitled to the abatement of 67% under notification 15/2004  ST/notification No. 1/2006-ST.

2. The appellant has contended that it was providing construction service/CICS and was not merely providing completion and finishing services inasmuch as the service rendered by it involved work of execution of design and plans in respect of the complete and finished buildings which were either bought or taken on lease and required undertaking woodwork, panelling, partition, provisioning of fixed and loose furniture and storage, provisioning of blinds and plastering of walls, relaying of floors etc etc. It contended that the services were beyond mere competition and finishing services and therefore, it was entitled to 67% abatement under the aforesaid notifications. Alternatively, the appellant stated that it was entitled to the benefit of notification No. 12/2003-ST in respect of the material sold/supplied in the course of rendering of impugned service. As regards, the adjustment of Rs. 2,68,218/- it stated that it was a mere procedural lapse, and therefore, the substantial benefit of the said adjustment cannot be denied and cited the judgement of CESTAT in the case of BSNL 2014  TIOL  1684  CESTAT  DEL

3. The ld. Departmental Representative on the other hand strongly argued that the service rendered by the appellant fell in the category of completion and finishing service as is also evident from the statement of its manager (finance) Praveen Kumar and also from the nature of work done by it, and therefore, it was not entitled to 67% abatement under notification No. 15/2004 or 1/2006. He, however, conceded that the appellant would be entitled to the benefit of notification No. 12/ 2003-S.T in respect of the material supplied in the course of rendering of impugned service provided it is able to satisfy the conditions of the said notification.

4. We have considered the contentions of both sides. Section 65 (25b) (c) ibid reads as under:

(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;

From the sample scrutiny of work-orders provided by the appellant, it is evident that it was providing various interior services such as wooden & metal partition, plastering, painting, civil work, joinery items, floor & wall tiling and other similar services in respect of building or civil structure or part thereof. The item rates in the work-orders were inclusive of cost of material. In the light of the type of activities which are covered under the scope of completion and finishing services as per the definition quoted above, there hardly remains any doubt that the services rendered by the appellant are more appropriately covered under the scope of completion and finishing services, and therefore, the abatement of 67% under notification No. 15/2004 or 1/2006 is clearly inadmissible as completion finishing services have been expressly excluded from the coverage of the said notification. However, the Ld. DR conceded that if the appellant can demonstrate that it satisfied the conditions of notification No. 12/2003-ST, the benefit of the said notification can be extended in the wake of the decision of Delhi High Court in the case of GD Builders versus union of India 2013(32)STR673(Del). Also, CESTAT in the case of Raj furnitures2014-TIOL-2267-Del has held that the appellant cannot be disallowed to claim the benefit of notification No. 12/2003-ST and the same can be claimed by it even at this stage. However, the benefit of the said notification (no. 12/2003-ST) can be extended only if the appellant satisfies the conditions subject to which the benefit thereunder can be granted. CESTAT has also held in the case of Mehta Plastcorporation 2012-TIOL-616-Cestat-Del that to claim exemption under notification 12/2003-ST it is not necessary that invoices should separately indicate the value of the goods sold and the benefit of the said notification can be granted when there is transfer of possession of goods. Both sides have agreed that this case may be remanded to the original adjudicating authority with a direction that the appellant should be given an opportunity to claim the benefit of notification No. 12/2003-ST.

5. As regards the adjustment of service tax paid in excess (amounting Rs. 2,68,218/-) we find that in the case of BSNL (supra) CESTAT while dealing with similar adjustment of service tax paid in excess has held as under:

We have considered the facts and the submissions made in the case. As is evident from the several judgments cited above, it has been consistently held that substantial benefit cannot be denied in such case merely because some aspects of the procedure had not been followed. Indeed, such adjustment has been permitted by the CESTAT in BSNLs own case cited in the earlier para. In the present case there has been no malafide on the part of the appellant as is evident from the fact that the adjudicating authority refrained from imposing any penalty observing that the appellant acted in a bonafide manner and malafide cannot be attributed to them.

In the light of the foregoing, the demand of Rs. 2,68,218/- is not sustainable.

6. In the light of the foregoing, we set aside the demand of Rs.2,68,218/- and remand the case to the adjudicating authority with the direction that the remaining impugned demand may be recomputed after allowing the benefit of notification 12/2003-ST provided the appellant is able to demonstrate that it satisfied the conditions of the said notification for which the appellant may be granted an opportunity of being heard. Needless to say that the penalties will also need to be recomputed in the wake of the re-computation of demand. The appeal stands disposed of in these terms

(Ashok Jindal)

Member (Judicial)

(R.K. Singh)

Member (Technical)

Ritu