Civil Net vs C. S.T, New Delhi

Arising out of the order-in-original No.23-26/ST/SRB/2013-14 dated 31.12.2013 passed by the Commissioner (Adjudication), Service Tax, Indore.

For approval and signature:

Honble Mr. Justice G. Raghuram, President

Honble Mr. C.J. Mathew, Technical Member

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 26 of the CESTAT (Procedure) Rules, 1982?

2 Whether it should be released under Rule 26 of 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 Departmental authorities?

Civil Net  Appellant

Vs.

C. S.T, New Delhi . Respondent

Appearance:

Present Shri B.L. Narasimhan, Advocate for the appellant

Present Shri Amresh Jain, A.R. for the respondent

Coram: Honble Mr. Justice G. Raghuram, President

Honble Mr. C.J. Mathew, Technical Member

Final Order No. 53267/2015

Per Justice G. Raghuram:

Heard Shri B.L. Narasimhan, ld. Advocate for the appellant and Shri Amresh Jain, ld. A.R. for Respondent/Revenue.

2. The appeal is directed against the adjudication order dated 31.12.2013 passed by the ld. Commissioner ,Service Tax (Adjudication), New Delhi. The impugned order confirmed a cumulative tax demand of Rs.30,94,91,352/- pursuant to four show cause notices dated 20.4.2010, 21.10.2010, 21.10.2011 and 23.10.2012, covering the block period 1.4.2014 to 31.3.2012.

3. Proceedings were initiated on the premise that appellant had provided Commercial or Industrial Construction service during the relevant period, received consideration therefor and failed to file returns and remit service tax due. The proceedings were initiated on the basis of an investigation by the Anti-Evasion Branch. The appellant failed to cooperate either during the process of investigation or during adjudication. Appellant neither furnished documents nor responded to the show cause notice or the summons issued. In the circumstances, Revenue obtained information from Income Tax Authorities and verified balance sheet and income tax returns of the noticee for the periods 2004-05 to 2007-08. Balance sheets for the subsequent period under consideration could not however be obtained since the appellant did not file income tax returns for the subsequent periods No information was therefore available to Revenue to assess in actual turnover and the actual consideration received for the rendition of the alleged taxable service. In the circumstances, reckoning the consideration received during 2006-07 as the basis, the taxable value for the subsequent period was arrived at on best judgment basis by assynubg a 100% increase in turnover for each year subsequent to 2007-08.

4. The singular response of the appellant during the entirety of the adjudication proceedings, was by a letter dated 16.4.2011, furnished in response to a call for information addressed by Revenue. In this letter, the appellant merely asserted that it was working as an interior decorator; it was proprietary concern on a sub-contract since 2007; appellant had not remitted any service tax since it was working as a sub-contractor; that as per the master Circular No.96/7/2007 dated 23.8.2007 a sub-contractor was not liable to remit tax if the main contractor had done so. No other plea in defence was ever raised or asserted by the appellant.

5. In the circumstances, on best judgment basis for the periods 2007-08 to 2011-12 and on the basis of actual figures available (derived from the income tax returns and balance sheets submitted to the income tax authorities for the period 2005-06 to 2006-07 and computing the turnover for each year subsequent 2006-07 which was taken as the base year, the demand was confirmed by the impugned order.

6. Shri B.L. Narasimhan, ld. Advocate for the appellant states that the appellant had provided construction services exclusively under work contracts for the entire period in issue; that works contract is not taxable prior to 1.6.2007 in view of the Judgment of the Supreme Court in C.S.T. vs. Larsen & Toubro  2015 (39) STR 913; that the actual consideration received for rendition of works contract service for the period subsequent to 1.6.2007 (admittedly taxable as WCS) is now available and is now furnished, in the present appeal; that 100% increase assumed in the impugned order on best judgment basis is irrationaland not on relevant parameters; that in fact no consideration was received during 2010-11 to 2011-12; that the appellant in any event would be entitled to the benefits of the composition scheme or for exclusion of the value of the goods deemed to have been supplied as integral to rendition of works contract service; and that in the peculiar facts and circumstances, this Tribunal be pleased to take a lenient view and may be pleased to remit the matter to the adjudicating authority for a de novo consideration and determination of all relevant facts applicable principles of the law, on just terms as to the costs as deemed fit. as extant.

7. We find absolutely no justification for the appellant adopting an attitude of total non-cooperation with the adjudication proceedings. The conduct of the appellant in stonewalling the adjudication proceedings; in failing, to submit its records for verification or submitting addressing relevant claims on facts and law, is clearly deprecable.

8. Work contracts was not a taxable service prior to 1.6.2007, as Commercial or Industrial Construction Service defined, Section 65 (25b) of the Finance Act, 1994. At least since 1989, the law is clearly settled vide the judgment in Builders Association of India vs. UOI - 1989 (2) SCC 645 that in works contract, since there is a fusion to two distinctly taxable aspects, namely rendition of service and deemed transfer of goods involved in execution of the works; service tax is leviable only on those aspects amounting to rendition of service and excluding deemed sale of goods. Whether the appellant had in fact provided the works contract service is of course a question of fact. It is so asserted in the appeal for the first time but has not been so asserted or pleaded before the adjudicating authority.

9. In the totality of the facts and circumstances, we consider it appropriate to remit the matter to the adjudicating authority. We do so by setting aside the impugned order but on stringent terms as to costs. We set aside the impugned order since service in adopting the best judgment assessment method for arriving at the appellants turnover for the period 2007-08 to 2011-12, which in the circumstances the adjudicating authority was entitled to do (on account of non-cooperation of the appellant), the ld. Commissioner nevertheless adopted no rational basis for assuming that the turnover increase in each year subsequent to 2006-07 would be 100%. We notice that the turnover of the appellant during 2004-05 (though on non- taxable rendition of service) was Rs.3,16,29,092/-; in 2005-06, the turnover was Rs.3,91,73,437/- and in 2006-07 was Rs.8,09,50,588/-. Even according to the ld. Commissioner, the turnover increase in 2005-06 was 23.8% while it was 106%, only in 2006-07. Assumption that the increase in turnover would be 100% in each subsequent year is therefore unreasonable and based no rational or statistical principles.

9. Since the appellant wholly obstructedhas failed to cooperate in the adjudication proceeding by non-cooperation and thereby disabled the ld. Commissioner to properly discharge his statutory functions, to pass a well considered order of assessment and since such non-cooperation of the appellant had resulted in substantial waste of public money involved in the primary adjudication proceeding as well as the clearly avoidable expenditure of appellate resources, we consider it appropriate to afford an opportunity to the appellant to submit its facts and figures and legal defences before the adjudicating authority in de novo proceeding, but on costs of Rs.5 lakhs, which shall be remitted to the credit of the Union Government, within 30 days from today.

10. For the reasons recorded supra, we set aside the impugned order and remit the matter to the jurisdictional Commissioner for de novo adjudication. The appellant shall furnish complete details of all the works executed along with relevant transactional documents in respect of each of the works executed during 2004-05 to 2011-12; plead all relevant aspects that the appellant chooses, including pleas as to its immunity to the levy and collection of tax; the non-leviability of works contract to service tax prior to 1.6.2007; and other pleas with regard to any entitlement to exclusion of the value of the goods incorporated in works executed by it, whether on the basis of value or on the basis of composition or abatement schemes and any other defences as it desires. All submissions along with relevant supporting documents shall be furnished to the adjudicating authority within 30 days from the date of receipt of this order and after remitting the costs as ordered. If the appellant submits its response along with any supporting documents within the period of 30 days, the jurisdictional Commissioner shall consider the same and shall pass a fresh order of adjudication, within three months from the date of submission of the appellants response, within a 3 months or after expiry of the 30 days, as aforesaid. The appellant shall furnish proof of deposit of the costs of Rs.5 lakhs (five lakhs) to the jurisdictional Commissioner

11. The appeal is disposed of as above, with costs as directed.

(Justice G. Raghuram)

President

(C.J. Mathew)

Technical Member

scd/

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