Commissioner Of Central Excise & ... vs M/S. B.M. Constructions

IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, WEST ZONAL BENCH AT MUMBAI COURT NO. II

APPLICATION NO. ST/MA(Ors)1883/10 IN APPEAL NO. ST/254/10

Arising out of Order-in-Appeal No. AGS(162)18/2009 dated 23.07.2009 passed by the Commissioner of Central Excise & Customs (Appeals), Aurangabad.

APPEAL NO. ST/136/10

Arising out of Order-in-Appeal No. AGS(31)10/2010 dated 15.02.2010 passed by the Commissioner of Central Excise & Customs (Appeals), Aurangabad.

For approval and signature:

Honble Shri M.V. Ravindran, Member (Judicial) Honble Shri P.S.Pruthi, Member (Technical)

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should 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 : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

Commissioner of Central Excise & Customs, Aurangabad : Appellant

Versus

M/s. B.M. Constructions

Respondent

Appearance

Shri K.S. Mishra, Addl. Commissioner (A.R.) for appellant Shri Sumeet Tholle, C.A. For Respondent

CORAM:

Shri M.V. Ravindran, Member (Judicial) Shri P.S. Pruthi, Member (Technical)

Date of Hearing : 16.04.2015 Date of Decision : 16.04.2015

ORDER NO.

Per P.S. Pruthi Appeals have been filed by Revenue against Order-in-Appeal No. AGS(162) 18/09 dated 23.7.2009 and Order-in-Appeal No. AGS/31/10/2010 dated 15.02.2010 passed by the Commissioner (Appeals) in the case of M/s. B.M. Constructions, Aurangabad. Miscellaneous application bearing No. ST/MA(Ors)1883/10 is also filed by Revenue in respect of first Order-in-Appeal seeking to include additional grounds of appeal.

2. As the issue is common, all the appeals are taken up together.

3. The issue relates to admissibility of CENVAT credit on three counts viz. (i) non inclusion of value of steel, cement and other materials received free of cost by respondent from their customers while arriving at the value of construction service for payment of service tax on the construction services provided by them, (ii) availment of CENVAT Credit on input service during March 2006 in violation of condition of notification 1/2006-ST dated 01.03.2006 and (iii) failure to pay service tax on GTA services from 01.01.2005 to 31.12.2007. Adjudicating authority confirmed the demands of Rs.9,42,920/-, Rs.43,681/- and Rs.1,14,416/- respectively on the above issues, confirmed recovery of interest, imposed equivalent penalty (total Rs.11,01,017/-) under Section 78 with option to pay 25% of the penalty in terms of proviso to Section 78 and penalty of Rs.1000/- under Section 77. The Commissioner (Appeals) set aside the demand and corresponding interest as far as first issue is concerned as well as total penalty under Section 78. He confirmed the remaining duty, interest and penalty under Section 77.

4. As far as the first issue is concerned, Commissioner (Appeals) held that the service was provided prior to the issue of Notification 1/2006-S.T. dated 01.03.2006 which brought in the condition of addition of value of material received from customers for the purpose of computation of assessable value. He held that no such condition was there in notification 15/2004-S.T. dated 10.09.2004 which covers the period in dispute. Therefore he set aside the demand of Rs.9,42,920/-. Revenue is in appeal against this decision because notification 15/2004 (ST) speaks about gross amount charged and gross amount must include the cost of all material used. According to Revenue, Notification 15/2004 requires two conditions to be fulfilled namely (i) asseessee should not have availed CENVAT credit on inputs/capital goods (ii) no benefit should have been availed under notification 12/2003-ST dated 20.06.2003 which exempts the value of service equal to the value of goods and materials sold by the service provider to the recipient of service.

4.1 In the first appeal against Order-in-Appeal dated 23.7.2009, Revenue prays for imposition of penalties under Section 78. On merits, we find that the issue of inclusion of free material provided to the service provider by the customer and computation of value thereof for the purpose of payment of service tax by the service provider is decided by the Larger Bench of this Tribunal in the case of Bhayana Builders (P) Ltd. & others vs. CST, Delhi  2013-TIOL-1331-CESTAT-Del.LB in favour of the assessee. As a matter of judicial discipline we follow the above decision and reject the appeal of the Revenue on this matter. The corresponding penalty is, consequently, also set aside.

4.2 On the other two issues, Commissioner (Appeals) upheld the demand with interest but set aside the penalties.

5. In their additional grounds in miscellaneous application, Revenue prayed that simultaneous imposition of penalty under Section 76 and 78 was discontinued with effect from 10.5.2008 in terms of Section 78(5). The period involved in the instant case being 2005-07, the adjudicating authority had erred in imposing penalty under Section 76. Revenue relies on CESTAT judgement in the case of Aakruti Cable Network vs.CCE Jaipur  2009 (15) STR 338 and ruling of the Honble High Court of Kerala in the case CCE vs. Krishna Poduval - 2006 (1) STR 185 (Ker.). We find that the appropriate forum to agitate this point was the Commissioner (Appeals) who decided the appeal filed by the respondent B.M. Constructions. This is not an issue taken up by the Commissioner (Appeals) in his order under consideration. Therefore matter of imposing penalty under Section 76 is not maintainable before us.

6. As regards the appeal against Order-in-Appeal dated 15.2.2010, we find that the matter arises out of Order-in-Appeal dated 23.7.2009 which led the respondent to file a refund claim of Rs.4,69,339/-. As there was no stay against the said order, the Commissioner (Appeals) sanctioned the refund of penalty of Rs.2,75,255/- and interest of Rs.1,91,084/- totaling Rs.4,69,339/-.

6.1 The amount of Rs.2,75,255/- is 25% of the penalty of Rs.11,01,017/- which was set aside by Commissioner (Appeals). We have already set aside the penalty on the first issue. As regards issues at (ii) and (iii) in para 3, we find that the amounts were deposited before issue of show-cause notice. Therefore penalty is not imposable under Section 78 because show-cause notice was not required to be issued under Section 73(3) as no mens rea for wilfull suppression of facts has been established. Therefore, refund of Rs.2,75,255/- should be granted. We order so.

6.2 As regards the interest of Rs.1,94,084/- on the service tax demand of Rs.9,42,920/-, we have already set aside the demand. Therefore the interest of Rs.1,94,084/- paid by appellant merits refund. We order the refund be paid to the respondent.

6.3 Amounts of duty and interest on the issues (ii) and (iii) at para 3 had been paid by the recipient and admittedly not contested by them today.. Revenue in this appeal prays for linking this matter with the earlier appeal arising out of Order-in-Appeal dated 23.7.2009. The matter pertaining to appeal arising out of Order-in-Appeal dated 23.7.2009 is decided by us above. Therefore, it is ordered that refund be sanctioned to the respondent.

7. Both appeals are dismissed. Miscellaneous application also stands disposed of.

(Dictated in open Court)

(M.V. Ravindran) Member (Judicial) (P.S. Pruthi) Member (Technical)

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