The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that merely classifying services under an incorrect head does not amount to fraud or suppression of fact.
Based on survey conducted to find out the non-payment/ evasion of service tax by the Service provider, it was noticed by the department that Paresh H Thakkar, the Appellant had provided ‘Works Contract Service’ to M/s Gujarat State Police Housing Corporation Ltd. (M/s GSPHCL), and other but had not paid the Service tax thereon. The matter was investigated and detailed documents were called for from the appellant under summons proceedings.
The appellant was engaged in providing Works Contract Services to their clients. Accordingly, a detail Show Cause Notice dated 22.10.2012 was issued proposing to service tax demand under works contract services along with interest and also for imposing penalty. After due process of law, the adjudicating authority confirmed the service tax demand that has been raised in the Show Cause Notice. The adjudicating authority also imposed penalty in regard to the demands confirmed.
Shri Bishan Shah, Chartered Accountant appeared and argued for the appellant. He submitted that the services were mainly provided to Government Departments and the work undertaken related to Government Buildings either meant for residential or non-commercial purpose apart from public utilities.
He further submitted that Appellant has provided services to Gujarat State Police Housing Corporation for electrification of Jail and Residences of police officers. The services rendered to Gujarat State Police Housing Corporation are not taxable. The services rendered by the appellant are to Government Agencies and are for purposes which are not for commerce or Industry or any other business or profession.
The electrical installation works undertaken by the appellant during the disputed period is to be classified under the Works Contract Service. For the purpose of ascertaining the taxability and classification of services it is necessary to analyze the definition of both the services. We firstly reproduce the definition ‘Works Contracts Services’ defined under Section 65(105)(zzzza) of Finance Act, 1994.
It was found that appellant are engaged in the business of electrical contractor for State Government and Semi-Governments Department. The nature of business of appellant is both, electrification and electrical material supply through tender from Government Department.
The revenue nowhere provided any invoices or any documents by which it can be conclude that the appellant are engaged in erection, commissioning or installation of electrical and electronic devices. Therefore the two-member bench comprising Mr Ramesh Nair, Member (Judicial) and Mr C L Mahar Member (Technical) that the Service tax demand in the present matter not sustainable under works contract services on appellant’s activity.
The issue involved is of pure interpretation of legal provisions and classification of services therefore, it cannot be said that the Appellant had any mala fide intentions and have suppressed any fact with intention to evade payment of service tax.
A two-member bench comprising Mr Ramesh Nair, Member (Judicial) and Mr C L Mahar Member (Technical) observed that “Mere omission or merely classifying its services under an incorrect head does not amount to fraud or collusion or willful misstatement or suppression of facts. The intention has to be proved to invoke extended period of limitation.”
In the case of Larsen & Toubro dated 20 August, 2015, prior to which there was no clear ruling that services which involved supply or deemed supply of goods could only be classified under Works Contract Service. Therefore, demand is time barred and, therefore, cannot sustain. The CESTAT set aside the impugned order and allowed the appeal.
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