In a recent case, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) New Delhi has held that service tax is not leviable on work contract service (WCS) provided to airports and non-commercial governmental authorities. The bench viewed that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty.
M/s Kailash Chawla, the appellant is registered for providing taxable service under the works contract services ( WCS). During the audit of service tax records of Airport Authority of India ( AAI), it was observed that the appellant had provided services to AAI more than the threshold limit but the appellant has not paid the service tax on the amount received for providing the said services.
Several documents were called from the appellant as that of balance sheet, profit and loss account agreements/work orders, income tax returns, TDS, ST-3 returns etc. The documents were provided by appellant vide their letter dated 3.10.2011 with the mention that the appellants have not charged any service tax to AAI. They are rather covered under the general exemption of Notification No. 42/2010 dated 28.6.2010.
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The department observed that the appellant had entered into annual rate contract for repair and maintenance of civil work. As such they were providing the maintenance and repair services and not the WCS. No exemption is available for providing maintenance and repair services not even in Notification No. 24/2009 dated 27.7.2009.
While invoking the extended period of limitation, show cause notices as mentioned above been issued for the respective period already mentioned in the above table. The proposals of both the show cause notices have been confirmed vide common orderin-original as mentioned in the above table.
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It was submitted that the appellant is a contractor providing services in relation to construction, renovation, repair, maintenance, completion and finishing etc. of the buildings or the civil structures. The appellant is the registered contractor of AAI and during most of the period in dispute, the appellant had been executing contracts entered with AAI. The other authority to whom the services have been provided during the impugned period is Central Public Works Department (CPWD) i.e. a non commercial Government body. The appellant is also registered with the VAT department.
The adjudicating authority have erred in confirming the demand under MMR even for the composite contracts which are otherwise classifiable under WCS. Hence the demand is liable to be set aside on these grounds only.
It was also argued that the definition of works contract services excludes services provided to governmental authorities hence the services provided to CPWD are out of the scope of taxability. The demand has been confirmed including the value of goods involved in rendering the services which amounts to travelling beyond the scope of statutory provision of law. S
The Departmental Representative for department also has relied upon the Circular No. 12/2003-ST dated 20.06.2003 which also exempts so much of the value of all taxable services, as is equal to the value of the goods and materials sold by the service provider to the recipient of service from the service tax leviable thereon under Section 66 of the Finance Act. Though as per department this circular is applicable if there is documentary proof specifically indicating the value of said goods or materials. But as already held above that in such case there shall be available the abatement of 67%. In any case the value of goods is not leviable to service tax.
A two member bench of Dr. Rachna Gupta, Member (Judicial) and Hemambika R. Priya, Member (Technical) observed that the activity of the appellant rendered to AAI should be classified as Works Contract Service with effect from 1.6.2007. For the period i.e. from March 2006 to May 2007, the activity still cannot be called as Maintenance Management or Repair service. Though it could be Commercial or Industrial Construction Service as defined under Section 65(105) (zzq) of Finance Act, 1994, that too was not the service simpliciter, in the present case.
The Tribunal held that the appellant is not liable to pay service tax as confirmed against him, for the services being provided to airport and non commercial governmental authority hence there is no willful, misstatement when the appellant has filed Nil return.
It is settled law that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression. The bench viewed that there was no deliberate intention on the part of the appellant not to disclose the correct information or to evade payment of duty, it was not open to the Central Excise Officer to proceed to recover duties in the manner indicated in proviso to section 11A of the Act.
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