The Chennai bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the invocation of an extended period since non-filing of ST-3 returns by subcontractors for a long period will make the intent to evade tax.
M/s. Apex Viswa Engineering Services Pvt. Ltd., the appellant engaged in the construction of commercial/industrial buildings and structures and received construction charges for the services provided which they have accounted for under contract receipts.
The appellants have challenged the order passed by Commissioner of Service Tax, Anna Nagar, Chennai, confirming the demand of Service Tax of Rs.7,59,82,639/- for the period from April 2006 to September 2010 and also of Service Tax of Rs.59,87,226/- for the period from October 2010 to June 2011 under Section 73 (1) of the Finance Act, 1994 read with Section 73 (2) of the Act along with recovery of interest under Section 75 of the Finance Act, 1994 on the Service Tax demanded and also imposed penalties under Section 77 and Section 78 of the Finance Act, 1994.
The revenue noticed that the appellants have collected Service Tax on the taxable value but did not pay the credit of the government on the construction services provided. The investigation revealed that the appellants undertook the construction of commercial and residential buildings and construction charges were received and accounted as “income from contract receipts”. The appellants have not filed Service Tax returns for more than five years i.e. from March 2006 onwards.
Construction materials such as cement, steel etc., were supplied by the customers free of cost for construction service provided by the appellants but did not include the value of such free supply materials to arrive at the gross receipts though they have availed the abatement provided under Notification No. 1/2006-ST dated 01.03.2006 and also concessional rate of duty as prescribed under Works Contract Composition Scheme.
Shri V. Prasanna Krishnan appeared for the appellants have contended that there are circulars which provide that in an arrangement involving contractors and sub-contractors, there cannot be double taxation at any stage for the same service and as long as main contractors pay Service Tax there is no liability for the sub-contractors to pay Service Tax.
It has been contended that they have been executing the works in the capacity of sub-contractors to various main contractors in several projects and as the main contractors were registered with the Service Tax department under Works Contract Service and must have paid Service Tax. Even if the Service Tax is paid by them, it would be available as input credit to the main contractors.
It was evident that specific clarifications were issued by Board during 2004, 2006 and 2007 that sub-contractors are liable to pay service tax and these clarifications will prevail over the clarification relating to GTA which was rendered in a different context.
It was also observed that the appellants continued to default in payment of Service Tax even after issuance of Master Circular and there cannot be any dispute relating to the sub-contractor’s liability to pay Service Tax right from the imposition of levy on construction service.
“The provisions of the proviso to Section 73 (1) of the Finance Act, 1994 are pari pasu and pari materia to the provisions of the proviso to Section 11A of the Central Excise Act, 1994. The intention to evade payment of tax is manifest and articulated by the non-disclosure of the details of the provision of services and receipt of consideration. Non-filing of ST-3 returns for such a long period i.e., from March 2006 to March 2010 will make the intent to evade tax obvious. So invocation of extended period is justified, consequently, the imposition of penalty are also required to be upheld.”, the two-member comprising Mr P Dinesha, Member (Judicial) and Mr Vasa Seshagiri Rao, Member (Technical).
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