The Customs, Excise & Service Tax Appellate Tribunal, Chennai remanded the Service Tax case of M/s. Bharathi Constructions back to lower authority for recalculation of Taxable Service Value.
Facts
During the audit of accounts of M/s. Bharathi Constructions, Erode by the officers attached to Salem Commissionerate in November 2008, it was noticed that the appellants had carried out erection and installation related work to the tune of Rs.34,96,200/- and no service tax had been paid by the appellants. It was ascertained from the records that the appellants were liable to pay Rs.4,79,603/- towards service tax for the period 2009 – 10.
On the above basis, Show Cause Notice (SCN) was issued to the appellants. After due process of law, the original authority confirmed the proposals for demand of Rs.4,79,603/- under Section 73(1) of the Finance Act, 1994 along with interest, being the service tax liability for the services rendered by them under the category of ‘Erection, Commissioning and Installation’ under Section 65 (39a) of the Finance Act 1994, for the period 2009 – 10. Penalties were also imposed.
Submissions
Advocate M.N. Bharathi, appearing for the appellant, submitted that the appellant is providing taxable service under the category “Works Contract Service. The condition of the contract entered into with M/s Bannary Amman Sugars Ltd is only for repair of shed by replacing the worn out materials with fresh ones supplied by the said Bannari Amman sugars.
He argued that such an activity being ‘manufacture’ is not exigible to service tax but only to Central Excise duty.
Anandalakshmi Ganeshram, Superintendent (AR) for the Revenue, stated that the activities of the appellant are taxable service carried out as per a works contract and cannot be termed as manufacture.
Decision
The division bench of P. Dinesha, Member (Judicial) and M. Ajit Kumar, Member (Technical) observed that as per the Explanation, given at S. No. (1) of the Notification pertaining to the service of erection, commissioning or installation, the gross amount charged from the customer shall include the value of the plant, machinery, equipment, parts and any other material sold by the commissioning and installation agency, during the course of providing erection, commissioning or installation service.
The bench held that the value of goods and materials supplied free of cost by M/s Bannari Amman Sugars Ltd are to be excluded from the value of the taxable service for computation of duty.
It was further held that the tax liability has to be calculated by treating the total consideration received as value of taxable service plus service tax payable.
The Tribunal found that the appellant had failed to pay the service tax and also have failed to report provision of service in their periodical returns. Hence the fact that these activities were suppressed from the department with intention to evade payment of tax has substance. We are therefore not inclined to interfere with the imposition of penalty or issue of Show Cause Notice invoking the extended period of time limit.
“The matter is remanded back to the lower authority to determine the value of the taxable service afresh allowing cum-tax benefit and by not including the value of goods and materials supplied free of cost by M/s. Bannari Amman Sugars Ltd. Penalty may thereafter be imposed suitably as per law” the bench observed.
Case title: M/s. Senthil Engineering Works v/s Commissioner of GST & Central Excise
Citation: Service Tax Appeal No.40026 of 2014
