M/s Engineering India vs Commissioner Of Central Excise

P V Subba Rao, Member (T)

M/s. Engineering India[the appellant]. filed this appeal to assail the Order in Appeal dated 29.11.2017 by the Commissioner (Appeals), Bhopal whereby he upheld the Order in Original [OIO] dated 27.8.2012 passed by the Additional Commissioner and rejected the appeal filed by appellant.

The appellant is registered with the Service Tax department for providing ‘works contract service’. Receiving intelligence that the appellant was not paying service tax correctly, the officers of the preventive branch of the Commissionerate visited the appellant on 26.3.2009 to investigate the matter. During investigation, the appellant in its letters admitted that it had failed to pay service tax in respect of the taxable service rendered to M/s. Abhishek Industries, Budhani during 2007-08 and 2008-09.

The appellant paid the service tax on this service amounting to Rs.5,67,282/- along with interest. It was also noticed that the appellant had not filed ST-3 returns for the period April 2007 to March 2009. A Show Cause Notice [SCN] dated 29.1.2010 was issued to the appellant demanding the service tax amount as above along with interest and proposing to appropriate the amounts already deposited towards this demand and further proposing to impose penalties under sections 76,77 and 78 of the Finance Act, 1994 [Finance Act].

The Additional Commissioner passed the OIO confirming the proposals in the SCN and imposing penalty of Rs. 20,000 under section 77 and penalty of Rs. 5,67,282/- under section 78. On appeal by the appellant, the Commissioner (Appeals) passed the impugned order upholding this OIO.

Submissions by the appellant

Aggrieved, the appellant is before us. Learned counsel made the following submissions on behalf of the appellant:

(i) The service which it had rendered to M/s. Abhishek Industries, Budhani during the relevant period was construction of a boundary wall. During the relevant period, the taxable service under section 65 (105)(zzza) was “construction of a new building or a civil structure or a part thereof or a pipeline primarily for the purpose of commerce and industry”;

(ii) Boundary wall is not a part of the building nor is it a civil structure or a part of the building or civil structure and therefore, it was not covered by the clause. Therefore, no service tax was payable at all;

(iii) Extended period of limitation was not invokable in this case;

(iv) The appellant may be refunded the amounts already paid;

(v) All penalties also need to be set aside; and

(vi) The impugned order may be set aside and the appeal may be allowed.

Submissions by the department

Learned authorised representative vehemently supported the impugned order and asserted that it calls for no interference.

Findings

We have considered the submissions advanced on behalf of the appellant and the Revenue.

The appellant is contesting the impugned order on merits of the demand, limitation and regarding the penalties. Admittedly, service tax was payable on the construction of a new building or a civil structure or a part thereof. The appellant’s contention is that boundary wall is not a part of the building nor is it a civil structure. This submission cannot be accepted. A boundary wall is invariably a part of the building or a civil structure. It needs to be noted that service tax was payable not only when the entire building or a civil structure is built but it was also payable when a part of it is built. We do not agree with the submission of the appellant that the boundary wall is not a part of the building and is also not a civil structure. Therefore, we find against the appellant regarding the demand on merits.

The second contention of the appellant is that extended period of limitation has been wrongly invoked. It is a matter of record that the appellant had not paid service tax on this service which it had rendered. It is also a matter of record that the appellant had not even filed its ST -3 returns for the period April 2007 to March 2009. The intelligence received by the Preventive Wing of the Commissionerate and the follow up investigations revealed that the appellant had rendered this service and had not paid any service tax. During investigation itself, the appellant agreed and paid the service tax. Had the appellant been discharging its obligations and filing ST 3 returns, it would have been the responsibility of the department to scrutinise them with the records and raise a demand. The appellant in this case neither disclosed the rendering of this service nor paid service tax on it nor filed the returns. This qualifies as suppression of facts with intent to evade payment. Therefore, the extended period of limitation was correctly invoked in this case.

The appellant’s third contention is against the imposition of penalties under section 77 and 78 of the Finance Act. Whenever any service tax is not paid by reason of fraud or collusion or wilful misstatement or suppression of facts or violation of the provisions of the Act or Rules with an intent to evade payment of service tax, penalty under section 78 can be imposed. In other words, the same elements which make the extended period of limitation invokable also make the assessee liable to penalty under section 78. Since we have already held against the appellant on the question of extended period of limitation, we find no reason to take a different view with respect to penalty under section 78. Section 77 is a general penalty for offences. Since the appellant had failed to pay self assess service tax correctly and pay it and file returns, we find the penalty of Rs. 10,000 on the appellant under section 77 is also just and fair.

In view of the above, the appeal is dismissed and the impugned order is upheld.