Customs, Excise and Services Tax Appellate Tribunal (CESTAT): A Division Bench of Anil Choudhary (Judicial Member) and P. Venkata Subba Rao (Technical Member), allowed an appeal which was filed on being aggrieved by the dismissal of the appeal by the Commissioner (Appeals).
The appellant is registered with the Service Tax Department and was engaged in the business of civil construction classifiable under ‘Works Contract Services’. During verification of the records and accounts maintained by the appellant and on reconciliation with the ST-3 returns filed by the appellant, it appeared that the appellant had not paid service tax on some part of their turnover during the period 2011-12 to 2014-15 particularly in respect of service provided to organizations like Andhra Pradesh Power Generation Corporation (AP GENCO), Andhra Pradesh Tourism Development Corporation (APTDC), etc. It further appeared that in respect of service rendered the recipient(s) did not fall under the category of Government/ local authority/ Government authority. The show-cause notice was adjudicated on the contest and the aforementioned demands were confirmed along with penalty of Rs 1,03,83,141/- under Section 78 of the Act and a further penalty of Rs 10,000/ under Section 77(2) of the Finance Act, 1994. Aggrieved by which the appellant had filed an appeal with the Commissioner (Appeals) who had dismissed the appeal but had reduced the penalty. Thus, the instant appeal was filed.
The Tribunal while allowing the appeal explained that admittedly all the companies / Corporations have been established by the Government of Andhra Pradesh under the various Acts and /or ‘Government order’, as aforementioned and thus held that the appellant had provided service to Governmental authority. Thus, the service recipients were covered under sub-clause (i) of clause (5), of the definition of the term ‘Govt. Authority’, in Notification No. 25/2012-ST, as amended by Notification No. 2/2014-ST (by way of substitution). Accordingly, the appellant is entitled to exemption and the demand of Rs 97,63,710 is set aside. Further, in the second issue, it was found that the construction of flats under the ‘development agreement’ with the landowner by the appellant is on principal to principal basis. In such a transaction, there is neither any element of service provided to the landowner, nor any element of sale, thus, the Tribunal held that the service tax was not imposable setting aside the demand of Rs 5,55,458/-. Lastly, in the third issue, the Tribunal held that the appellant had already provided the service as well as raised the invoice before the due date. Further, admittedly appellant had not given the option for payment of tax as per the date of receipt of consideration. Thus, the Tribunal held that demand of tax, relying on Rule 11 of Point of Taxation Rules was bad, setting aside the penalty of Rs 63,973. [Krishi Constructions (P) Ltd. v. Commr. of Central Tax, 2020 SCC OnLine CESTAT 199, decided on 22-09-2020]
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