By TIOL News Service

MUMBAI, SEPT 23, 2014: THIS is the Crores season. Left, right and centre orders are being passed by the adjudicating authorities confirming ST demands running into hundreds of crores of rupees. Thankfully, an appellant in the new regime would be required to pay only a maximum of Rs.10 crores as pre-deposit!

In the order-in-original passed, the Commissioner of Service Tax, Mumbai-II did the following -

++ Confirmed a service tax demand of Rs.134.97 crores;

++ Denied CENVAT credit availment of Rs.168.82 crores;

++ Ordered for recovery of Rs.90.78 crores utilized by the appellant from the CENVAT credit account;

++ Appropriated an amount of Rs.47.63 crores paid by the appellant towards ineligible credit availed.

++ Payment ordered of Interest &equivalent amounts of penalties imposed.

Aggrieved, the appellant is before the CESTAT and submits -

ST demand of Rs.134.97 crores:

++ The service tax liability in respect of the 15 contracts awarded and executed after 1.6.2007 is Rs.95.88 crores, which has been discharged by the appellant under Works Contract by following Composition Scheme and, therefore, the confirmation of service tax demand to this extent is clearly not sustainable.

++ The balance amount of Rs.39.09 crores pertains to eight contracts which were awarded prior to 1.6.2007. The appellant had initially taken CENVAT credit on the capital goods used in the construction activity but they had reversed the CENVAT credit taken subsequently. However, the adjudicating authority has confirmed the service tax demand by disallowing the benefit of abatement available under Notification 1/2006-ST on the ground that the appellant has availed CENVAT credit on the capital goods and the demand works out to Rs.39.09 crores. Reliance is placed on the decisions in Hello Minerals Water Pvt. Ltd. - 2004-TIOL-57-HC-ALL-CX &B.G. Shirke Construction Tech. P. Ltd. vs. CCE, Pune - III - 2012-TIOL-511-CESTAT-MUM. The tax liability, at best, after taking into account the eligible abatement under Notification 1/2006-ST would be only Rs.1.22 crores.

CENVAT credit denial of Rs.168.82 crores& Rs.90.78 crores:

++ During the period of demand i.e. from 1.4.2007 to 31.3.2012, the total CENVAT credit availed was only Rs.130.26 crores whereas the order seeks to disallow a credit of Rs.168.82 crores and, therefore, is a fictitious disallowance.

++ The CENVAT credit denial of Rs.90.78 croresis already included in the total CENVAT credit availed of Rs.168.82 crores and, therefore, there cannot be any double demand for the same amount.

++ The appellant submits that the entire credit was taken on the documents relating to the contracts executed by the appellant and the Chartered Accountant's certificate showing the liability was produced before the adjudicating authority. However, the adjudicating authority has not considered any of these documentary evidences available on record and has mechanically confirmed the demands. Therefore, the matter should be remanded.

The AR while reiterating the findings of the adjudicating authorityfairly conceded that there cannot be double demands inasmuch as the credit availed is denied and the credit utilized which is already included in the credit availed, is once again confirmed. However, had the appellant produced all the requisite evidences before the adjudicating authority, such confirmation of demands twice would not have occurred and, therefore, it is his prayer that the impugned order be sustained and the appellant be put to terms.

The Bench observed -

++ As regards the demand of service tax for the period on or after 1.6.2007, the activity is liable to service tax under ‘works contract service' and, therefore, if the appellant has discharged service tax liability under ‘works contract service', the question of confirmation of the demand would not arise at all once again. The weak observation made in the impugned order is the appellant did not produce the requisite contracts so as to satisfy the adjudicating authority that they were entered into or on after 1.6.2007. This observation of the adjudicating authority is quite naive and cannot be accepted.

++ We direct the appellant to submit copies of all the 23 contracts awarded to them, in respect of which they undertook the work, before the adjudicating authority to show that in respect of 15 contracts where service tax liability of Rs.95.88 crores has been confirmed, the appellant has discharged the service tax liability under the works contract scheme.

++ As regards the balance of Rs.39.09 crores confirmed by the adjudicating authority, the appellant has reversed the credit taken on the inputs and input services and consequently the appellant would be entitled for the benefit of abatement under Notification 1/2006-ST. The adjudicating authority has not considered thedecisions cited and has not given any finding as to why these decisions are inapplicable to the facts of the appeal before us. Therefore, the confirmation of the demand to the extent of Rs.39.09 crores also does not appear to be sustainable in law.

++ It is seen that the appellant has availed only an amount of Rs.134.26 crores during the impugned period. If that be so, we do not understand how a disallowance of a credit ofRs.168.82 croresnot availed can be made by the Revenue. Therefore, the denial of CENVAT credit to the extent of Rs.168.82 appears to be not based on any documentary evidences.

++ Similarly, the demand of Rs.90.78 crores being the credit actually utilized is also clearly not sustainable in law inasmuch as the said amount is already included in the CENVAT credit disallowed. There cannot be any double demand towards CENVAT credit, once by disallowing the entire amount of credit taken and second by a demand of credit utilized.

Observing that there are a lot of inconsistencies/mistakes committed in the order by the adjudicating authority, the matter was remanded to the adjudicating authority for fresh consideration.

Appeal was allowed by way of remand.

(See 2014-TIOL-1820-CESTAT-MUM)