Ms Hcl Technologies Ltd vs CE & CGST Noida
- Court
- Customs, Excise and Service Tax Appellate Tribunal
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.II
Service Tax Appeal No.70612 of 2021
(Arising out of Order-In-Original No.35-PrCOMMR-ST-NOIDA-20-21, dated -
12.01.2021 passed by Principal Commissioner, Central Goods & Service Tax,
Noida)
M/s HCL Technologies Ltd. …..Appellant
(B-34/3, Sector-59,
Noida, Uttar Pradesh 201301)
VERSUS
Commissioner, Central Goods & Service Tax, Noida
….Respondent
(C-56/42, Renu Tower, Sector-62
Noida, Uttar Pradesh-201307)
A PPEARANCE :
Shri Atul Gupta, Advocate for the Appellant
Shri N. K. Mohan, Authorized Representative for the Respondent
HON'BLE MR. P. A. AUGUSTIAN, MEMBER (JUDICIAL)
HON’BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
CORAM:
FINAL ORDER NO.-70322/2026
DATE OF HEARING : 28.07.2026
DATE OF DECISION : 01.09.2026
SANJIV SRIVASTAVA:
This appeal is directed against order in original No 35/Pr
COMMR/ST/NOIDA/ 2020-21 dated 12.01.2021 of the Principal
Commissioner Central Goods & Service Tax Noida. By the
impugned order following has been held:
ORDER
(I) I disallow the CENVAT credit of Rs. 2,06,11,174/-
(Rupees Two Crores Six Lakhs Eleven Thousand One
Hundred Seventy Four only) to the party under Rule 14
of the CENVAT Credit Rules, 2004 read with the Proviso
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2
to Section 73(2) of the Finance Act, 1994 as discussed
supra.
(II) I confirm the demand of Interest on the disallowed
CENVAT credit at applicable rates during the relevant
period, on above amount under Rule 14 of the CENVAT
Credit Rules, 2004 read with Section 75 of the Finance
Act, 1994 as discussed supra.
(III) I impose a penalty of Rs. 2,06,11,174/- (Rupees Two
Crores Six Lakhs Eleven Thousand and One Hundred
Seventy Four only) upon the party, under Rule (15)(3)
of the CENVAT Credit Rules, 2004 read with Section 78
of the Finance Act, 1994 for the aforesaid contraventions
as discussed supra.
(IV) I impose penalty of Rs. 10,000/- (Rupees Ten Thousand
only) upon the party under Section 77 of the Finance Act,
1994 as discussed supra.
The dues adjudged above shall be paid forthwith.
2.1 Appellant are registered with service tax vide Centralized
Registration No. AAACH1645PST002 for providing output services
namely Information and Data Access / Retrieval", "Commercial
Training & Coaching Centre, Management", "Maintenance or
Repair Service", "Business Support Service" and "Business
Auxiliary Service", as defined under erstwhile Section 65(105)
(zh), (zzc). (zzg). (zzzq) and (zzb) of the Finance Act, 1994
(hereinafter referred to as the Act). They are availing the facility
of Cenvat credit in respect of input services used for providing
output services under the provisions of the Cenvat Credit Rules,
2004.
2.2 During the course of scrutiny of the records of the party by
the audit officers for the period from April'2011 to March-15
communicated through DAR No.143/2014-15(RUD-I), it has been
observed that:-
(a) Para No.1(a) The party availed inadmissible Cenvat
Credit of Rs.93,75,625/- on the basis of input services
received at their BPO branches situated at Chennai,
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3
Hyderabad, Gurgaon during the period 09.06.2011 to
19.08.2014. The said BPO branches were incorporated
under centralized registration w.e.f. 20.08.2014. The
party also availed the Cenvat Credit on various work viz.
Civil, Paint, setting up pipeline, removing Malba etc.
Thus, the Cenvat Credit of input services were availed
without incorporating the BPO branches in their
centralized registration and on the ineligible input
services. This cenvat credit is not admissible to the party.
(b) Para No.2 The party has availed inadmissible Cenvat
Credit of Rs.1,12,35,549/-on the basis of Service Tax
paid on Works Contract Services received for setting up
BPO offices at Gurgaon, Chennai, Hyderabad and NOIDA
under reverse charges mechanism w.e.f 01.07.2012, in
as much as the availability of Cenvat credit on work
contract services as input service tax credit has been
deleted from w.e.f. 01.04.2011. Moreover, the party has
also availed Cenvat Credit of Service tax of Works
Contract on account of Civil Work done at various places
at BPO offices, which is not admissible to them as per
clause (A) of 2(1) of Cenvat Credit Rules, 2004.
2.3 Appellant was requested by the jurisdictional Range
Superintendent, vide his office letter C. No. 20/STR-
XI/HCL/143/40/15/162 dated 16.03.2015 and reminder even
C.No.185 dated 06.04.2015, 280 dated 08.05.2015 & dated
24.08.2015, to deposit the amount involved and submit all
payment particulars. Appellant vide letter dated 21.09.2015 &
07.12.2015, submitted that ---
(a) For Para No. 1(a) -- They have taken Cenvat credit
amounting to Rs. 84,86,277/-pertaining to their
branches located at Chennai, Hyderabad and Gurgaon
during the period 09.06.2011 to 19.08.2014 which were
not added to their centralized registration upto
20.08.2014 and Cenvat credit of Rs.5,46,513/- taken on
input services viz. Civil, paint, setting up pipeline and
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4
removing Malba etc. which comes to Rs.90,32,790/-only
instead of audit objection of Rs.93,75,625/-.
(b) For Para No. 2 They have taken the Cenvat Credit of Rs.
1,12,35,549/- on account of maintenance, repair,
modernization of the existing premises and not on setting
of any new office or structure of the office and under the
cenvat credit rules, cenvat credit of service tax paid on
account of repair. maintenance etc is eligible.
2.4 On conclusion of enquiries and investigations, department
was of the view that appellant has wrongly availed CENVAT credit
of Rs.2,06,11,174/- (Rs.93,75,625/-+1,12,35,549/-) under Rule
2 & 3 of Cenvat Credit Rules, 2004 read with section 69 of the
Finance Act, 1994 and the same is liable to be disallowed and
recovered from them along with interest under Rule 14 of CENVAT
Credit Rules, 2004.
2.5 Further it was noticed that appellant has not shown any
sanctity to the statutory provisions and they have proceeded in a
manner defiant to the rule of law and vehemently worked in a
prejudicial way in as much as they
➢ out-rightly negated the procedure for adding the branches
in their Centralized registration in terms of Notification No.
11/2008-ST Dated 1/3/2008 w.e.f. 1/4/2008 issued for
Application form for registration under Section 69 of the
Finance Act, 1994 (32 of 1994); and
➢ not complying the Notification No. 3/2011-CE (NT) Dated
1/3/2011 w.e.f. 01.04.2011, vide which the work contract
services were excluded from the definition of input service
by adding a clause (A) in Rule 2(1) of the CCR.
Thus said amount of credit was irregular in nature and had
been availed by them fraudulently. This facts came to the notice
of the department only during the audit of accounts/records of the
party. Therefore, appellant has suppressed the vital facts with
intent to avail irregular Cenvat Credit. The said credit is
recoverable from them under the provisions of Rule 14 of the
CENVAT Credit Rules, 2004 read with proviso to Section 73(1) of
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5
the Finance Act, 1994 along with interest under Rule 14 of CCR by
invoking extended period of time beyond normal period of
limitation. Appellant was liable to penalty under the provisions of
Rule 15(3) of Cenvat Credit Rules'2004 read with Section 78 ibid
for wrongly availed the cenvat credit and penalty under the
provision of section 77 of the Act ibid for not including the
branches in their Centralized Registration for the period
09.06.2011 to 19.08.2014.
2.6 A show cause notice dated 13.04.2016 was issued to the
appellant asking them to show cause as to why:-
(a) CENVAT credit of Rs. 2,06,11,174/- (Rupees Two Crores
Six Lacks Eleven Thousands and One Hundred and
Seventy Four only) should not be disallowed and
recovered from them under Rule 14 of CENVAT Credit
Rules, 2004 read with the Proviso to Section 73(1) of the
Finance Act, 1994
(b) Interest involved on the above-said amount should not
be recovered from them under Rule 14 of CENVAT Credit
Rules, 2004 read with Section 75 of the Finance Act,
1994
(c) Penalty should not be imposed upon them in terms of
rule 15(3) of CENVAT Credit Rules, 2004 read with
Section 78 of the Finance Act, 1994 for the aforesaid
contraventions.
(d) Penalty should not be imposed upon them under Section
77 of the Finance Act, 1994 for the contravention o f
provisions of Section 69 of the Finance Act, 1994.
2.7 The show cause notice was adjudicated as per the impugned
order referred in para 1 above.
2.8 Aggrieved appellant has filed this appeal.
3.1 We have heard Shri Atul Gupta, Advocate for the appellant
and Shri N K Mohan, Authorized Representative for the revenue
on 28.07.2026. After conclusion of hearing following order was
made
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Order Sheet
Heard both the sides. Order Reserved. Both the sides at
liberty to file written submissions within one week.
Appellant has filed additional submissions which has been taken
on record. Revenue has not filed any submissions.
3.2 Arguing for the appellant learned counsel submits:
➢ Credit availed in respect of unregistered premises. Issue is
no longer res-integra and it has been constantly held that
CENVAT Credit is admissible even in respect of the services
which are received at the unregistered premises. Reliance is
placed on the following decisions:
o Samsung India Electronics Pvt. Ltd. [2017 (52) STR
497 (T-All)] affirmed by Hon’ble Allahabad High Court
as reported at [2017 (52) STR J253 (ALL)]
o
HCL Technologies [Final Order No 70912/2024 dated
28.08.2024 in Service Tax Appeal No 70985/2018]
o Samsung India Electronics Pvt. Ltd. [Order dated
17.07.2017 of Hon’ble Allahabad High Court in Central
Excise Appeal No 85-87/2017]
o MPortal India Wireless Solution P Ltd. [2012 (27) STR
134 (Kar)]
➢ Denial of Cenvat Credit in respect of service tax paid on
repair renovation and modernization of existing building
premises. These services though work contract ser5vices
were used for repair, renovation and modernization. Hence
are eligible for CENVAT Credit. Reliance is placed on the
following decisions:
o Godawari Power & Ispat Limited [Final Order No
51519/2023 dated 08.11.2023 in Excise Appeal No
51211 of 2020, Delhi Bench]
o
Jai Balaji Industries Ltd. [Excise Appeal No.76215 of
2016-CESTAT Kolkata maintained by Calcutta High
Court
o General Motors India Pvt. Ltd. [(2024) 15 Centax
124 (Tri.-Ahmd)]
Service Tax Appeal No.70612 of 2021
7
o Reliance Industries Ltd [2022-VIL-281-CESTAT-AHM-
CE]
o Milestone Preservatives Pvt. Ltd. [2023 (71) GSTL
188 (Tri.-Ahmd)]
o Balkrishna Industries Ltd. [2022 (65) G.S.T.L. 247
(Tri. - Del.)]
o Exide Industries Limited [2016 (43) STR 463 (Tri-
Del)]
o Ion Exchange (I) Ltd. [2018 (12) G.S.T.L. 302 (Tri. -
Ahmd.)]
➢ Demand for the period upto March 2014 is barred by
limitation as all the facts were in the knowledge of
department as the appellant had been filing the refunds
claims in respect of the Cenvat Credit taken by them in
terms of Rule 5 of the CENVAT Credit Rules, 2004.
Undisputedly they were also filing the ST-3 returns declaring
the credit taken in their returns. Reliance is placed on the
following decisions:
o Nizam Sugar Factory [2006 (197) ELT 465 (SC)]
o P & B Pharmaceuticals (P) Ltd. [2003 (153) ELLT 14
(SC)]
o ECE Industries Ltd. [2004 (164) ELT 236 (SC)]
o Hindustan Heavy Chemicals [2009 (240) ELT 14 (Cal)]
o Medicaps Limited [2011 (24) STR 572 (T-Del)]
o ITC Ltd [2014 (291) ELT 377 (T-Kol)]
o Cemphar Drugs and Liniments [1989 (40) ELT 276
(SC)]
o Padmini Poroducts [1989 (43) ELT 195 (SC)]
o Pushpam Pharmaceuticals Co. [1995 (78) ELT 401
(SC)]
o
Uniworth Textiles Limited [20133 (288) ELT 161 (SC)]
o Sands Hotel Private Limited [2009 (16) STR 329 9T-
Mum)]
o Punjab Chem & Pharma [2001 (135) ELT 227 (T-Del)]
o Asia Automotive Ltd. [1999 (113) ELT 841 (T-Mum)]
Service Tax Appeal No.70612 of 2021
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➢ Impugned order has travelled beyond the show cause
notice.
➢ Interest is not payable as the appellant has rightly availed
the credit.
➢ Penalty is not imposable.
In the written submissions filed subsequent to the hearing
appellant has only re-stated what has been submitted during the
course
3.3 Authorized Representative re-iterated the findings recorded
in the impugned order.
4.1 We have considered the impugned order along with the
submissions made in appeal and during the course of arguments.
4.2 The issues involved in the present appeal can be grouped in
following categories:
a. Whether the credit availed by the appellant in
respect of the services availed in respect of the
unregistered premises could have been denied.
b. Whether credit availed by the appellant in respect
of the work contract services would be admissible
to the appellant.
c. Whether extended period of limitation could be
invoked for making this demand as per proviso to
Section 73 (1) of the Finance Act, 1994.
d. Whether interest under Section 75 is demandable
from the appellant.
e. Whether penalty under Section 77 or 78 of the
Finance Act, 1994, could have been imposed upon
the appellant.
4.3 Whether the credit availed by the appellant in respect
of the services availed in respect of the unregistered
premises could have been denied.
4.3.1 We do not find any merits in the findings recorded by the
impugned order in view of the decision of jurisdictional High Court
in case of Samsung India Pvt. Ltd., holding as follows:
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“This is a Central Excise Appeal under Section 35-G of the
Central Excise Act, 1944 arises out of Appeal
No.ST/51147/2015 against the order dated
09.06.2016. The question no.2 is not being pressed by the
learned counsel for the appellant. By the impugned order
the Tribunal has allowed the claim of the assessee for
refund. The department has sought the below noted
question to be answered:
"Whether the Hon'ble CESTAT was correct in allowing the
CENVAT credit of the services used at unregistered premises
and refund thereof?"
This very question came up for consideration in a matter
before this Court in the case of Commissioner, Service Tax
Commissionerate Vs. M/s Atrenta India Pvt. Noida reported
in [2017(2) ADJ 590 (DB)], wherein this Court took a view
that the refund could not be denied to the assessee merely
on the basis of non-registration of the premises. The
Tribunal in this matter has also recorded findings that Stellar
Park Premises at Noida were taken on rent only in April
2012. Thereafter, they had applied for inclusion of Stellar
Park address in their centralized R.C. on 24.4.2013 and the
same was approved and granted on 19.07.2013. Even
otherwise, under Rules 3 of CCE 2004 it was not a
condition precedent that input service have to be
received at registered premises only of the output
service provider.
4.4 Whether credit availed by the appellant in respect of
the work contract services would be admissible to the
appellant
4.4.1 Impugned order records the findings as follows:
“5.3.1. Now I come to the demand of Rs. 1,12.35,549/-
which has been raised on the ground that the credit of input
services received on the service of works contract is not
admissible as the works contract services have been
excluded from the definition of input services vide Clause A
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of the Rule 2(1) of the CENVAT Credit Rules, 2004 as
amended de Notification No. 03/2011 CE (NT) dated
01.03.2011 with effect from 01.04.2011. The party on the
other hand, inter alia, contends that the services received
in the case are in relation to modernization, repairs,
renovation etc of its office premises which are specifically
mentioned in the inclusion-clause of the definition of input
services. The party has also provided copies of some
invoices on sample basis to support their contention. In this
regard, I find that the definition of input services was
amended with effect from 01.04.2011 vide Notification No.
03/2011 CE (NT) dated 01.03.2011. With effect from
01.07.2012 vide Notification No. 28/2012 CE (NT) dated
20.06.2012, the definition of input services was again
amended. The definition after the respective amendments
read as under,
Rule 2(I) (w.e.f 01.04.2011 to 30.06.2012)
"input service" means any service,-
(0) used by a provider of output service for providing
an output service, or
(ii) used by the manufacturer, whether directly or
indirectly, in or in relation to the manufacture of final
products and clearance of final products up to the
place of removal, and includes services used in
relation to modernization, renovation or repairs of a
factory, premises of provider of output service or an
office relating to such factory or premises,
advertisement or sales promotion, market research,
storage up to the place of removal, procurement of
inputs, accounting, auditing, financing, recruitment
and quality control, coaching and training, computer
networking, credit rating, share registry, security,
business exhibition, legal services, inward
transportation of inputs or capital goods and outward
Transportation up to the place of removal
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but excludes,-
(A) service portion in the execution of a works
contract and construction services including service
listed under clause (b) of section 66E of the Finance
Act (hereinafter referred as specified services) in so
far as they are used for -
(a) construction or execution of works contract of a
building or a civil structure or a part thereof; or
(b) laying of foundation or making of structures for
support of capital goods, except for the provision of
one or more of the specified services, or
services provided by way of renting of a motor vehicle,
in so far as they relate to a motor vehicle which is not
a capital goods; or
(BA) service of general insurance business, servicing,
repair and maintenance, in so far as they relate to a
motor vehicle which is not a capital goods, except
when used by -
(a) a manufacturer of a motor vehicle in respect of a
motor vehicle manufactured by such person, or
(b) an insurance company in respect of a motor
vehicle insured or reinsured by such person, or
(C) such as those provided in relation to outdoor
catering, beauty treatment, health services, cosmetic
and plastic surgery, membership of a club, health and
fitness centre, life insurance, health insurance and
travel benefits extended to employees on vacation
such as Leave or Home Travel Concession, when such
services are used primarily for personal use or
consumption of any employee;"
Rule 2(1) w.e.f 01.07.2012
"input service" means any service,-
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(1) used by a provider of output service for providing
an output service; or
( ii) used by the manufacturer, whether directly or
indirectly, in or in relation to the manufacture of final
products and clearance of final products up to the
place of removal,
and includes services used in relation to
modernization, renovation or repairs of a factory,
premises of provider of output service or an office
relating to such factory or premises, advertisement or
sales promotion, market research, storage up to the
place of removal, procurement of inputs, accounting,
auditing, financing, recruitment and quality control,
coaching and training, computer networking, credit
rating, share registry, security, business exhibition,
legal services, inward transportation of inputs or
capital goods and outward transportation up to the
place of removal
but excludes,-
(A) service portion in the execution of a works
contract and construction services including service
listed under clause (b) of section 66E of the Finance
Act
(hereinafter referred as specified services) in so far as
they are used for -
(a) construction or execution of works contract of a
building or a civil structure or a part thereof; or
laying of foundation or making of structures for
support of capital goods,
except for the provision of one or more of the specified
services, or
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(B) services provided by way of renting of a motor
vehicle, in so far as they relate to a motor vehicle
which is not a capital goods, or
(BA) service of general insurance business, servicing,
repair and maintenance, in so far as they relate to a
motor vehicle which is not a capital goods, except
when used by -
(a) a manufacturer of a motor vehicle in respect of a
motor vehicle manufactured by such person; or
(b) an insurance company in respect of a motor
vehicle insured or reinsured by such person, or
(C) such as those provided in relation to outdoor
catering, beauty treatment, health services, cosmetic
and plastic surgery, membership of a club, health and
fitness centre, life insurance, health insurance and
travel benefits extended to employees on vacation
such as Leave or Home Travel Concession, when such
services are used primarily for personal use or
consumption of any employee,"
Therefore, throughout the period involved the service
portion in the execution of works contract and construction
services in so far as they are used for construction or
execution of works contract of a building or a civil structure
or a part thereof, was excluded from the definition of input
service as defined under the CENVAT Credit Rules, 2004.
The party contends that the services received in the case
are in relation to modernization, repairs and renovation etc.
of its office premises which are specifically mentioned in the
inclusion-clause of the definition of input services. The party
has also provided copies of some invoices on sample basis
to support their contention.
5.3.2 . In this regard, I find that the party has not
disputed that the services were in relation to
execution of works contracts. The nature of service is
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also evident from the sample invoices produced by
the party as these invoices show that the tax has been
paid on reverse charge basis. The exclusion clause of
the definition of the input service provides that the
service would not be admissible for credit of tax in
case it relates to construction or execution of works
contract of a building or a civil structure or a part
thereof. Therefore, I of the view that even if the
services received related to modernization, repairs,
renovation etc. the same will not be admissible as
input services if the fell in the exclusion clause of the
definition of the Rule, ibid. The inclusion clause as
provided in the definition of input service is illustrative only
and it cannot override the exclusion clause which is quite
specific. Thus the contention of the party that the services
are covered under means and inclusion clause of the
definition is not acceptable as such services have been
excluded from the definition of eligible input services, even
if such services have been used for the provision of taxable
output services. Further, on examination of the sample
invoice produced by the party I see no ground to conclude
that the services received did not fall in the exclusion clause
as provided under Rule 2(1) of the CENVAT Credit Rules,
2004.
5.3.3. I observe that the party has placed reliance upon
various case laws in support of their contentions wherein
services of repair, renovation and modernization of the
premises were held to be an input service in terms of Rule
2(1) of the CENVAT Credit Rules, 2004 and the credit was
duly allowed: Commissioner Vs Exide Industries Limited,
2016(43) STR463 (Tri-Del and Pr. Commr. Of Central Tax
and C. Ex. Raipur Vs Jindal Steel and Power Ltd 2019 (2)
TMI 1732.
In the case of Exide Industries, Hon'ble Tribunal Delhi has
also hold that the Construction of a factory is excluded from
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the definition of input service. In the instant case, the party
has availed the CENVAT credit on the construction/setting
up of BPO branches at Gurgaon, Chennai, Hyderabad and
Noida. So far as the case of M/s Jindal Steel is concerned,
the same is not squarely applicable in the instant case as in
the case of Jindal Steel, the LPG gas was used as input for
manufacturing of capital goods which is not the case here.
In view of the discussion above, I hold that the services
received by the party were not input services as they fell in
the exclusion clause to the definition of input service as
provided under the CENVAT Credit Rules, 2004, and
accordingly, the credit of tax of Rs. 1,12,35,549/- availed
by the party on these services is liable to be recovered.”
4.4.2 From the perusal of the above it is evident that the
impugned order after examining the facts and evidences available
on the record has returned a finding of fact to the effect that
appellant has availed CENVAT Credit on the Work Contract
Services used for Construction/ Setting up of the BPO branches at
Gurgaon, Hyderabad, Chennai and Noida. Appellant has not
produced any evidence to show that the finding of fact returned
in the impugned order is perverse. They have made a claim to the
effect that these services were in relation to modernization, repair
or renovation of the existing facilities. In absence of any evidence
to the effect of use of these services in such a manner we are not
in position to agree with the claim made by the appellant.
4.4.3 Appellant has not claimed the credit in respect of services
received under the category of repair and maintenance services.
The services under the category of repair maintenance are
distinct from the work contract services and are subjected to
different treatment for levy of service tax. Hon’ble Supreme Court
has in case of Larsen And Turbo Ltd. [2015 (39) S.T.R. 913 (S.C.)]
clarifying the said distinction has clearly observed as follows:
“17. We find that the assessees are correct in their
submission that a works contract is a separate species of
contract distinct from contracts for services simpliciter
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recognized by the world of commerce and law as such, and
has to be taxed separately as such. In Gannon Dunkerley,
1959 SCR 379, this Court recognized works contracts as a
separate species of contract as follows :-
“To avoid misconception, it must be stated that the
above conclusion has reference to works contracts,
which are entire and indivisible, as the contracts of the
respondents have been held by the learned Judges of
the Court below to be. The several forms which such
kinds of contracts can assume are set out in Hudson
on Building Contracts, at p. 165. It is possible that the
parties might enter into distinct and separate
contracts, one for the transfer of materials for money
consideration, and the other for payment of
remuneration for services and for work done. In such
a case, there are really two agreements, though there
is a single instrument embodying them, and the power
of the State to separate the agreement to sell, from
the agreement to do work and render service and to
impose a tax thereon cannot be questioned, and will
stand untouched by the present judgment.” (at page
427)
18. Similarly, in Kone Elevator India (P) Ltd. v. State of
T.N. - (2014) 7 SCC 1 = 2014 (34) S.T.R. 641 (S.C.) = 2014
(304) E.L.T. 3 (S.C.), this Court held :-
“Coming to the stand and stance of the State of
Haryana, as put forth by Mr. Mishra, the same suffers
from two basic fallacies, first, the supply and
installation of lift treating it as a contract for sale on
the basis of the overwhelming component test,
because there is a stipulation in the contract that the
customer is obliged to undertake the work of civil
construction and the bulk of the material used in
construction belongs to the manufacturer, is not
correct, as the subsequent discussion would show;
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and second, the Notification dated 17-5-2010 issued
by the Government of Haryana, Excise and Taxation
Department, whereby certain rules of the Haryana
Value Added Tax Rules, 2003 have been amended and
a table has been annexed providing for “Percentages
for Works Contract and Job Works” under the heading
“Labour, service and other like charges as percentage
of total value of the contract” specifying 15% for
fabrication and installation of elevators (lifts) and
escalators, is self-contradictory, for once it is treated
as a composite contract invoking labour and service,
as a natural corollary, it would be works contract and
not a contract for sale. To elaborate, the submission
that the element of labour and service can be
deducted from the total contract value without
treating the composite contract as a works contract is
absolutely fallacious. In fact, it is an innovative
subterfuge. We are inclined to think so as it would be
frustrating the constitutional provision and,
accordingly, we unhesitatingly repel the same.” (at
para 60)
19. In Larsen & Toubro Ltd. v. State of Karnataka, (2014)
1 SCC 708 = 2014 (34) S.T.R. 481 (S.C.) = 2014 (303)
E.L.T. 3 (S.C.), this Court stated :-
“In our opinion, the term “works contract” in Article
366(29-A)(b) is amply wide and cannot be confined to
a particular understanding of the term or to a
particular form. The term encompasses a wide range
and many varieties of contract. Parliament had such
wide meaning of “works contract” in its view at the
time of the Forty-sixth Amendment. The object of
insertion of clause (29-A) in Article 366 was to enlarge
the scope of the expression “tax on sale or purchase
of goods” and overcome Gannon Dunkerley (1) [State
of Madras v. Gannon Dunkerley and Co. (Madras) Ltd.,
Service Tax Appeal No.70612 of 2021
18
AIR 1958 SC 560 : 1959 SCR 379]. Seen thus, even
if in a contract, besides the obligations of supply of
goods and materials and performance of labour and
services, some additional obligations are imposed,
such contract does not cease to be works contract.
The additional obligations in the contract would not
alter the nature of contract so long as the contract
provides for a contract for works and satisfies the
primary description of works contract. Once the
characteristics or elements of works contract are
satisfied in a contract then irrespective of additional
obligations, such contract would be covered by the
term “works contract”. Nothing in Article 366(29-
A)(b) limits the term “works contract” to contract for
labour and service only. The learned Advocate General
for Maharashtra was right in his submission that the
term “works contract” cannot be confined to a
contract to provide labour and services but is a
contract for undertaking or bringing into existence
some “works”. We are also in agreement with the
submission of Mr. K.N. Bhat that the term “works
contract” in Article 366(29-A)(b) takes within its fold
all genre of works contract and is not restricted to one
specie of contract to provide for labour and services
alone. Parliament had all genre of works contract in
view when clause (29-A) was inserted in Article 366.”
(at para 72)
20. We also find that the assessees’ argument that there
is no charge to tax of works contracts in the Finance Act,
1994 is correct in view of what has been stated above.
21. This Court in Mathuram Agrawal v. State of M.P.,
(1999) 8 SCC 667, held :-
“Another question that arises for consideration in this
connection is whether sub-section (1) of Section 127-
A and the proviso to sub-section (2)(b) should be
Service Tax Appeal No.70612 of 2021
19
construed together and the annual letting values of all
the buildings owned by a person to be taken together
for determining the amount to be paid as tax in
respect of each building. In our considered view this
position cannot be accepted. The intention of the
legislature in a taxation statute is to be gathered from
the language of the provisions particularly where the
language is plain and unambiguous. In a taxing Act it
is not possible to assume any intention or governing
purpose of the statute more than what is stated in the
plain language. It is not the economic results sought
to be obtained by making the provision which is
relevant in interpreting a fiscal statute. Equally
impermissible is an interpretation which does not
follow from the plain, unambiguous language of the
statute. Words cannot be added to or substituted so
as to give a meaning to the statute which will serve
the spirit and intention of the legislature. The statute
should clearly and unambiguously convey the three
components of the tax law i.e. the subject of the tax,
the person who is liable to pay the tax and the rate at
which the tax is to be paid. If there is any ambiguity
regarding any of these ingredients in a taxation
statute then there is no tax in law. Then it is for the
legislature to do the needful in the matter.
This construction, in our considered view, amounts to
supplementing the charging section by including
something which the provision does not state. The
construction placed on the said provision does not flow
from the plain language of the provision. The proviso
requires the exempted property to be subjected to tax
and for the purpose of valuing that property alone the
value of the other properties is to be taken into
consideration. But, if in doing so, the said property
becomes taxable, the Act does not provide at what
rate it would be taxable. One cannot determine the
Service Tax Appeal No.70612 of 2021
20
rateable value of the small property by aggregating
and adding the value of other properties, and arrive
at a figure which is more than possibly the value of
the property itself. Moreover, what rate of tax is to be
applied to such a property is also not indicated.” (at
paras 12 and 16)
22. Equally, this Court in Govind Saran Ganga Saran v.
CST, 1985 Supp SCC 205, held :-
“The components which enter into the concept of a tax
are well known. The first is the character of the
imposition known by its nature which prescribes the
taxable event attracting the levy, the second is a clear
indication of the person on whom the levy is imposed
and who is obliged to pay the tax, the third is the rate
at which the tax is imposed, and the fourth is the
measure or value to which the rate will be applied for
computing the tax liability. If those components are
not clearly and definitely ascertainable, it is difficult to
say that the levy exists in point of law. Any uncertainty
or vagueness in the legislative scheme defining any of
those components of the levy will be fatal to its
validity.” (at para 6)
23. To similar effect is this Court’s judgment in CIT v. B.C.
Srinivasa Setty, (1981) 2 SCC 460, held :-
“Section 45 charges the profits or gains arising from
the transfer of a capital asset to income tax. The asset
must be one which falls within the contemplation of
the section. It must bear that quality which brings
Section 45 into play. To determine whether the
goodwill of a new business is such an asset, it is
permissible, as we shall presently show, to refer to
certain other sections of the head, “Capital gains”.
Section 45 is a charging section. For the purpose of
imposing the charge. Parliament has enacted detailed
provisions in order to compute the profits or gains
Service Tax Appeal No.70612 of 2021
21
under that head. No existing principle or provision at
variance with them can be applied for determining the
chargeable profits and gains. All transactions
encompassed by Section 45 must fall under the
governance of its computation provisions. A
transaction to which those provisions cannot be
applied must be regarded as never intended by
Section 45 to be the subject of the charge. This
inference flows from the general arrangement of the
provisions in the Income Tax Act, where under each
head of income the charging provision is accompanied
by a set of provisions for computing the income
subject to that charge. The character of the
computation provisions in each case bears a
relationship to the nature of the charge. Thus the
charging section and the computation provisions
together constitute an integrated code. When there is
a case to which the computation provisions cannot
apply at all, it is evident that such a case was not
intended to fall within the charging section. Otherwise
one would be driven to conclude that while a certain
income seems to fall within the charging section there
is no scheme of computation for quantifying it. The
legislative pattern discernible in the Act is against
such a conclusion. It must be borne in mind that the
legislative intent is presumed to run uniformly through
the entire conspectus of provisions pertaining to each
head of income. No doubt there is a qualitative
difference between the charging provision and a
computation provision. And ordinarily the operation of
the charging provision cannot be affected by the
construction of a particular computation provision. But
the question here is whether it is possible to apply the
computation provision at all if a certain interpretation
is pressed on the charging provision. That pertains to
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22
the fundamental integrality of the statutory scheme
provided for each head.” (at para 10)
24. A close look at the Finance Act, 1994 would show that
the five taxable services referred to in the charging Section
65(105) would refer only to service contracts simpliciter and
not to composite works contracts. This is clear from the very
language of Section 65(105) which defines “taxable service”
as “any service provided”. All the services referred to in the
said sub-clauses are service contracts simpliciter without
any other element in them, such as for example, a service
contract which is a commissioning and installation, or
erection, commissioning and installation contract. Further,
under Section 67, as has been pointed out above, the value
of a taxable service is the gross amount charged by the
service provider for such service rendered by him. This
would unmistakably show that what is referred to in the
charging provision is the taxation of service contracts
simpliciter and not composite works contracts, such as are
contained on the facts of the present cases. It will also be
noticed that no attempt to remove the non-service elements
from the composite works contracts has been made by any
of the aforesaid Sections by deducting from the gross value
of the works contract the value of property in goods
transferred in the execution of a works contract.
4.4.4 Undisputedly the issue in the present case is in respect of
the CENVAT Credit availed by the appellant against the services
received by them under the category of work contract services.
Appellant claim that this credit was in respect of the services used
towards modernization, repair and renovation and is within the
inclusive part of the definition of input services as per Rule 2 (l)
of the CENVAT Credit Rules, 2004 is to be rejected in view of the
above decision of the Hon’ble Supreme Court read along with Rule
2 (t) of the CENVAT Credit Rules, 2004 reproduced below:
2. Definitions.
In these rules, unless the context otherwise requires,-
Service Tax Appeal No.70612 of 2021
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(t) words and expressions used in these rules
and not defined but defined in the Excise Act or
the Finance Act shall have the meanings
respectively assigned to them in those Acts.
In view of the above it is evident that these words used in
the CENVAT Credit Rules, 2004 have to be understood in the
manner they are defined and used in the Finance Act, 1994.
Hon’ble Supreme Court has categorically interpreted and limited
the meanings of these terms to services simpliciter and not to
composite contracts involving supply of goods and services which
fall under the category of Work Contract Services. Service tax in
respect of these services against which appellant has claimed the
CENVAT Credit was paid under the category of Work Contract
Services only.
4.4.5 The decisions referred to by the appellant in their
submissions may apply to the facts of those case. However we
also observe that none of these decisions have considered the
binding precedence of the decision of Hon’ble Supreme Court in
case of Larsen And Turbo Ltd., supra read along with Rule 2 (t) of
the CENVAT Credit Rules, 2004 and hence being sub-silento
cannot be considered as binding precedent. Even otherwise in
absence of any concrete evidence to show that the these services
were used for purpose other than construction/ setting up of BPO
branches at Gurgaon, Hyderabad, Chennai and NOIDA, a finding
returned in the impugned order, we do not find any merits in the
submissions made by the appellant.
4.4.6 In view of the discussions as above we uphold the demand
made for the recovery of the CENVAT Credit availed by the
appellant against Work Contract Services received by them,
subject to the findings which we record on the issue of limitation
in the next paragraph.
4.5 Whether extended period of limitation could be
invoked for making this demand as per proviso to Section
73 (1) of the Finance Act, 1994.
Service Tax Appeal No.70612 of 2021
24
4.5.1 On limitation appellant had made following submissions
before the adjudicating authority, which have been recorded in
the impugned order.
“3.13. WITHOUT PREJUDICE, THERE IS NO SUPPRESSION
OF INFORMATION BY THE NOTICEE. THUS, DENIAL OF
CENVAT CREDIT IS PARTLY TIME BARRED AS EXTENDED
PERIOD OF LIMITATION IS NOT INVOCABLE.
Without prejudice to the submissions made in the foregoing
paragraphs, it is submitted that even assuming without
admitting that the Noticee has wrongly taken the CENVAT
credit on the aforesaid services, the extended period of
limitation cannot be invoked and therefore, the demand is
partly time barred. In the present case, the period covered
by the SCN dated 22.09.2016 is from April, 2013 to March
2014. Therefore, the SCN is barred for the period prior to
October, 2013. Therefore, for the period April, 2011-March,
2014 the denial of credit is beyond eighteen (18) months
and thus the denial of credit under the SCN is liable to be
dropped to this extent.
3.14. Facts already in knowledge of the Department as
refund claims under Rule 5 of CCR, 2004 filed by the Noticee
The SCN has erroneously alleged that the Noticee has
suppressed the material facts from the Department willingly
by availing the inadmissible CENVAT credit with intent to
evade payment of service tax. It is submitted that the
CENVAT Credit availed by the Noticee is in consonance with
the output services being rendered by them in accordance
with the Rule 2(1) and Rule 3 of the Rules. It is submitted
that the Department was aware of all the facts in the present
case. The Noticee is registered with Service Tax Department
and is exporting Online Information and Data
Access/Retrieval service, Commercial Training & Coaching
services, Business Auxiliary services, and Business Support
services. Since the Noticee is not in a position to utilize the
CENVAT credit of its input services availed, the Noticee has
Service Tax Appeal No.70612 of 2021
25
filed refund claims under Rule 5 of CCR, 2004 till the period
October December, 2013. It is to be noted that since the
Noticee had been filing for refund, at that itself all the facts
were made know to the Department. Therefore, there
cannot be any allegation of suppression, fraud etc. on the
part of the Noticee.
Further, it is submitted that the Noticee has never
suppressed any fact relating to the activities carried on by
them with an intention to evade payment of service tax. The
Noticee has always cooperated with the Department in their
proceedings and has always provided the details asked for
by the Department. Many documents were submitted by the
Noticee during the investigations and the Noticee did not
suppress any information from the department. Therefore,
the allegation of suppression is legally and factually
incorrect and part of the demand is liable to be dropped on
this ground itself. The Noticee was under a bonafide belief
that the Credit on the input services availed is admissible to
the Noticee.
It is further submitted that the Noticee has not suppressed
any material fact with intent to evade payment of Service
Tax. With reference to this, it is pertinent to mention various
judicial pronouncements that have interpreted the
expression "suppression" with reference to Section 11A of
the Central Excise Act, 1944 which is pari materia to Section
73 of the Act. In the case of Continental Foundation Jt. v.
Commr. of C.Ex., Chandigarh-1 reported in 2007 (216)
E.LT. 177 (S.C.), the Supreme Court held that the
expression "suppression" has been used in the proviso to
Section 11A of the Central Excise Act, 1944 accompanied by
very strong word as "fraud" or "Collusion" and therefore,
has to be construed strictly. Similarly, the Hon'ble Supreme
Court in the case of Commissioner of C. Ex., Bangalore v.
Kamataka Agro Chemicals reported in 2008 (227) E.L.T. 12
(S.C.) held that it is well settled that mere non-declaration
Service Tax Appeal No.70612 of 2021
26
is not sufficient to invoke the larger period. Some positive
act of suppression is required for invoking larger period of
limitation under Section 11A.
3.15. Suppression cannot be alleged as show cause notices
for prior period have been issued by the Department
As stated above, the Noticee has filed various refund clairns
for claiming refund of unutilized CENVAT credit (pertaining
to various input services) for the period upto December,
2013. On receipt of these refund claims, six show cause
notices were issued to oticee which, inter alia, sought to
disallow CENVAT credit relating to service tax paid for
'renting of immovable property service because the rent was
paid for the premises which were not included in the
registration of the Noticee. Furtner the CENVAT credit
relating to "Works Contract Services' was also sought to be
denied. The Noticee has already filed replies to these SCNs
and the same are pending adjudication as on date. It is
submitted that the aforesaid SCNs had already analyzed the
activities undertaken by the Voticee and made proposals to
disallow refund of CENVAT credit. This proves beyond doubt
that the Department was aware of the activities carried out
by the Noticee. In view of he foregoing, it is submitted that
the allegation in the present SCN that there is suppression
on the part of the Noticee is wrong and erroneous. Further,
it is submitted that it is settled principle of law that
suppressions cannot be alleged or held when the
department has already issued the show cause notice for
the earlier period.
3.16. Regular returns filed by the Noticee
It is further submitted that in any case, the Noticee has been
regularly filing its statutory returns with the Department.
The Noticee had provided all the information required to be
provided in terms of the said returns. The Noticee submitted
the said returns on the basis of self-assessment and it was
the responsibility of the Department to scrutinize the
Service Tax Appeal No.70612 of 2021
27
assessment made by the Noticee and verify the correctness
of the same. In such a situation, the Department cannot
invoke extended period of limitation on the basis of
suppression against the Noticee. Copies of the ST-3 returns
filed by the Noticee for the relevant period are enclosed This
clearly shows that there was no intention to evade tax or
suppress any information. It is also a settled position of law
that, when the returns are regularly filed containing all
statutorily required information, then suppression cannot be
alleged against an assessee.
3.17. No intention to avail ineligible CENVAT credit
It is submitted that the Noticee had no intention to act
disnonestly and have acted according to the legislative
provisions in as much as everything is on record and no
CENVAT Credit has been availed without the knowledge of
the department.
3.18. Noticee was acting under Bona-Fide belief
In any case, it is submitted that the Noticee had availed
CENVAT Credit on the input services, based on the invoices
received and the amount of Service Tax paid on the said
service, under a bona-fide belief that credit is available on
such services with no specific conditions regarding
registered premises. That the bona fide belief of the Noticee
was pased on various judicial pronouncements which were
in favour of the Noticee and the grounds discussed above.”
4.5.2 The said submissions were not accepted by the
adjudicating authority and it was held that extended period has
been rightly invoked for making this demand observing as follows:
5.4. Invoking of Extended period -
5.4.1. Another contention of the party against the demand
raised is that the extended period of limitation as invoked
under proviso to Section 73(1) of the Finance Act, 1994 for
raising the demand is not invokable in the case and the
demand s partly time barred as the department was aware
Service Tax Appeal No.70612 of 2021
28
of the facts as refund claims under Rule 5 of the CENVAT
Credit Rules, 2004 have been filed by them as six show
cause notices with reference to refund claims filed by them
have been issued by the department, they provided all 149
the information to the department during investigation, as
they acted under a bona-fide belief, as all the details were
filed in the Returns filed with the department and as they
had no intention to avail irregular credit.
5.4.2. In this regard I find that the case was detected
subsequent to the audit of the records of the party.
Thereafter, the department investigated the matter
resulting into issuance of demand notice. In terms of the
Proviso the department can raise demand for the last 5
years from the relevant date in case any party has willfully
contravened the provisions of the Finance Act, 1994 with
the intent to evade payment of the Service Tax. In the
instant case the demand has been raised for the period
2011-12 to 2014-15 and the notice has been issued on
19.04.2016, therefore, the notice has been served before
the expiry of 5 years from the relevant date. Accordingly,
the notice is not hit by the limitation clause. Further, the
contention of the party that the department was aware
about the facts by way of issuance of show cause notices
issued with reference to refund claims filed by them, is not
acceptable as they have not provided the copies of these
show cause notices and in the absence of the same I am not
able to arrive at any conclusion, and as they have not
provided as to how the same allegations were part of the
earlier show cause notices. I am also not inclined to accept
their contention that they never intended to avail irregular
credit and acted on a bonafide belief as from the findings
above it! is clear that they availed irregular credit of crores
of rupees in contravention of the provisions of CENVAT
Credit Rules, 2004, as they never sought any clarification
from the department on the issues involved and continued
Service Tax Appeal No.70612 of 2021
29
to avail irregular credit, as they never came to the
department with the fact that the invoices on which credit
has been availed belonged to their unregistered mises and
as fact of availment of irregular credit came to the
knowledge of the department only after the audit of their
records was conducted. They continued to avail irregular
credit for the years together without getting the said
premises registered and without complying the Notification
No. 03/2011 CE (NT) dated 01.03.2011 vide which the
definition of input service was amended and credit in
relation to works contract service was restricted by imposing
certain conditions. Various acts of omission and commission
on the part of the party leads me but to the conclusion that
they violated the provisions of the CENVAT Credit Rules,
2004 and the Finance Act, 1994 with the intent to avail to
irregular credit resulting into evasion of tax. Accordingly, I
find that the extended period of limitation
has correctly been invoked in the present case and the
demand in not hit by limitation clause
Thus I hold that the party violated the provisions of CENVAT
Credit Rules, 2004 so as to avail irregular credit with the
intent to evade payment of due tax. Thus, in view of the
discussion above I find that the party is liable to pay the
irregular credit demanded under impugned show cause
notice.
4.5.3 Invocation of extended period of limitation for making the
demand is dependent on the existence of the various factors
mentioned in the proviso to section 73 (1) of the Finance Act,
1994. Existence of this factors is a question of fact and needs to
be examined on the basis of the available records and information.
Appellant has taken specific stand before the Commissioner that
all the facts were in the knowledge of the department as they had
been regularly filing their ST-3 returns declaring the CENVAT
Credit taken by them in their ST-3 returns. They had also
submitted that they had filed refund claim in terms of the Rule 5
Service Tax Appeal No.70612 of 2021
30
of the CENVAT Credit Rules, 2004. These refund claims have been
considered and allowed an disallowed by issuance of the show
cause notices. Impugned order though records the submissions,
brush aside the same and has only stated that the fact in respect
of these inadmissible credit came to the knowledge of department
only at the time of audit of records of the appellant and hence
extended period can be invoked. We find the logic to be flawed.
From plain reading of the proviso to Section 73 (1) it is evident,
that the said proviso can be invoked for the reason of commission
or omission of any act as per the law by the appellant, leading to
existence of the conditions specified by the said section.
Impugned order fails to specify any such act which could lead to
invocation of the extended period of limitation, when the appellant
has declared the credit taken in respect of the disputed services
in their ST-3 returns. It is act of omission and commission on the
part of appellant which would determine whether extended period
could be invoked or not and not the manner in which department
has determined that inadmissible credit has been taken by the
appellant. We do not find any merits in invocation of the extended
period of limitation in the present case. The demand made has to
restricted for the period April 2014 to March 2015. As we find that
extended period of limitation could not have been invoked on the
basis of the facts in the present case, we are not inclined to record
any finding in respect of the catena of the decisions relied upon
by the appellant in this respect, for the reason that ratio decidendi
i.e. law pronounced is precedent and not the finding of facts.
However even without consideration of these decisions we
conclude that extended period could not have been invoked in this
case as has been pleaded by the appellant.
4.6 Whether interest under Section 75 is demandable
from the appellant.
4.6.1 Impugned order records findings as follows:
5.5. Recovery of Interest -
5.5.1. Now, coming to next issue whereby interest has been
demanded and sought to be recovered under Section 75 of
Service Tax Appeal No.70612 of 2021
31
the Finance Act, 1994, the party has submitted that, the
Rule 14 of the Rules has been amended vide the Notification
18/2012-CE (NT) dated 17.03.2012 e.f. 01.04.2012) and
the word "or" has been substituted as "and", that as a result,
the Legislature has brought into force this clarificatory
amendment which states that interest is payable only when
credit has been wrongly availed and utilized that in the
present case they have not utilized the credit as refund
thereof has been filed that once credit has not been utilized,
interest cannot be demanded in the light of amended
provisions and law settled in this regard that interest is
compensatory in character and it is imposed on the actual
amount of tax withheld, and to the extent tax is "due and
payable that when the Government Exchequer has not
suffered any loss and the principal amount has not been
wrongfully taken/held/utilized, the charge of interest is
erroneous.
5.5.2. In this regard, I find that the contention of the party
with reference to non-availment of credit under dispute is
not supported with facts and figures, and accordingly no
relief can be granted on the basis of mere submissions not
supported by facts and figures. On the other hand, the
provisions of Rule 14 of CENVAT Credit Rules, 2004 mandate
that the recovery of inadmissible CENVAT Credit has to be
made along with interest. Accordingly I find that interest
provisions are applicable in the case and the party is liable
to pay the same under the provisions of Rule 14 of CENVAT
Credit Rules, 2004 read with Section 75 of the Finance Act
1994. Further, I find that Hon'ble CESTAT in the case of Sree
Vadivambigai Textile Mills Ltd. V.CCE [2005]1 STT 72
(Chennai-CESTAT) held that levy of interest under Section
75 is mandatory and no leniency can be shown merely
because appellant has been declared as a sick company. It
is held by the Hon'ble court in the case of CCE, Calicut Vs
General Manager Telecom, BSNL STR450 that payment of
interest is mandatory in nature. It is also held by the Hon'ble
Service Tax Appeal No.70612 of 2021
32
Apex Court in the case of CTT, Lucknow Vs Kanhai Ram
Thekedar ELT 185 [SC] that interest is payable on belated
payment of tax and no specific notice is required to be given
for the same. I also find that the Hon'ble CESTAT in the case
of INMA International Security Academy (P) Ltd. Vs. CCE
[2005] 1 STT 31 (Chennai-CESTAT) held that the liability to
pay interest at prescribed rates was inescapable as the law
did not confer any discretion in the matter of levying
interest.
In view of above, the interest at the appropriate rate is
chargeable from the party under Section 75 of the Finance
Act 1994.
4.6.2 As the appellant has taken credit against work contract
services used for construction/ setting up of the BPO branches at
Gurgaon, Chennai, Hyderabad and Noida and we have held that
the same is not admissible and recoverable from them for the
period 2014-15, demand of interest in terms of Section 75 of the
Finance Act, 1994 cannot be faulted with and is upheld. In case of
General Manager Telecom, BSNL [2009 (14) STR 450 (Ker)]
Hon’ble Kerala High Court has held as follows:
“The appeal is filed against the order of the Customs, Excise
and Service Tax Appellate Tribunal cancelling Interest
demanded from the respondent under Section 75 of the
Finance Act, 1994. The respondent, which is a Government
Department, delayed payment of service tax by four days
on account of delay in allotting head of account for payment.
Learned counsel for the respondent submitted that the
amount was deposited in time, but on account of delay in
allotting head of ac-count, credit was given for payment only
with a delay of four days. Whatever be the reason for the
belated payment, we find that the provision for interest
containing Section 75 is mandatory. The Tribunal appears
to have cancelled the interest on the assumption that find
that he had the demand made is penalty. However, on going
through the impugned order of the Additional
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33
Commissioner, waived penalty and the amount of Rs.
19,009/- demanded is only in the form of interest under
Section 75, which is mandatory in nature. Learned counsel
for the respondent submitted that the amount was also
deposited prior to final orders issued by the Tribunal. Since
we find that the Tribunal has cancelled the demand treating
as penalty, we allow the appeal by cancelling the order of
the Tribunal and restoring the demand of interest under
Section 75 of the Act..”
4.6.3 Same view has been expressed by Hon’ble Supreme Court
in case of SKF India Ltd [2009 (239) ELT 385 (SC)] observing as
follows:
“9. Section 11A puts the cases of non-levy or short levy,
non-payment or short payment or erroneous refund of duty
in two categories. One in which the non-payment or short
payment etc. of duty is for a reason other than deceit; the
default is due to oversight or some mistake and it is not
intentional. The second in which the non-payment or short
payment etc. of duty is "by reason of fraud, collusion or any
wilful mis-statement or suppression of facts, or
contravention of any of the provisions of the Act or of Rules
made thereunder with intent to evade payment of duty";
that is to say, it is intentional, deliberate and/or by deceitful
means. Naturally, the cases falling in the two groups lead to
different consequences and are dealt with differently.
Section 11A, however allow the assessees in default in both
kinds of cases to make amends, subject of course to certain
terms and conditions. The cases where the non-payment or
short payment etc. of duty is by reason of fraud collusion
etc. are dealt with under sub-section (1A) of section 11A
and the cases where the non-payment or short payment of
duty is not intentional under sub-section (2B).
10. Sub-section (2B) of section 11A provides that the
assessee in default may, before the notice issued under sub-
section (1) is served on him, make payment of the unpaid
Service Tax Appeal No.70612 of 2021
34
duty on the basis of his own ascertainment or as ascertained
by a Central Excise Officer and inform the Central Excise
Officer in writing about the payment made by him and in
that event he would not be given the demand notice under
sub-section (1). But Explanation 2 to the sub-section makes
it expressly clear that such payment would not be exempt
from interest chargeable under section 11AB, that is, for the
period from the first date of the month succeeding the
month in which the duty ought to have been paid till the
date of payment of the duty. What is stated in Explanation
2 to sub-section (2B) is reiterated in section 11AB that
states where any duty of excise has not been levied or paid
or has been short levied or short paid or erroneously
refunded, the person who has paid the duty under sub-
section (2B) of section 11A, shall, in addition to the duty, be
liable to pay interest......It is thus to be seen that unlike
penalty that is attracted to the category of cases in which
the non-payment or short payment etc. of duty is "by reason
of fraud, collusion or any wilful mis- statement or
suppression of facts, or contravention of any of the
provisions of the Act or of Rules made thereunder with intent
to evade payment of duty", under the scheme of the four
sections (11A, 11AA, 11AB & 11AC) interest is leviable on
delayed or deferred payment of duty for whatever reasons.”
4.7 Whether penalty under Section 77 or 78 of the
Finance Act, 1994, could have been imposed upon the
appellant.
4.7.1 As we hold that extended period could not have been
invoked, in the present case we are also not inclined to uphold the
penalty imposed upon the appellant under Section 78 of the
Finance Act, 1994, following the decision of Hon’ble Supreme
Court in case of Rajasthan Spinning and Weaving Mills Ltd. [2009
(238) ELT 3 (SC)] wherein following has been held:
“17. The main body of sub-section 1 lays down the
conditions and circumstances that would attract penalty and
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the various provisos enumerate the conditions, subject to
which and the extent to which the penalty may be reduced.
18. One cannot fail to notice that both the proviso to sub
section 1 of section 11A and section 11AC use the same
expressions: "....by reasons of fraud, collusion or any wilful
mis-statement or suppression of facts, or contravention of
any of the provisions of this Act or of the rules made
thereunder with intent to evade payment of duty,...". In
other words the conditions that would extend the normal
period of one year to five years would also attract the
imposition of penalty. It, therefore, follows that if the notice
under section 11A (1) states that the escaped duty was the
result of any conscious and deliberate wrong doing and in
the order passed under section 11A (2) there is a legally
tenable finding to that effect then the provision of section
11AC would also get attracted. The converse of this, equally
true, is that in the absence of such an allegation in the notice
the period for which the escaped duty may be reclaimed
would be confined to one year and in the absence of such a
finding in the order passed under section 11A (2) there
would be no application of the penalty provision in section
11AC of the Act. On behalf of the assessees it was also
submitted that sections 11A and 11AC not only operate in
different fields but the two provisions are also separated by
time. The penalty provision of section 11AC would come into
play only after an order is passed under section 11A(2) with
the finding that the escaped duty was the result of deception
by the assessee by adopting a means as indicated in section
11AC.
19. From the aforesaid discussion it is clear that penalty
under section 11AC, as the word suggests, is punishment
for an act of deliberate deception by the assessee with the
intent to evade duty by adopting any of the means
mentioned in the section.”
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4.7.2 For imposing penalty under Section 77 impugned order
records as follows:
5.7. Imposition of penalty under Section 77 of the
Finance Act, 1994-
5.7.1. As regards penal provisions under Section 77 of the
Finance Act, 1994, the party has contended that delayed
inclusion of premises in Centralised Registration is merely a
procedural lapse which was corrected in due course; that
penalty cannot be imposed under Section 77 as the same is
only a residual provision, i.e. this penal provision will be
applicable where any provision of the Act is violated, and
which violation is not penalized under any other provision
that in the present case since there is a specific provision
available viz. Section 78 for the alleged violation there can
be no simultaneous proposal for position of penalty under
Section 77, a residuary penalty provision.
5.7.2. In this regard I find that the contention of the party
is not acceptable as the penal provisions under Section 77
and 78 of the Finance Act, 1994 are for the different
purposes and it cannot be accepted that once penalty under
Section 78 has been proposed penalty under Section 77
cannot be imposed.
As the party failed to get the unregistered premises
registered for more than three years in continuity I find that
they are liable for penal action under Section 77 o the
Finance Act, 1994.
4.7.3 From the perusal of the above findings we observe that
penalty under Section 77 has been imposed upon the appellant
for the reason that they have contravened the provisions of
Section 69 of the Finance Act, 1994, by not getting certain
premises from where they were providing taxable services
registered. We further observe that appellant was having
centralized registration. Thus they were registered with the
department for providing taxable services. They were also filing
the ST-3 returns, showing the receipts in respect of the services
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37
provided from the premises indicated for providing the taxable
services in their ST-2 certificate and the premises not included
therein. It is not the case of the revenue that ST-3 filed by the
appellant did not include the turnover of the taxable services
provided from this premises not included in the ST-2 certificate.
Thus mere non inclusion of these premises in the ST-2 certificate
by the appellant cannot be reason to hold that appellant had
contravened the provision of Section 69 of the Finance Act,1994
as the appellant was duly registered for provision of taxable
services as required by Section 69 ibid. Thus we do not find any
merits in the penalty imposed upon the appellant under Section
77.
4.8 Summary and Conclusions:
(a) Demand made in respect of the CENVAT Credit availed
by the appellant in respect of the taxable services
received in unregistered premises is set aside.
(b) Demand made in respect of the CENVAT Credit availed
on the Work Contract Services for construction/ setting
up of the BPO branches at Gurgaon, Chennai, Hyderabad
and Noida is upheld.
(c) Demand made by invoking extended period of limitation
as per proviso to section 73 (1) of the Finance Act, 1994
is set aside and limited to demand for normal period of
limitation i.e. for period 2014-15. As we do not have the
year wise break of the demand the matter is remanded
back to the original authority to recomputed the demand
for normal period of limitation i.e. 2014-15.
(d) Demand of interest under Section 75 of the Finance Act,
1994 in respect of demand upheld is confirmed.
(e) Penalties under Section 77 & 78 of the Finance Act, 1994
is set aside.
5.1 Appeal is partly allowed as indicated in the para 4.8 above.
Matter is remanded to the original authority for computation of
demand for the normal period of limitation (2014-15) as per para
4.8 (b) and (c) above.
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5.2 As matter is pertaining to period 2014-15 the adjudicating
authority should re-quantify the demand in remand proceedings
within three months of receipt of this order.
(Pronounced in open court on 01.09.2026)
Sd/-
(P. A. AUGUSTIAN)
MEMBER (JUDICIAL)
Sd/-
(SANJIV SRIVASTAVA)
MEMBER (TECHNICAL)
Nihal