· web viewm/s. ccg constructions, 1004, shyamvrund apartment, shyamal road, opp.-dhananjay...

2 OIO No. 20/STC/AHD/ADC(JSN)/2013-14

BRIEF FACTS OF THE CASE

M/s. CCG Constructions, 1004, Shyamvrund Apartment, Shyamal Road, Opp.-Dhananjay Tower, Ahmedabad [hereinafter referred to as "M/s. CCG/noticee" for the sake of brevity] are engaged in construction activity, however, they were not registered with the local Service Tax authority as a Service Tax assessee under the Service category of "Construction Service in respect of Commercial and Industrial Service and Civil Structure" and/or "Works Contract Services".

2. Intelligence was received in the Directorate General of Central Excise Intelligence (DGCEI) to the effect that M/s. CCG, a proprietorship firm of Sanjay S Gor HUF wherein karta was Mr. Sanjay Gor, was engaged in the business of Industrial and Commercial construction, and was not registered with the Service Tax department and is evading payment of Service Tax by not paying the same. Intelligence further indicated that M/s CCG had provided construction services to Central Warehousing Corporation (M/s CWC) a commercial concerns taking land/space from various concern on long term lease basis including Indian Railways for setting up warehouses. M/s CWC is awarding contracts to various persons (contractors) for the construction of such warehouses etc. with all amenities on sub contracting basis. These contractors either complete the work themselves or in turn further providing such contracts to other persons on sub contract basis to complete the said work of construction of warehouses. The services provided to M/s CWC are taxable in nature and are covered under "Works Contract Service".

3. Accordingly, searches at the premises of "M/s. CCG" at 1004, Shyamvrund Apartment, Shyamal Road, Opp.-Dhananjay Tower, Ahmedabad and at Plot No. 426, Nr. Jyoti Power, B/H-Steel Tower Weigh Bridge, Moraiya, Changodar, Ahmedabad were carried out on 12.10.2012 and records, relevant to the investigation, were resumed. Subsequent to the searches, M/s CCG obtained Service Tax registration No. AACHG0450LSD001 on 02.01.2013

4. RECORDS SUBMITTED BY M/s. CCG: During the investigation, M/s. CCG submitted various records, relevant to the case vide their letter dated 08.11.2012 & 26.11.2012. Relevant records are discussed hereunder:-

4.2.1. Work Order provided by M/s CWC to M/s S V Enterprise: This is a copy of work order No. CWC/CC-AHD/RWC-Kandla/06-07/638 dated 15.01.2007, provided by M/s CWC to M/s S V Enterprise, 202, Cindrella Apartment, Nr. Richi Rich Hotel, B/H- Modi Bunglow, Parle Point, Surat. As per the said work order, M/s S V Enterprise was awarded with work contract of Rs. 13,30,91,666/- for construction of 32200 MTC Godown alongwith ancillary Buildings, Development of area, Boundary Wall, Electrification, Drainage,Weigh-bridge etc. at RWC, Kandla.

It revealed from the above said work order that M/s CWC had provided work of construction of 32200 MTC Godown Alongwith Ancillary building, development of area, Boundry wall, Electrification, Drainage, weigh bridge etc. at RWC Kandla to M/s S V Enterprise. M/s S V Enterprise had got the said work order for tender amount of Rs. 13,30,91,665.78.

4.2.2. Sub-Contract Agreement between M/s S V Enterprise & M/s CCG: This is a sub contract agreement dated 17.01.2007 between M/s S V Enterprise & M/s CCG. As per the said agreement M/s S V Enterprise was awarded the above said work order No. CWC/CC-AHD/RWC-Kandla/06-07/638 dated 15.01.2007 of Rs. 13,30,91,666/- to M/s CCG for construction of 32200 MTC Godown alongwith ancillary Buildings, Development of area, Boundary Wall, Electrification, Drainage, Weigh-bridge etc. at RWC, Kandla on sub contracting basis.


It revealed from the said Sub-Contract Agreement dated 25.01.2007 between M/s S V Enterprise & M/s CCG that M/s S V Enterprise appointed M/s CCG for execution of the work order awarded to them by M/s CWC under certain terms and conditions. It further revealed that the client for which the work is to be executed is M/s CWC and place of execution was RWC Kandla. It also revealed from the said agreement that Service Tax, VAT & Income Tax shall be deducted from the claim of M/s CCG and thus, liability to pay Service Tax fell on M/s CCG.

4.2.3. Account ledger copy of M/s S V Enterprise in the books of M/s CCG: These were account ledger copies of M/s S V Enterprise in the books of M/s CCG for the period 2008-09 to 2010-11. As per the said account ledger, M/s S V Enterprise had paid Rs. 3,00,22,737.00 to M/s CCG during the period 2008-09 to 2010-11 in lieu of services provided in respect of work order No. CWC/CC AHD/RWC-Kandla/06-07/638 dated 15.01.2007 on sub contracting basis.

4.2.4. Work Order provided by Western Railway to M/s Dhorajia Construction Co.: This was a copy of work order No. DYCE(C) P&D/ADI/BVPW.SHOP/08 (RI) dated 21.10.2008 provided by Western Railway to M/s Dhorajia Construction Co. As per the said work order M/s Dhorajia Construction Co. was awarded with work contract of Rs. 6,15,82,691/- for construction of RCC structure like piles, pile cars, grade beams, columns,- trusses, rafters etc. roofing, louvers, wall cladding etc. for roller bearing shop at Bhavnagar in connection with Bhavnagar work shop-providing facilities for 50 BG Coach POH [50 Broad Gauge Periodical Over Hauling].

4.2.5 Sub-Contract Agreement between M/s Dhorajia Construction Co. & M/s CCG: This was a sub contract agreement dated 01.04.2008 between M/s Dhorajia Construction Co. & M/s CCG. As per the said agreement M/s Dhorajia Construction Co. was awarded the above said with work order No. DYCEOP&D/ADI/BVP-W.SHOP/08(R1) dated 21.10.2008 of Rs. 6,15,82,691/- to M/s CCG for construction of RCC structure like piles, pile cars, grade beams, columns, trusses, rafters etc. roofing, louvers, wall cladding etc. for roller bearing shop at Bhavnagar in connection with Bhavnagar work shop-providing facilities for 50 BG Coach POH on sub contracting basis.

4.2.6. Account ledger copy of M/s Dhorajia Construction Co in the books of M/s CCG: These were account ledger copies of M/s Dhorajia Construction Co in the books of M/s CCG for the period 2008-09 to 2010-11. As per the said account ledger, M/s Dhorajia Construction Co. had paid Rs. 6,09,04,904.00 to M/s CCG during the period 2008-09 to 2010-11 in lieu of services provided in respect of work order No. DYCEOP&D/ADI/BVP-W.SHOP/08(RI) dated 21.10.2008 on sub contracting basis.

4.2.7. Bank Account statements of M/s CCG: These were the bank account statements of M/s CCG of bank account No. 10033630532 with State Bank of India. Manekbaug, Ahmedabad for the period 01.04.2008 to 31.03.2012.

4.2.8. Tax Audit Reports of M/s CCG: These are tax audit reports of financial accounts of M/s CCG for the period 2008-09 to 2011-12 (tax report for 2010-11) submitted to Income Tax authorities. As per the said tax audit reports for the period 2008-09 to 2010-11 (tax report for 2010-11), M/s CCG had shown contract income from its business to the tune of Rs. 7,32,37,201.00 during the period 2008- 09 to 2011-12.

5. SCRUTINY OF SEIZED AND SUBMITTED RECORDS OF M/sCCG: Scrutiny of records as discussed in para 4, above, revealed that M/s CCG had provided 'services to following customers (main contractors):


[1] M/s S V Enterprise. 202, Cindrella Apartment, Nr. Richi Rich Hotel, B/H Modi Bunglow, Pane Point, Surat [Services provided to M/s Central Warehousing Corporation (M/s CWC)]

[1] M/s Dhorajia Construction Co., Plot No. 04, B/H-Devashish School, NearPhoolwadi Party Plot, Satellite, Ahmedabad [Services provided to Western Railways]

5.1. It revealed from the work order No. CWC/CC-AHD/RWC-Kandla/06- 07/638 dated 15.01.2007 of Rs. 13,30,91,666/- issued by M/s CWC that the same was provided to M/s S V Enterprise, 202, Cindrella Apartment, Nr. Richi Rich Hotel, B/H- Modi Bunglow, Pane Point, Surat. It also revealed from the subcontract agreement dated 17.01.2007 between M/s S V Enterprise and M/s CCG that M/s S V Enterprise had provided the said work order to M/s CCG which was executed by them as sub-contractor. The said work order was mainly for construction of 32200 MTC Godown alongwith ancillary Buildings, Development of area. Boundary Wall, Electrification, Drainage, Weigh-bridge etc. at RWC, Kandla. Thus, the said activity carried out by M/s CCG appeared to be work contract service subject to fulfillment of the conditions related therewith. Further, it revealed from the ledger account submitted by M/s CCG that they had received an amount of Rs. 3,00,22,737.00 from M/s S V Enterprise, Surat during the period from 2008-09 to 2010-11.

5.2. I t r e v e a l e d f r o m t h e w o r k o r d e r N o . D Y C E ( C ) & D / A D I / B V P -W.SHOP/08(R1) dated 21.10.2008 of Rs. 6,15,82,691/- issued by Western Railways that the same was provided to M/s Dhorajia Construction Co. It also revealed from the sub-contract agreement dated 01.04.2008 between M/s Dhorajia Construction Co. and M/s CCG that M/s Dhorajia Construction Co. had provided the said work order to M/s CCG which was executed by them as sub-contractor. The said work order was mainly for construction of RCC structure like piles, pile cars, grade beams, columns, trusses, rafters etc. roofing, louvers, wall cladding etc. f o r r o l l e r b e a r i n g s h o p a t B h a v n a g a r i n c o n n e c ti o n w i t h B h a v n a g a r w o r k s h o p - providing facilities for 50 BG Coach POH. Thus, the said activity carried out by M/s CCG appeared to be work contract service subject to fulfillment of the conditions related therewith. Further, it revealed from the ledger account submitted by M/s CCG that they had received an amount of Rs. 6,78,34,904.00 from M/s Dhorajia Construction Co. during the period from 2008-09 to 2010-11. However, the said activity being services provided to Railways are excluded for the purpose of payment of Service Tax in terms of Section 65(30a) of the Finance Act, 1994.

6. During the investigation, it was noticed that M/s CCG had provided Workcontract services to their clients as discussed in para 5, above. Therefore, inquiry was extended at the end of aforesaid service receivers by calling various details under summons/letters for the period 2007-08 to 2012-13[up to September'2012] & recording of statements. They have submitted following details:6.1. M/s Central Warehousing Corporation (M/s CWC): M/s CWC videletter No. CWC/CC-N.M./servicetax/2012-13/1486 dated 02.02.2013submitted copies of work order No. CWC/CC-AHD/RWC-Kandla/06-07/638 dated 15.01.2007 provided to M/s S V Enterprise, Bill wise passing orders vide which payment was made to M/s S V Enterprise and other relevant documents like schedule of quantities etc. As per the said details M/s CWC made the following payment of M/s S V Enterprise:

Payment made by M/s CWC to M/s S V EnterpriseGross Amount

(Rs.)Net Amount

(Rs.) Date of payment

1623515 1572829 30.03.073083788 2852234 09.04.073554333 3384131 24.04.075017995 4889208 09.05.071168625 1013633 06.06.071852174 1807204 18.08.07


4900609 4179775 07.09.0715115615 13228731 05.10.0710198552 8831951 23.10.0710571959 9213433 06.11.07

3800069 3287534 29.11.0711402917 11040260 10.12.07

5337256 5155266 26.12.0711892602 11628874 07.01.08

5766722 5624454 28.01.0813324912 13109476 11.02.0816024705 15667778 13.03.08

8106744 7877180 28.03.086674614 6116755 07.04.087865696 5684422 06.08.0814,72,83,402.00 13,61,65,128.00

6.2 Statement dated 02.04.2013 of Shri Ramkrishan Verma Son of Sh. S K Verma, Senior Assistant Manager of M/s Central Warehousing Corporation, Construction Cell, Adj. Railway Goods Yard, Sector-20, Vashi, Navi Mumbai-400613 was recorded under Section 14 of the Central Excise Act, 1944 as made applicable to Finance Act, 1994. Relevant portion are reproduced herein below:

My name, age, address, occupation etc., as given herein above are true and correct. I state that lain B.Com , MBA. My PAN No. is ACIPV4232B. Q1.. What is your name and give the detail of work done by you?Ans.. My name is Shri Ramkrishan Verma son of Sh. S K Verma, aged 51 years, Senior Assistant Manager of Central Warehousing Corporation (CWC), Construction Cell, Adj. Railway Goods Yard, Sector-20, Vashi, Navi Mumbai-400613. Central Warehousing Corporation (CWC) is engaged in the business of warehouse storage to various concerns. We are collecting storage charges f rom customers for the above sa id storage. Income of my organization (CWC)- is.from warehouse income and CFS (Container freight station) income. Our expenditure is basically salaries of employees, construction cost of warehouses and their repair & maintenance etc. We prepare annual accounts in the form of balance sheet and income & expenditure. The said annual accounts are being audited from time to time by the statutory auditors.

Q 2: Please state whether you are registered with Central Excise department for the purpose of payment of Service Tax? If yes, please provide the details.Ans.. Yes, we are engaged in receiving services of construction and works contract on reverse charge mechanism for various parties, and therefore we are registered with Central Excise department for the purpose of payment of Service Tax. Our regional offices are registered with Service Tax department for their respective activity. We are having about 15 regional offices all over India.

Q 3 • Please state about the work of construction being awarded to various persons by Central Warehousing Corporation (CWC)?

Ans.. We float tenders for construction of warehouses and succeeding persons being allocated the work. We take 2% of estimated cost as EMD (Earnest Money deposit) at the time of tendering. Successful person have to further deposit performance guarantee of 5% of tender amount (bank guarantee/demand draft/FDR in favour of CWC). On receipt of bills we deduct further 5% as security deposit for one year. After one year of completion of the work, we refund all the above amounts to the person, if work is as per the agreed terms and condition.

Q.4 Please explain the nature of work carried out by M/s S. V. Enterprise in respect of works order from CPVC i.e. CWC/CC-AHD/RWC-K4NDLA/06- 07/507 dated 16.12.2006?

http://B.Com/


Ans.. I state that we have awarded the above work as a composite contract toM/s S. V. Enterprise i.e. with all materials on succeeding by tender. Regarding the nature of work carried out by them, 1 state that the same are construction work of Warehousing Complex.

Q 5: Please peruse the work order No. CWC/CC-AHD/RWC-KANDLA/06- 07/507 dated 16.12.2006 issued by CWC to M/s S. V. Enterprise. Please also peruse Sub-contract agreement between M/s S. V. Enterprise and M/s CCG Constructions, Ahmedabad for carrying out the above said work. Please explain the nature of the said work carried out by Ms CCG Constructions, Ahmedabad on sub-contracting basis which was awarded to M/s S. V. Enterprise?

Ans. . I state that we have awarded the above work as a composite contract to M/s S. V. Enterprise i.e. with all materials and also made payment to them only. Regarding the nature of work carried out by them I state that the same are construction work of Warehousing Complex. In respect of above said Sub-contract agreement between M/s S. V. Enterprise and M/s CCG Constructions, Ahmedabad for carrying out the above said work, I state that we never awarded the said contract to M/s CCG Constructions, Ahmedabad and it may be the matter between these two parties.

Q 6: Please provide the details of payment made to M/s S. V. Enterprise in respect to the above said work order?

Ans.. 1 state that we have paid Rs. 147283402.00 as gross payment and Rs. 136165128/- as the net payment [after deducting TDS and WCT (work contract Tax) etc. from the passed bills of M/s S. V. Enterprise].

Q7: Please explain about the WCT (work contract Tax) in respect to the above said work order?

Ans: I state that we have deducted WCT from the passed bills of M/s S.V Enterprise which is payable to state Government like VAT is leviable on composite works contracts.

Q 8: Please provide the details as required under letters of this office??Ans: I submit photocopies of relevant pages of Audited Annual Accounts of Central

Warehousing Corporation (CWC) for the period 01.04.2008 to 31.03.2012 & half yearly closing accounts as on 30.09.2012.

6.2. M/s S V Enterprise, Surat: M/s S V Enterprise, Surat vide its letter dated 24.12.2012 & 02.02.2013 submitted copies of (i) agreement entered with M/s CCG (ii) account ledger for the period 2007-08 to 2011-12 of M/s CCG (iii) bills raised by M/s CCG on M/s S V Enterprises for the period 2007-08 [from October'2007] to 2011-12 (iv) Work order No. CWC/CC-AHD/RWC-Kandla/06- 07/638 dated 15.01.2007 provided to M/s S V Enterprise. As per the said details M/s S V Enterprise made the following payment to M/s CCG against the services provided to them on sub contract basis at M/s CWC:

Sr. No.

RA BillNo.

Amount(Rs.) Date of payment Amount (Rs.)

1 8 10096567 03.10.2007 114091

2 06.10.2007 1877000

3 08.10.2007 4693000

4 09.10.2007 4500000

5 11.10.2007 20000

6 12.10.2007 1228000

15.10.2007 350000

8 24.10.2007 4600000


9 29.10.2007 2900000

10 9 10466239 02.11.2007 118269

11 05.11.2007 900000

12 07.11.2007 8500000

13 10 3762603 24.11.2007 42517

14 30.11.2007 3250000

15 11 11288888 04.12.2007 127564

16 12 5283883 04.12.2007 5970817 12.12.2007 990000018 18.12.2007 100000019 27.12.2007 450000020 13 11773676 02.01.2008 133043

21 11.01.2008 8900000

17.01.2008 2500000

23 14 5709055 21.01.2008 64512

24 29.01.2008 5560000

25 13.02.2008 444000026 14.02.2008 445000027 18.02.2008 4050000

28 15 13191663 01.03.2008 14906629 16 15864458 04.03.2008 179268

30 15.03.2008 4900000

31 18.03.2008 750000020.03.2008 1500000

25.03.2008 50000034 17 8025677 27.03.2008 90690

29.03.2008 500000

31.03.2008 3977737

37 18 6607867 04.04.2008 7700000

38 19 6430737 22.04.2008 1800000

39 25.04.2008 4200000

40 15.07.2008 74867

41 12.08.2008 1325000

42 01.09.2008 2500000

43 05.09.2008 1000000

44 17.10.2008 400000

45 24.10.2008 500000

46 15.11.2008 100000

15.11.2008 72860

48 20.11.2008 150000

49 13.02.2009 200000

50 31.03.2009 9254

51 31.03.2009 777191

52 31.03.2009 7823153 05.06.2009 60000054 19.06.2009 150000055 06.08.2009 72341756 09.12.2009 300000

57 06.04.2010 200000

58 17.06.2010 200000

59 05.07.2010 200000

60 31.03.2011 4971890

TOTAL 108501313.00 12,76,57,175.00


6.2.1. Statement of Shri Manherbhai Ratanjibhai Patel, Partner of M/s S. V. Enterprise, 202 Cindrella Apartment, Near Richi Rich Hotel, Behind Modi Bungalow, Surat, was recorded under Section 14 of the Central Excise Act, 1944 as made applicable to Finance Act, 1994 on 12.03.2013. Relevant portion of the said statement is reproduced hereunder:

My name, age, address, occupation etc., as given herein above are true and correct. I state that I am B.E. in Civil Engineering. My PAN No. is ABBPP10431 and PAN No. of M/s. S. V. Enterprise is AAPF57663E. I also submit photocopies of the same. I have been requested to write my statement, but I requested you to record my statement by typing on computer. Further, I give the reply of questions put before me by the Sr. Intelligence Officer as under:

Q 1 What is your name and give the detail of work done by you?Ans.. My name is ,Shri Manherbhai Ratanjibhai Patel. I am one of the Partners of M/s S. V. Enterprise, 202 Cindrella Apartment, Near Richi Rich Hotel, Behind Modi Bungalow, Surat. Our firm is engaged in the business of construction and work contracts from more than last 15 years and have undertaken said works like Science Centre and Auditorium for Surat Municipal Corporation, residential buildings, industrial and commercial construction and Central Warehousing Corporation (CWC) etc.

Q 2: Please state whether you are registered with Central Excise department for the purpose of payment of Service Tax? If yes, please provide the details.

Ans: Since we are engaged in providing services of construction and works contract for various parties, we are registered with Central Excise department for the purpose of payment of Service Tax.

Q 3: Please provide the details of transactions with M/s CCG Constructions, Ahmedabad?

Ans: We have obtained works contracts from CWC i.e. CWC/CC-AHD/RWCKANDLA/06-07/ 507 dated 16.12.2006 on tender, works related to the said tender was provided to M/s CCG Constructions, Ahmedabad on subcontract basis. Details, namely copy of Sub-Contract Agreement, Sub contractor Ledgers and Bills of the said sub-contractor have been furnished to your office.

Q 4: Please explain the nature of work carried out by M/s CCG Constructions, Ahmedabad on sub-contracting in respect of works contracts from CWC i.e. CWC/CC-AHD/RWC-KANDLA/06-07/507 dated 16.12.2006?

Ans: I state that we have taken the above work contracts on succeeding by tender. Regarding the nature of work carried out M/s CCG Constructions, Ahmedabad, I state that the same are construction work of Warehousing Complex on behalf of Central Warehousing Corporation, which is a commercial concern.

Q 2: Please explain the system of completion of work, receipt of payments from clients and passing on of the payment received to sub-contractors.

Ans: After measuring the work done by the sub-contractor and certified by the concerned client, RA bills are being raised by the sub-contractors on us. In turn, we raise the RA bills on our client. After receiving the payment from our client, we release the payments to sub-contractor. I explain that for our client, we are the service providers and sub-contractor is the service provider to us.

Q 6: Please peruse Bill No. 18 dated 15.07.2008 of M/s CCG Constructions, Ahmedabad raised on your firm and submitted by you vide letter dated 24.12.2012. Please explain the contents of the said Bill.

Ans.. I state that the said Bill was raised on my firm for payment by M/s CCG


Constructions, Ahmedabad, contains details of work done, amount, deductions therefrom in the form of Commission (less I%) and less last bill amount and amount withhold etc. For example, I explain that the said Bill No. 18 dated 15.07.2008 of M/s. CCG Construction, Bil l amount is Rs.140655533.39 (which includes amount of earlier bills), less amount of last bill as Rs. 132463094.00 and balance amount requires to be paid is Rs.8192439.15. Out of the said Rs. 8192439.15, we have made deductions of withhold amount of Rs. 1517825.15 and Commission (less 1%) i.e. Rs.66746. 14. Thus, the remaining payment of Rs.6607867.86 was paid to M/s. CCG Constructions by us. On being further asked, I state that the Commission (less 1 %)° is our profit amount from the tender, we succeeded. In respect of TDS, I state that the same is being deducted for the credit in the account of the sub-contractor by payment to Govt. of India which is reflecting in our Ledgers.

Q.7 Please provide the details of clients for which you have undertaken work or provided services directly or through sub-contractors.

Ans. We have executed works relating to construction of Science Centre and Auditorium for Surat Municipal Corporation, construction of residential buildings and commercial centres and industrial construction for various parties etc. We have also provided Services of constructions to CWC through sub-contractor namely M/s CCG Constructions, Ahmedabad. List of Debtors (Service receivers from us) are reflecting in our Tax Audit Report.

Q 7: Please peruse the ledger of M/s. CCG Construction, Ahmedabad submitted by you. It is reflecting from the said ledger that you have paid an amount of Rs. 55,71,890.00. Please confirm whether the said amount was paid by you to M/s. CCG Construction, Ahmedabad.AnS: Yes, we have paid the said amount to M/s. CCG Construction, Ahmedabad against the work carried out by them at M/s. CWC and as per their instructions.

6.3. Western Railways: The Deputy Chief Engineer (C), P & D, Western Railway, Ahmedabad vide letter No. P & D/ADI/BVP W. Shop/Misc/01 dated 15.01.2013 submitted copies of work order No. DYCE(C) P&D/ADI/BVPW.SHOP/08(R1) dated 21.10.2008 provided by Western Railway to M/s Dhorajia Construction Co., copies of final contract certificate, on account contract certificate etc. showing payment to M/s Dhorajia Construction Co. It was found that M/s Dhorajia Construction Co., through sub-contractor M/s. CCG had provided construction services to Western Railways such as construction of RCC structure like piles, pile cars, grade beams, columns, trusses, rafters etc. roofing, louvers, wall cladding etc. for roller bearing shop at Bhavnagar in connection with Bhavnagar work shop-providing facilities for 50 BG Coach POH.

6.3.1. M/s Dhorajia Construction Co., Ahmedabad: M/s Dhorajia Construction Co.. Ahmedabad vide its letter dated 27.12.2012 & 24.01.2013 submitted copies of (i) agreement entered with M/s CCG (ii) account ledger for the period 2008-09 to 2011-12 of M/s CCG (iii) bills raised by M/s CCG on M/s Dhorajia Construction Co., for the period 2007-08 [from October'2007] to 2011-12 (iv) work order No. DYCE(C) P&D/ADI/BVP-W.SHOP/08(RI) dated 21.10.2008 provided to M/s CCG on sub contract basis. As per the said details M/s Dhorajia Construction Co. made payments to M/s CCG against the services provided to them on sub contract basis. However, the said payment was made in respect of services provided to Railways and therefore the same appeared to be exempted from payment of Service Tax, as per the provision of statue as discussed later on.

6.3.2. Statement of Shri Purshottambhai Bhikhabhai Akbari, Partner of M/s Dhorajia Construction Company, Behind Devashislt School, Opp. Krishna Complex, Premchamlnagar Road, Ahmedabad recorded under Section 14 of the Central Excise Act, 1944 as made applicable


to Finance Act, 1994, on 11.03.2013. Relevant portion of the said statement is reproduced hereunder:

Q 1: What is your name and give the detail of work done by you?Ans.. My name is Shri Purshottambhai Bhikhabhai Akbari. I am one of the Partners of M/s Dhorajia Construction Company, Behind Devashish School, Opp. Krishna Complex, Premchandnagar Road, Ahmedabad. Our firm is engaged in the business of construction and work contracts mainly of irrigation projects of Government of Gujarat from last 04 to 05 years.

Q 3: Please provide the details of transactions with M/s CCG Constructions, Ahmedabad and M/s. Prem Fabricators, Ahmedabad?Ans.. We have obtained works contracts from Western Railways viz. DYCE(C)P&D/ADI/BVP-W.Shop/8 and DYCE(C) P&D/ADI/BVP-W.Shop/12 on tender, works related to these tenders were provided to M/s CCG Constructions, Ahmedabad and M/s. Prem Fabricators, Ahmedabad, respectively on sub-contract basis. Details, namely copies of Sub-Contract Agreements, Sub contractor advance A/c. (Ledgers) of Sub-Contractors and Memorandum of Payments made to the said sub-contractors have been furnished to your office. Further details are being submitted by me.

Q :Please explain the nature of work carried out by Ws CCG Constructions, Ahmedabad and M/s. Prem Fabricators, Ahmedabad on sub-contracting in respect of works contracts from Western Railways viz. DYCE(C) P&D/ADI/BVP-W.Shop/8 and DYCE(C) P&D/ADI/BVP-W.Shop/12?

Ans: I state that we have taken the above work contracts on succeeding by tender. Regarding the nature of work carried out M/s CCG Constructions, Ahmedabad and M/s. Prem Fabricators, Ahmedabad, I state that the same are construction work for Railways for maintenance of coaches.

Q 5: Please explain the system of completion of work, receipt of payments from clients and passing on of the payment received to sub-contractors.

Ans.. After measuring the work done by the sub-contractor and certified by the concerned client, RA bills are being raised by the sub-contractors on us. In turn, we raise the RA bills on our client. After receiving the payment from our clients, we release the payments to sub-contractors. I explain that for our clients, we are the service providers and sub-contractor is the service provider to us.

Q 7: Please provide the details of clients for which you have undertaken work or provided services directly or through sub-contractors.Ans.. We have executed works relating to construction of canal and tunnel for Irrigation projects of Sardar Sarovar Narmada Nigam Ltd, and IrrigationD e p a r t m e n t , G o v e r n m e n t o f G u j a r a t . W e h a v e a l s o p r o v i d e d S e r v i c e s o f constructions to railways through sub-contractors namely M/s CCG Constructions, Ahmedabad and M/s. Prem Fabricators, Ahmedabad.

7. T a x a b i l i t y o f t h e w o r k c a r r i e d o u t a t R a i l w a y s a n d C e n t r a l Warehousing Corporation:

It was seen that M/s CCG provided services to Western Railways in respect of construction and civil work on sub-contract basis wherein M/s Dhorajia Construction Co., had obtained work order. It appeared that the work carried out at Western Railways was for the purpose of use in respect of periodical over hauling of its coaches. From the work order provided by Western Railways, it appeared that the building/structure constructed by M/s CCG for Western Railways is for the use of over hauling of railway coaches and therefore the said activity on the part of railways is in discharge of their statutory obligation. Moreover, it appeared that such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and riot for the purposes of profit are not taxable, being non-commercial in nature.


Generally, government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally government constructions would not be taxable. However, if such constructions are for commercial purposes like local government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to service tax. Thus, the said activity of M/s CCG falls in the category of exempted service. The legal position on the issue is as under:

7.1.1. As per Section 65(105) (zzzza) of Finance Act, 1994 defines the "Taxable Service" as any service provided or to be provided to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Further as per the Boards Circular No.80/10/2004-ST dated 17.09.2004, constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature. Relevant para(s) are reproduced hereunder:

"Construction services (commercial and industrial buildings or civil structures)

13.1 Services provided by a commercial concern in relation to construction, repairs, alteration or restoration of such buildings, civil structures or parts thereof which are used, occupied or engaged for the purposes of commerce and industry are covered under this new levy. In this case the service is essentially provided to a person who gets such constructions etc. done, by a building or civil contractor. Estate builders who construct buildings/ civil structures for themselves (for their own use, renting it out or fir selling it subsequently) are not taxable service providers. However, if such real estate owners hire contractor/ contractors, the payment made to such contractor would be subjected to service tax under this head. The tax is limited only in case the service is provided by a commercial concern. Thus service provided by a laborer engaged directly by the property owner or a contractor who does not have a business establishment would not be subject to service tax.

13.2 The leviability of service tax would depend primarily upon whether the building or civil structure is "used, or to be used" for commerce or industry. The information about this has to be gathered from the approved plan of the building or civil construction. Such constructions which are for the use of organizations or institutions being established solely for educational, religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature. Generally, government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally government constructions would not be taxable.

However, if such constructions are for commercial purposes like local government bodies getting shops constructed for letting them out, such activity Iliould be commercial and builders would be subjected to service tax."

7.2. Further, M/s CCG also provided services to Central WarehousingCorporation in respect of construction and civil work on sub-contract basis wherein M/s S V Enterprise had obtained work order. It appeared that the work carried out at Central Warehousing Corporation was for the purpose of use in respect of warehousing of goods for which they are charging storage charges from the public in general. The said warehouses were being used for furtherance of business for the purpose of profit. Central Warehousing Corporation (CWC) is engaged in the business of warehouse storage to various concerns and collecting storage charges from them for the above said storage being shown by them as their warehouse income. Central Warehousing Corporation being a commercial concern also prepares annual accounts in the form of balance sheet and income & expenditure like


any other business entity. The said annual accounts were being audited from time to time by the statutory auditors. From the work order provided by Central Warehousing Corporation (CWC), it appeared that the building/structure constructed by M/s CCG for them is for the use of storage of goods and for furtherance of business being carried out by Central Warehousing Corporation (CWC) for the purpose of earning more profit. The said activity on the part of Central Warehousing Corporation (CWC) was purely commercial in nature and therefore could not be equated with the activity for educational, religious, charitable, health, sanitation or philanthropic purposes. Thus, services provided to Central Warehousing Corporation (CWC) was taxable and therefore, services provided by M/s CCG appeared to fall in the category of taxable service.

8. Further investigations as regard to the financial aspect were carried out by calling details from the State Bank of India, Manekbaug, Ahmedabad wherein M/s. CCG was having a bank account No. 10033630532. SBI, Manekbaug, Ahmedabad, vide its letter dated Ref. SBI/8052/2012-13/178 dated 02.03.2013 submitted bank account statement of M/s CCG from 01.04.2007 to 31.08.2008. It revealed from the said bank statement that M/s CCG had received the consideration from the above said service receivers which is deposited in the said bank account.

9. During the investigation, Statements dated 12.10.2012, 10.12.2012 &07.04.2013 of Shri Sanjay Surendrabhai Gor, Karta of M/s Sanjay S Gor (HUF), Proprietor of M/s CCG Construction, 1004, Shyamvrund Apartment Opp.- Dhanajay Tower, Satellite, Ahmedabad were recorded under Section 14 of the Central Excise Act, 1944 as made applicable to the provisions of Finance act, 1994. Relevant portion of these statements are reproduced hereunder:

9.1 S ta t em en t da te d 1 2. 10 . 2 0 1 2 o f S h r i S a n j a y S ur e ndr a b ha i Go r .Relevant portion of the same are reproduced hereunder:

"I am Karta of M/s Sanjay S Gor (HUT). The said HUE firm is the Proprietor of M/s CCG Construction. The said M/s CCG Construction is providing services of Construction and fabrication work at site from 2006-07 to 2009. We are not registered in the name of M/s CCG Construction. On beim; further asked I state that we have provided services front M/s CCG Construction to M/s S V Enterprise, Surat & 11/1/s Dhorajia Construction Co., Ahmedabad. I further state that we have used all the material/goods of our own while providing services in M/s CCG Construction."

9.2.S ta t em en t da t ed 1 0. 12 . 2 0 1 2 of S h r i S a n j a y S ur e ndr a b ha i G or .Relevant portion of the same are reproduced hereunder:

Q 2: What is the constitution of M/s CCG Construction, Ahmedabad?Ans: It is a Proprietorship firm having Sanjay S Gor (HUF) as its Proprietor. I am looking after all day to day affairs of the said firm as I am Karla of Sanjay S G'or (HUF).

Q. 3: When did said M/s CCG Construction, Ahmedabad formed and what type of Services/business you are providing in M/s CCG Construction, Ahmedabad? Please explain in detail.Ans.. M/s CCG Construction, Ahmedabad was formed in the year 2004. We are engaged in the work of providing services of Construction, fabrication, erection and commissioning etc.

Q 4: Please provide the names, address and other details of all clients of M/s CCG Construction, Ahmedabad?Ans.. We have provided above said services to MA Central warehousing Corporation and M/s Central Railside Warehouse Company Ltd. on sub contracting


basis wherein M/s S V Enterprise, Surat were the contractors. We have also provided said services to Western Railways on sub contract basis wherein M/s Dhorajia Construction Co., Ahmedabad was the main contractor.

Q 5: Please explain the system of issuance of bills and receiving payment from your clients?Ans: We were raising bills showing our name as the service provider on main contractors and receiving the payment. We shows amount towards work done and also an amount of commission @ 1.00/1.25% payable to main contractors in the bills. In other words, while paying to us the main contractors deducts an amount of commission from the total work done by us. As per the said bills they release our payment.

Q6 : Are you raising bills including Service Tax amount or charging the same separately in bills and receiving payment of Service Tax component also at the time of receiving payment from your clients?Ans: We are raising bills by showing the amount and less commission amount @1.00/1.25%. We raise the bills of total amount without showing the Service Tax component.

Q 7: Have you deposited any amount of Service Tax in the Government treasury? Please give details. If not paid, why?Ans: We have not deposited any amount of Service Tax to the Government.

Q 8: Please provide the Bank account details of M/s CCG Construction, Ahmedabad viz, account nos., name of the bank and address?: We maintain Bank account No. 00000010033630532 (Current account) with Bank of India, Manek Baug, Ahmedabad.

Q 9: As stated by you that you have provided services to M/s Central warehousing Corporation, M/s Central Railside Warehouse Company Ltd. and Western Railways on sub contacting basis wherein M/s S V Enterprise, Surat & M/s Dhorajia Construction Co., Ahmedabad was the main contractors. Do you know that activities being undertaken by M/s CCG Construction, Ahmedabad are taxable under Finance Act, 1994? If yes, whether you have taken Service Tax Registrations from the service Tax Department and in case of yes, please provide details of the same?

Ans: Here, I understand that the activities being undertaken by M/s CCG Construction, Ahmedabad appears to be taxable under Finance Act, 1994. Therefore, I will take registration and voluntarily pay up the part payment of Service Tax within 15 days i.e. latest by 25th December'2012 and rest payment within latest by 15th February 2013. However, it is to add that due to unawareness about the taxability we have not paid the Service Tax.

9.3 . Statement dated 07. 04.2013 of Shr i Sanjay Surendrabhai Gor . Relevant portion of the same are reproduced hereunder:

Q I: Please peruse your earlier statements dated 12.10.2012 and 10.12.2012. Please offer your comments on the same?

Ans.. I have perused my earlier statements dated 12.10.2012 and 10 12.2012 and put my dated signatures on the same in token of having perused and agreeing with the same in full.

Q 2: Please state whether you have provided services of Construction, fabrication, erection and commissioning etc. to M/s Central Railside Warehouse


Company Ltd. as stated by you in your, statement dated 10.12.2012?Ans.. No. We have not provided services of Construction, fabrication, erection and commissioning etc. to M/s Central Railside Warehouse Company Ltd. and in fact the same were provided to M/s Central Warehousing Corporation on sub contractimf basis wherein M/s S V Enterprise, Surat were the main contractors.

Q. 3: Whether Ws CCG Construction, Ahmedabad has provided above said services of Construction, fabrication, erection and commissioning etc. to any other person except to M/s Central warehousing Corporation and Western Railways? If yes, please provide the name, contact details, address etc.? Please explain in detail.Ans.. No. We have provided services of Construction, fabrication, erection and commissionim; etc. to Mts Central warehousim; Corporation and Western Railways only. We have not provided these services to any other person except to the above said two entities which were in fact provided through main contractors viz, M/s S V Enterprise, Surat and M/s Dhoralia Construction Co., Ahmedabad,

Q 4: Please peruse statements dated 11.03.2013 and 12.03.2013 of Shri Purshottambhai Bhikhabhai Akbari, Partner of M's Dhorajia Construction Company, Ahmedabad & Shri Manherbhai Ratanjibhai Patel, Partner of M/s S V Enterprise, Surat, respectively. Please offer your comments on the same?Ans: I have perused statements dated 11.03.2013 and 12.03.2013 of Shri Bhikhabhai Akbari, Partner of M/s Dhorajia Construction Company, Ahmedabad & Shri Manherbhai Ratanjibhai Patel, Partner of M/s S V Enterprise, Surat, respectively. I put my dated signatures on the same in token of having perused and agreeing with the same in full.

Q 5: Please explain the system of receiving payment from the service recipients as you have provided above said services of Construction, fabrication, erection and commissioning etc. on sub-contract basis?Ans.- We were issuing bills on the service receivers i.e. main contactors viz. M/s Dhorajia Construction Co., Ahmedabad & M/s S V Enterprise, Surat claiming amount towards services provided to them on sub contract basis although the services vere provided to Western Railways and M/s Central warehousing Corporation. M/s Dhorajia Construction Co., Ahmedabad & M/s S V Enterprise, Surat were issuing bills and receiving payments from respective service receivers viz. Western Railways and M/s Central warehousing Corporation, respectively. On receipt of payment from Western Railways and M/s Central warehousing Corporation the above said main contractors were releasing payment to us after deducting °their commission at the pre-decided rate from the amount received.

Q 6 : P l e a s e p e r u s e t h e a c c o u n t l e d g e r c o p i e s o f M / s S V E n t e r p r i s e , S u r a t & M / s D h o r a j i a C o n s t r u c ti o n C o . , A h m e d a b a d s u b m i tt e d b y y o u . F r o m t h e said ledgers, it transpires that y o u h a v e r e c e i v e d p a y m e n t ofRs.3 , 00 , 22 , 737 / - f r om M/s S V E nte r pr i se , S ur at dur ing t he pe r iod 200 8-0 9 to 2 0 1 0 - 1 1 i n l i e u o f t h e a b o v e s a i d s e r v i c e s p r o v i d e d . S i m i l a r l y , y o u h a v e a l s o r e c e i v e d p a y m e n t o f R s . 6 , 0 9 , 0 4 , 9 0 4 / - f r o m M / s D h o r a j i a C o n s t r u c ti o n C o . , A h m e d a b a d d u r i n g t h e p e r i o d 2 0 0 8 - 0 9 t o 2 0 1 0 - 1 1 i n l i e u o f t h e a b o v e s a i d s e r v i c e s p r o v i d e d . H a v e y o u r e c e i v e d a n y o t h e r payment from the above said M/s S V Enterprise, Surat & M/s Dhorajia C o n s t r u c ti o n C o . , A h m e d a b a d d u r i n g t h e p e r i o d 2 0 0 8 - 0 9 t o 2 0 1 0 - 1 1 ? P l e a s e a l s o s t a t e w h e t h e r y o u h a v e r e c e i v e d a n y o t h e r p a y m e n t f r o m a n y o t h e r p e r s o n s e x c e p t t o t h e a b o v e p e r s o n s / e n ti ti e s a g a i n s t t h e s e r v i c e s provided?

Ans.. I have perused the account ledger copies of M/s S V Enterprise, Surat & M/s Dhorajia Construction Co., Ahmedabad submitted by us. I put my dated signatures


on the same in token of having perused and agreeing with the same in .full. It is true that we have received payment of Rs. 3,00,22,737/- from M/s S V Enterprise, Surat and Rs. 6,09,04,904/- from M/s Dhorajia Construction Co., Ahmedabad during the period 2008-09 to 2010-11 in lieu of the above said services provided as also reflecting in the said account ledgers. We have neither received any other payment from the above said persons/entities nor from any other person except to the above persons/entities against the services provided.

Q 7: Are you aware that M/s CCG Construction, Ahmedabad have provided services of Construction, fabrication, erection and commissioning etc. to M/s Central warehousing Corporation and Western Railways on sub contacting basis wherein M/s S V Enterprise, Surat & M/s Dhorajia Construction Co., Ahmedabad were the main contractors, are taxable under Finance Act, 1994? Have you deposited any amount. of Service Tax in the Government treasury? Please give details. If not paid, why?Ans: Yes. We understand that the said services of Construction, fabrication, erection

and commissioning etc. provided to M/s Central warehousing Corporation and Western Railways on sub contacting basis wherein MA S V Enterprise, Surat & M/s Dhorajia Construction Co., Ahmedabad were the main contractors are taxable under Finance Act, 1994. We have taken Service Tax registration Certificate No. AACHG0450LSD001 on 02.01.2013 and also paid an amount of Rs. 3,00,000 towards liability of /service /tax. However, I cannot keep my premises of voluntarily payment latest by 15 th Fb 13 which I will pay up e,

Q 8: Please peruse the statement dated 02.04.2013 of Shri Ramkrishan Verma Son of Sh. S K Verma, Senior Assistant Manager of M/s Central Warehousing Corporation, Construction Cell, Adj. Railway Goods Yard, Sector-20, Vashi, Navi Mumbai-400613. From the said statement, it transpires that the construction work of warehouses carried out by M/s CCG Construction, Ahmedabad at the site of Central Warehousing Corporation is for the purpose of use in respect of warehousing of goods for which they collect storage charges from the public in general. The said warehouses are being used for furtherance of business for the purpose of profit by Central Warehousing Corporation (CWC) and collecting storage charges being shown by them as their warehouse income. Further, Central Warehousing Corporation being a commercial concern also prepares annual accounts in the form of balance sheet and income & expenditure like any other business entity. The said annual accounts are being audited from time to time by the statutory auditors. Therefore, construction of warehouses by Central Warehousing Corporation (CWC) is for furtherance of business being carried out by them for the purpose of earning more profit. The said activity on the part of Central Warehousing Corporation (CWC) is purely commercial in nature and therefore is not for educational, religious, charitable, health, sanitation or philanthropic purposes. Thus, services provided by M/s CCG Construction, Ahmedabad to Central Warehousing Corporation (CWC) are taxable service. Please offer your comments on the same?

Ans.. 1 have perused statements dated 02.04.2013 of Shri Ramkrishan Verma Sonof Sh. S K Verma, Senior Assistant Manager of M/s Central Warehousing Corporation, Construction Cell, Adj. Railway Goods Yard, Sector-20, Vashi, Navi Mumbai-400613. I put my dated signatures on the same in token of having perused and agreeing with the same in full. I accept that services provided by MA CCG Construction, Ahmedabad to Central Warehousing Corporation (CWC) are taxable service. Therefore, we have taken Service Tax registration Certificate No. AACHG0450LSD001 on 02.01.2013 and also paid an amount of Rs. 3,00,000/- towards liability of Service Tax. I also promise to pay up the remaining amount of Service Tax.


Q 8: Please submit the records/documents/information as required vide various summons latest dated 02.04.2013.

Ans: 1 submit the records/documents/information as required vide various summons latest dated 02.04.2013 vide our letter dated 07.04.2013. In respect to the remaining I promise to submit the same within next 02 days.

10. Classification of Taxable Services provided by M/s CCG:

10.1. Section 65(105) (zzzza) of Finance Act, 1994 defines the "TaxableService" as any service provided or to be provided to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams. Explanation.—For the purposes of this sub-clause, "works contract" means a contract wherein,—

(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and

(ii) such contract is for the purposes of carrying out,—

(a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids , heating, ventilation or a i r -con ditioning inc lud ing re lated p ipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or

(b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or

(b) construction of a new residential complex or a part thereof; or(c) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or

(c) turnkey projects including engineering, procurement and construction or

(d) commissioning (EPC) projects;

10.2. Further, "Works contract", for the purposes of section 65(105)(zzzza), means a contract wherein,-(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and

(ii) such contract is for the purposes of carrying out.—erection, commissioning or installation of plant, machinery, equipment or structures,whether pre-fabricated or otherwise, installation of electrical andelectronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or

(a) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or

(a)construction of a new residential complex or a part thereof; or(a)completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or(e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;

From the above, it revealed that if the specified contract is work contract on which


VAT/sales Tax is payable, the service will be taxable under works contract service. If the contract is a simple service contract (i.e. either no material is involved or even if some material is involved, VAT/sales tax is not payable), the service will go under respective heads of taxable service.

10.3. As per Board's circular F. No. B1/16/2007-TRU dated 22.05.2007 "Works contract is a composite contract for supply of goods and services. A composite works contract is vivisected and,-

(i) VAT / sales tax is leviable on transfer of property in goods involved inthe execution of works contract [Art.366(29A)(b) of the Constitution of India], and

(i) Service tax will be leviable on services provided in relation to the execution of works contract.

Further, as per the definition under section 65(105)(zzzza) contracts which are treated as works contract for the purpose of levy of VAT / sales tax shall also be treated as works contract for the purpose of levy of service tax. In view of the above discussions and on the basis of records recovered during the search, submitted records by M/s CCG & service recipient of M/s CCG and on the basis of statements of Shri Sanjay Surendrabhai Gor, Karta of M/s Sanjay Surendrabhai Gor (HUF), Proprietor of M/s CCG & statement of Shri Ramkrishan Verma of Central Warehousing Corporation, it appeared that M/s CCG was engaged in providing services of Construction, fabrication, erection and commissioning etc. It further appeared that the services provided by M/s 'CCG to M/s CWC on behalf of M/s S V Enterprises, Surat are provided with materials as composite work contract. Further the documents submitted by Central Warehousing Corporation shows that they were deducting TDS and WCT (work contract Tax) etc. from the passed bills which is payable to state Government like VAT is leviable on composite works contracts. Therefore, services provided by M/s CCG fall in the category of "Works Contract Service".

11. Quantum of Evasion of Service Tax:

11.1. As discussed in the aforesaid paras, findings of the scrutiny of various records resumed/seized during the course of investigation, records produced by the respective parties, bank account statements & explanations/confirmations given by various concerned persons in their submissions/statements, it is revealed that M/s CCG Construction is involved in evasion of Service Tax by resorting to nonpayment of the same.

11.2. It also revealed during the investigation that M/s CCG had provided "Work Contract Services" by utilizing their own (M/s CCG) materials as a composite contract. Accordingly, Service Tax calculated at the applicable rate on gross value of the receipt of services charged and collected from service receiver i.e. M/s S V Enterprises which is also reflecting in the ledger account of the said service receiver. Further, M/s CCG had received the said amount including Service Tax component and therefore taxable value for charging Service Tax to be adopted as per the provisions of sub section (2) of Section 67 of the Finance Act, 1994 as per which -the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged." Accordingly, Service Tax component is deducted from the gross amount received to arrive at the taxable value and thereafter Service Tax is calculated on the said taxable value. Detail of said calculation is as per Annexure 'A' attached.

11.3. On perusal of the said Annexure-A, it is seen that M/s CCG Constructionhad provided "Work Contract Services- and have issued bills and received totally amounting to Rs. 12,76,57,175/- during the period 2007-08 (from October 2007) to 31.03.2011 from M/s S V Enterprise against the said services. The amount of the Service Tax required to be demanded from M/s CCG Construction is calculated on the basis of the receipts of the said amount from M/s S V Enterprise and details viz, bills and account ledgers submitted by M/s S V Enterprise & seized records as discussed in foregoing paras. The calculation are attached to


the notice as "ANNEXURE-A" for the period 2007-08 (from 01.10.2007) to 2011-2012 The perusal of the "ANNEXURE-A" revealed that, during the period from 01.10.2007 to 31.03.2012, M/s CCG Construction had raised the bills and received an amount of Rs. 12,76,57,175/- which is taxable receipt and chargeable to Service Tax in the category of "Work Contract Services". M/s CCG Construction, though provided taxable services having charged and collected taxable amount but not paid the Service Tax leviable thereon into the Government account. Thus, the total amount of Service Tax (including Education Cess) not paid by M/s CCG Construction was worked out as Rs. 35,24,213/- [Rupees Thirty Five Lakhs Twenty Four Thousand Two Hundred Thirteen Only], as detailed in "ANNEXURE-A" to the Show Cause Notice. Thus, it appeared that M/s CCG Construction had not paid Service Tax [including Education Cess] amounting to Rs. 35,24,213/- [Rupees Thirty Five Lakhs Twenty Four Thousand Two Hundred Thirteen Only]. During the investigation, M/s CCG Construction have paid an amount of Rs.3,00,000/- through GAR7 Challan dated 18.01.2013.

12. Contravention of provisions of Service Tax:12.1. As per Rule 6 of the Service Tax Rules, 1994, in case of proprietary firmsthe Service Tax is required to be paid to the credit of the Central Government by the 5th of the month immediately following the quarter, in which the payments are received towards the value of the taxable services. M/s CCG Construction had charged and collected the taxable amount from their client on which Service Tax is leviable but had failed to deposit the service Tax in the Government exchequer. In view of the above, it appeared that M/s CCG Construction was aware that the services rendered by them viz. "Work Contract Service" in respect of Commercial and Industrial Building and Civil Structure" are taxable services. Being so aware they had charged and collected the taxable amount from their client on which Service Tax is leviable but had not paid the same to the Government exchequer in contravention of the provisions of the Finance Act, 1994 and Rules made there under relating to levy and collection of Service Tax. They had suppressed these facts of charging and collecting the taxable amount' from their client on which Service Tax is leviable from the jurisdictional Service Tax authorities with 'intent' to evade the payment of Service Tax. M/s CCG Construction intentionally had not filed the ST-3 returns for the said services and, therefore, the fact of provision of such service was suppressed from the department. Thus, it appeared that the proviso to sub-section [1] of Section 73 of the Finance Act, 1994 is applicable to invoke the extended period of five years for the recovery of Service Tax not paid by them.

13.2. In view of the above, it appeared that M/s CCG hadcontravened the provisions of:-

· Section 66 of the Finance Act, 1994, in as much as they have failed to collect and pay the Service Tax as detailed in Annexure 'A' attached to the SCN, to the credit of the Central Government.

· Section 67 of the Finance Act, 1994, in as much as they have failed to determine the value of the amount received for the purpose of charging the Service Tax as detailed in Annexure 'A' attached to the SCN to the credit of the Central Government

· Section 68 of the Finance Act, 1994, read with Rule 6 of the Service Tax Rules, 1994, in-as-much as they have failed to make the payment of Service Tax, as detailed in Annexure 'A' attached to the SCN, to the credit of the Central Government.Section 69 of the Finance Act, 1994 read with Rule 4 of the Service Tax Rules, 1994, in-

as-much as they have failed to obtain registration from the jurisdictional Superintendent of Central Excise within a period of thirty days from the date on which the service tax levied.

· Section 70 of the Finance Act, 1994, read with Rule 7 of the Service Tax Rules, 1994, in as much as they had failed to file the half yearly returns and had thus suppressed the amount of charges received by them for providing taxable service viz. "work contract Service" in respect of "Construction of Commercial and Industrial Building and Civil Structure".


· Section 76, 77 & 78 of the Finance Act, 1994, in as much as they had failed to pay Service Tax by resorting to will full misstatement and suppression of facts; failed to take registration in accordance with the provisions of section 69 or rules made under Chapter-V of the Finance Act, 1994; failed to keep, maintain or retain books of account and other documents as required in accordance with the provisions of Finance Act, 1994; failed to appear before the Central Excise Officer, when issued with a summon for appearance to give evidence or to produce documents; failed to issue invoice in accordance with the provisions of the Act or rules made thereunder, with incorrect or incomplete details; failed to submit the information/records called •for by the investigating officer under summons.

14. M/s CCG Construction are also liable to penal action under Section 78 ofthe Finance Act, 1994 for non-payment of Service Tax and for suppressing the value of faxable service and contravention of the provisions of Chapter V of the Finance Act, 1994 with an intent to evade Service Tax. They are also liable to pay interest for delayed payment as per the provisions of Section 75 of the Act, ibid.

15. Therefore, a show cause notice no. DGCEI/AZU/36-08/2013-14 dated 12.04.2013 was issued by Additional Director, DGCEI, Ahmedabad Zonal Unit, Ahmedabad to M/s. CCG Constructions, 1004, Shyamvrund Apartment, Shyamal Road, Opp.-Dhananjay Tower, Ahmedabad, and answerable to Additional Commissioner, Service Tax, Ahmedabad as to why:(i) The Service Tax amounting Rs. 35,24,213/- [Rupees Thirty Five Lakhs

Twenty Four Thousand Two Hundred Thirteen Only], including Education cess and Secondary & Higher Secondary Education Cess, as detailed in Annexure 'A' attached to the show cause notice, should not be demanded and recovered from them, under Section 73 of the Finance Act, 1994, by invoking extended period of limitation as per the proviso to sub-section (1) of said Section 73;

(ii) Interest at an appropriate rate for delayed payment of Service Tax shouldnot be demanded and recovered from them under Section 75 of the Finance Act, 1944;

(i) Penalty should not be imposed upon them under Section 76 of the FinanceAct, 1994, for the contraventions mentioned in foregoing paras;

(ii) Penalty should not be imposed upon them under Section 77 of the FinanceAct, 1994 (as amended) for each non-filing/delay in filing of the ST-3 returns in terms of Section 70;

(iii) Penalty should not be imposed upon them under Section 78 of the FinanceAct, 1994, for the contraventions mentioned in foregoing paras;

(i)The amount of Rs.3,00,000/- [Rupees Three Lakhs Only] already paid bythem during the investigation towards the Service Tax liability should not be appropriated against the said demand of Service Tax.

DEFENCE REPLY

16. With reference to the show cause Notice F.No DGCEI/AZU/36-08/2013-14 dated 12.4.2013 the service provide filed defence reply dated 23.10.2013, where they stated as under :


17. They denied charges and allegations levelled in the Show Cause Notice for demanding service tax under the category of "Works Contract". It was submitted that services for construction of Warehouses in Railway area was not liable to be taxed in view of the definition of taxable services provided in the context of "Works Contract" under Section 65(105)(zzzza) of the Act. Definition of taxable services excludes the works contract service provided in relation to Railway. Since there is no liability of tax, they have rightly not paid service tax. They followed Rules and Regulations and the provisions of the Act and never intended not to pay service tax or intention to evade payment of service tax. In these facts, proposal made in the Show Cause Notice for invocation of Larger period cannot be sustained.

18. That the Ministry of Railway identified the land near Kandla Railway Terminal for development of warehousing complex with handling facilities for meeting the logistic requirements of its customers, so that Railway can provide better services through local logistic solutions to Railway users to attract additional traffic and revenue to Rail and Central Warehousing Corporation. For these purposes, Railway decided to provide their land for development of warehousing complex to CWC and CWC in turn, construct, develop, repair, maintain and operate the entire warehousing complex on the Railway land. Apart from the lease rent of Re1/- per sq. mtr per annum CWC had to pay 5% of gross receipt from all activities of CWC arising out of the business from the 3 rd year to Railway. This payment had to be made till 6th year and thereafter the percentage of gross receipts from warehousing operation payable by CWC to Railway Administration would be reviewed every 3 years after the date of operation of the warehousing complex or from the 6 th year after execution of the agreement, whichever is earlier. The title of the agreement entered between Railway and CWC is given "Lease agreement" but the word "lease agreement" is misnomer as it is actually revenue sharing agreement.

19. Pursuant to the agreement between Railway authority and the CWC, CWC awarded the contract to M/s. S.V. Enterprises on 16.12.2006 for construction of 32,200 MTC Godown alongwith necessary Buildings, Development of Area, Boundary Wall, Electrification, Drainage, Weigh bridge etc. at Railway Warehousing Corporation (RWC), Kandla. M/s. S.V. Enterprise in turn awarded the contract to M/s. C.C.G. Construction on back to back basis. As per agreement, it was decided that service tax, VAT, Income Tax would be deducted from the Running Bi l ls of CCG Construction.

20. On perusal of the agreement entered between Railway Authority and CWC as well as CWC and M/s. S .V. Enterpr ises and M/s. S.V. Enterprises and M/s. CCG Construction it transpires that the contract was awarded for construction of warehouses in the area of Railway which is situation in near to Railway Terminals. Taxable services provided under Section 65(105)(zzzza) of the Act excludes works contract service provided in relation to Railway. Definition of taxable services provided in the Act is as under :

To any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways, transport terminals, bridges, tunnels and dams.

Explanation : - For the purposes of this sub-clause, works contract means a contract wherein, -

i. transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and

ii. such contract is for the purposes of carrying out,-

a. erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-


fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or

b. construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or

c. construction of a new residential complex or a part thereof; or

d. completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or

e. turnkey projects including engineering, procurement and construction or commissioning (EPC) projects

21. Meaning of Railway as defined includes all lands of Railways, sidings, or yards, or branches used for the purposes of, or in connection with, a railway. In the present case, warehouses have been constructed in Railway area and the same is connected through Railway lines and therefore, construction undertaken for construction of warehouses for CWC is covered under the definition of Railway. Once it is covered under the definition of Railway, the proposal made in the Show Cause Notice for demanding service tax under the "Works Contract" cannot be sustained in view of execution from the definition.

22. It was submitted that CWC awarded the contract to M/s. S.V. Enterprises and in turn we were awarded the contract for construction of warehouses. It was undisputed factthat M/s. S. V. Enterprise is the main contractor who provided the service and therefore, M/s. S.V. Enterprise is liable for service tax on services rendered by the Contractor. We are the sub-contractor and therefore, in view of the following decisions, the sub-contractors are not liable for service tax.

a. JAC Air Services Pvt Ltd Vs. CST 2013 (31) STR 155 (T)

b. Vijay Sharma & Co Vs C.C.Ex 2010 (20) STR 309 (T- LB)

23. Without prejudice to the aforesaid, it was submitted that M/s. S.V. Enterprises had already deducted the amount of service tax from Running Bills raised by them and made balance payment. They enclosed herewith and mark as Annexure C a summary of table showing number of bills along with the value of Running Bills and payment received towards the Running Bills which proves that the amount of service tax had been deducted by them. Since the contractor had already deducted service tax from them, liability of service tax is upon the contractor.

24. Period of the dispute involved in the present case was from 03.10.2007 upto 31.03.2011 and the Show Cause Notice had been issued on 12.04.2013. Since the Show Cause Notice had been issued beyond the period of limitation, demand beyond the period of normal period cannot be sustained.

25. That in terms of the provisions of the Act at the relevant time, the Show Cause Notice ought to have been issued within one year from the date of relevant date. It is settled law the Larger Period can be invoked when there is suppression, willful statement of collusion of facts to evade payment of service tax. In the present case, we always carried impression that there is not liability of service tax as the construction was undertaken for Railway and Railway is included in the exclusion definition of taxable


service of works contract and/or industrial commercial construction services. Statements of the undersigned were recorded from time to time wherein nowhere it transpires there was intention on our part for not to make payment of service tax.

26. That the extended period of limitation can be invoked only on those grounds which are specifically provided under the statute. If the department seeks to invoke the extended period of limitation on the ground other than those mentioned in the statue, then such invocation of extended period of limitation is bad in law. In the present case, the Revenue has not set out any basis whatsoever for invoking the larger period in the show cause notice.It is well settled law inter alia by the judgement of the Hon’ble Supreme Court in Nestle India Ltd vs. CCE (2009(235)ELT 577 (S.C.) that to invoke larger period of limitation, there should be some positive act other than mere inaction or failure on the part of the assessee, or there must be conscious or deliberate withholding of information by the assessee. There must be some positive action in withholding information on the part of the assessee to constitute willful suppression. Similarly, in CC vs. Tin Plate Co. of India Ltd. [1996 (87) E.L.T. 589 (S.C.)], it was held that suppression envisages a deliberate and conscious omission to state a fact with the intention of deriving wrongful gain.

27. It was also well settled that, as regards issues that are interpretational the assessee cannot be put to fault and default attributed to the assessee. In other words, in such cases no suppression or misstatement can be alleged on them.

28. It was thus clear and apparent that the issue was interpretational and they have not adopted any positive action to consciously withhold or suppress the issue from the Tax Authorities. In view of the above, there cannot be said to have any positive act by us to conscious or deliberately withhold the information and hence extended period cannot be invoked in such cases.

29. Without prejudice to the aforesaid, it was submitted that the benefit of cum-tax value should be granted in the present case as they have not collected amount of service tax from the main contractor which can be seen from running bills. Service tax is an indirect tax and therefore, as per the system of taxation, tax borne by the consumer of goods/services is to be collected by the assessee and remitted to the Government. When tax is not collected separately, the gross amount has to be treated as inclusive of taxable service.

30. It was humbly submitted that for the reasons set out hereinabove, the entire demand itself was unsustainable, as there can be no liability to Service tax for the period in dispute. Hence the demand for penalty and interest therefore cannot sustain. It is settled law, inter alia, by the judgment of the Hon'ble Supreme Court in CCE vs. HMM Ltd. reported in (1995 (76) ELT 497 (SC)] that where the demand itself is unsustainable, the imposition of penalty cannot sustain.

31. Without Prejudice to the above, it was submitted that there was no intention to evade payment of Service tax. In such circumstances, the levy of penalty is clearly unsustainable. None of these aspects have been dealt with in the captioned Show Cause Notice. In this regard, we refer to the decision of the Hon'ble Supreme Court Tamil Nadu Housing Board vs. CCE reported in [1994 (74) ELT 9 (SC)] , wherein it was held that an intent to evade payment of tax is not a mere failure to pay the tax, it is much more. The person alleged to have evaded the payment of a tax must be proved to be aware of the taxability of the transaction and must deliberately have avoided payment of the tax. The Hon’ble Supreme court further held that the word evade in the context of the phrase intent to evade means defeating the provisions of law of paying the tax, and it is made more stringent by the use of the word ‘intent’. Thus intent to evade payment of a tax is in law, much more than a mere failure to pay the tax. It is settled law, interalia by the judgement of the Hon’ble Supreme court in Hindustan Steel Ltd vs. State of Orissa reported in (1978(2) ELT 159(SC),.

32. It was submitted that in a case where there was no malafide intent to evade the payment of duty, no penalty should be levied in terms of Section 76 of this Act. Reliance


in this regard is made to the decision in the case of Catalyst Capital Services vs, CCE, Mumbai reported in 2005 (184) ELT 34, wherein it has inter alia been held that“it is contended on belaf of the appellants that there is no malafide intention on the part of the appellants in making the late payment of Service Tax. There is also provision in the Finance Act for waiver of the penalty where sufficient cause is shown. As the appellants had already deposited the Service Tax and as there was no mala fide intention in making the delayed payment. the penalty imposed thereof i.e. Rs. 7,105/- is hereby set aside."

33. Reliance in this regard is also placed on the case of Market Force Chennai Pvt. Ltd. vs. CST, Chennai reported in 2007 (8) STR 175(Tri-Chennai). Therefore it is submitted that there has been no mala fide intent on our part to evade the payment of duty and therefore the aforementioned cases will squarely apply to us. Hence no penalty in terms of Section 76 of the Act is leviable.

34. Without Prejudice to the above, it was submitted that Section 80 of the Act provides that

"no penalty shall be imposed..." under Sections 76, 77, 78 or 79, if there was a reasonable cause for the failure of the assessee in complying with the relevant provisions. The said provision being constructed by the use of the word 'shall' is mandatory, and your Honor is bound, in law, to consider the same. There was a bonafide doubt and therefore there was a reasonable cause for us not to pay Service Tax. We should therefore be entitled to the benefit of Section 80 of the Act and no penalty should be leviable on us.

35. Without prejudice to the aforesaid, it was submitted that penalty under Section 76cannot be imposed in terms of 5 th proviso to Section 78 when penalty under Section 78 has been imposed. By way of Finance Act, 2008, it is provided in fifth Proviso toSection 78 that if the penalty is payable under Section 78, the provisions of Section 76 shall not apply. 5th proviso to Section 78 was in force when the Show Cause Notice was issued. As per amendment, proposal for imposition of penalty under Section 76 ought not to be made as the Show Cause Notice has already proposed for imposition of penalty under Section 78. In the case of C.C.Ex. Vs. Pendharkar Construction reported in 2011 (23) STR 75 held that penalty under Section 76 is not imposable when under Section 78 has been imposed because 5 th Proviso to Section 78 was in force when Show Cause Notice was issued.

36. That in the following cases, it was held that penalty under Section 76 is not warranted in view of imposition of penalty under Section 78 of the Act :

a. CCE, Ludhiana v. Silver Oak, 2008 (9) STR 481 (Tr)

b. Kamal Photo Studio & Colour Lab Vs. CCE, Mumbai-I, 2007 (7) STR 307 (Tr)

c. The Financers V. CCE, Jaipur, 2007 (8) STR 7 (Tr)

d. C.C.Ex. Lucknow Vs. Orbit Travels —2009 (15) STR 184 (Tr)

37. Under the circumstance, the Noticee requested that the show cause notice be dropped.

PERSONAL HEARING

38. Shri Hardik Modh, Conultant and Shri Sanjay Gor (Proprietor) of M/s CCG appeared for hearing on 23.10.2013 . They made submissions on merits, cum tax,


limitation/penalty and stated that the main contractor has already charged Service Tax from them etc. They requested a few days time to submit their written submission. The noticee thereafter filed a written submission dated 23.10.2013.

DISCUSSIONS AND FINDINGS

39. I have carefully gone through the contents of the show cause notices and the defence reply, relevant documents of the case and written submissions of the said noticee submitted during or before the personal hearing.

40. I find that the show cause notice alleges that the noticee had provided construction services to Central Warehousing Corporation (M/s CWC), a commercial concern, taking land/space from various concerns on long term lease basis, including Indian Railways for setting up warehouses, through a sub-contract awarded to them by M/s S V Entrprise, Surat, which are taxable in nature and are covered under "Works Contract Service". The noticee has contended that services for construction of Warehouses in Railway area was not liable to be taxed in view of the definition of taxable services provided in the context of "Works Contract" under Section 65(105)(zzzza) of the Act. Definition of taxable services excludes the works contract service provided in relation to Railway.

41. The facts of the case is that pursuant to an agreement between Railway authority and the CWC, CWC awarded the contract to M/s. S.V. Enterprises on 16.12.2006, for construction of 32,200 MTC Godown alongwith necessary Buildings, Development of Area, Boundary Wall, Electrification, Drainage, Weigh bridge etc. at Railway Warehousing Corporation (RWC), Kandla. M/s. S.V. Enterprise in turn awarded the contract to M/s. C.C.G. Construction on back to back basis. As per agreement dated 17.01.2007, it was decided that service tax, VAT, Income Tax would be deducted from the Running Bi l ls of M/s CCG .

42. I find that with effect from 1-6-2007, vide Notification No. 23/2007 dated 22-5-2007, sub-section (105) of Section 65 of the Act was amended and Clause (zzzza) was introduced. This clause reads as follows :

“(zzzza) Taxable service means any service provided or to be provided to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of roads, airports, railways , transport terminals, bridges, tunnels and dams.

Explanation :- For the purposes of this sub-clause, “works contract” means a contract wherein, -

(i) transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods, and

(ii) such contract is for the purposes of carrying out, -

(a) erection, commissioning or installation of plant, machinery, equipment or structures, whether pre-fabricated or otherwise, installation of electrical and electronic devices, plumbing, drain laying or other installations for transport of fluids, heating, ventilation or air-conditioning including related pipe work, duct work and sheet metal work, thermal insulation, sound insulation, fire proofing or water proofing, lift and escalator, fire escape staircases or elevators; or

(b) construction of a new building or a civil structure or a part thereof, or of a pipeline or conduit, primarily for the purposes of commerce or industry; or

(c) construction of a new residential complex or a part thereof; or


(d) completion and finishing services, repair, alteration, renovation or restoration of, or similar services, in relation to (b) and (c); or

(e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;”

42.1 Thus I find that the noticee is contending that as work contracts providing in relation to Railways were exempted from payment of Service Tax, since their contract awarded top them by M/s CWC was regarding construction of godowns in Railway premises as per the definition of ‘railway’ in Railway Act, 1989 they were not liable to pay so.

43. In this context, it would be plausible if we look at the work that M/s CWC carries out. I find that M/s CWC , though being a PSU, is a commercial concern. The work carried out at M/s CWC was for the purpose of use in respect of warehousing of goods for which they are charging storage charges from the public in general. The said warehouses were being used for furtherance of business for the purpose of profit. M/s CWC is engaged in the business of warehouse storage to various concerns and collecting storage charges from them for the above said storage being shown by them as their warehouse income. M/s CWC being a commercial concern also prepares annual accounts in the form of balance sheet and income & expenditure like any other business entity. The said annual accounts were being audited from time to time by the statutory auditors. From the work order provided by Central Warehousing Corporation (CWC),the building/structure constructed by M/s CCG for them is for the use of storage of goods and for furtherance of business being carried out by M/s CWC for the purpose of earning more profit. The said activity on the part of M/s CWC was purely commercial in nature and therefore could not be equated with the activity for educational, religious, charitable, health, sanitation or philanthropic purposes.

43.1 In a similar case of M/s A.B. PROJECTS PVT. LTD. Versus COMMISSIONER OF CENTRAL

EXCISE, NAGPUR reported at 2010(19) STR 886 (Tr-Mumbai), the Hon’ble Tribunal also held on the same

lines , in Para 4 to 6 as under:

“4. The main issue before me in the case is as to whether the warehousing complexes constructed by the appellants on Railway side against the award of contract by the Central Warehousing Corporation, an undertaking of Government of India, the appellants are covered in the category of Commercial and Industrial Construction Services or not. According to the Board Circular No. 80/10/2004-S.T., dated 17-9-2004, building civil structure or parts thereof which are used, occupied or engaged for the purpose of commerce and industry are covered by levy of Service tax. According to above clarification, construction of warehousing complex, warehouses, cold storage, markets, bazaars etc. are covered under commercial and industrial construction services and contractors executing such work, either for Govt., Semi Govt. or local bodies are liable to pay Service tax on such construction. It was further clarified that such construction which are for use of organizations or institutions being established solely for educational religious, charitable, health, sanitation or philanthropic purposes and not for the purposes of profit are not taxable, being non-commercial in nature. Generally, Government buildings or civil constructions are used for residential, office purposes or for providing civic amenities. Thus, normally Government constructions would not be taxable. However, if such constructions are for commercial purposes like local Government bodies getting shops constructed for letting them out, such activity would be commercial and builders would be subjected to Service tax.5. Heard.6. From the above submissions made by DR, it is clear that the commercial construction done on behalf of the Government, which in returns for letting out purposes and Government earns Revenue from them are covered under Commercial & Industrial Building Construction services. With these observations, I do not find any merit in the appeal filed by the appellant and the same is rejected.”


43.2 Further, in the case of GANGAADHAR & SHARMA & SONS Versus

COMMISSIONER OF C. EX., BHOPAL reported at 2008(10) STR 45 (Tri-Delhi) , on the

same issue has categorically held as under :

“5. In this case, the main contention of the applicant is that the applicant constructed a warehouse on behalf of the railway and the land belonging to railway, therefore, does not cover under the scope of commercial or industrial construction service. I find that the service provided in respect of roads, airports, and railways is not covered under the commercial or industrial construction service. In the present case, the railway land was leased out to Central Warehousing Corporation and Central Warehousing Corporation is paying rent as per the terms and conditions of the agreement. The tenders were floated by Central Warehousing Corporation for construction of warehouse and in response to the tenders the applicant constructed a warehouse for Central Warehousing Corporation. Hence it cannot be said that the applicant constructed a warehouse on behalf of the railway. Regarding contention of the applicant is that the contract is a works contract, the applicant had not produced the copy of contract between the applicant and Central Warehousing Corporation to show that construction is under contract. In these circumstances, prima facie, it is not a fit case for waiver of amount of Service Tax.”

(emphasis supplied)

43.3 Thus, I find that services provided to M/s CWC has been held to be not provided to the Railways and thus is taxable under sub-section (105) of Section 65 of the Act and Clause (zzzza). In view of the above discussions, I hold that Service Tax amounting Rs. 35,24,213/-, as detailed in Annexure 'A' attached to the show cause notice, is to be recovered from them, under Section 73 of the Finance Act, 1994 under the category of “Works Contract Services”. Accordingly, the cases cited by the noticee in this regard are not applicable.

44. Further, M/s CCG has contended in their defence that M/s SV Enterprise had already deducted the amount of service tax from running bills raised by them and made the balance payments and that since the contractor had already deducted the service tax from them, the liability of the service tax is on the contractor. In their support they have also enclosed a certificate of a Chartered Accountant of Shri Niral Parikh dated 31.10.2013. In find from the agreement dated 17.01.2007 between M/s S V Enterprise and the noticee, the service tax was to be deducted from the Running Bi l ls of M/s CCG /noticee. I find that in this case, the noticee has not provided any proof/documentary evidence regarding the service tax so deducted by M/s SV Enterprise and paid by them to the Govt. account, as claimed by them. Further, the service tax was to be charged by M/s CCG on M/s SV Enterprise, which has not been done. The same is fortified by the fact that the noticee has claimed the benefit of cum-duty-value in their defence reply dated 1.11.2013 at Para 17 and also as admitted by Shri Sanjay Surendrabhai Gor in his statement dated 12.10.2012, that they have not deposited any amount of Service Tax to the Government.

44.1 In this connection, the Boards’ Circular No. 138/7/2011-S.T., dated 6-5-2011, has also clarified on the issue as under :

“…..(iii) Attention is also invited to Circular No. 96/7/2007-S.T., dated 23rd August, 2007 [2007 (7) S.T.R. C69] regarding clarification on technical issues relating to taxation of services under the Finance Act, 1994. The relevant portion is reproduced below,-

999.03/23-8-07

A taxable service provider outsources a part of the work by

A sub-contractor is essentially a taxable service provider. The fact that services provided by such sub-contractors are used by the main


engaging another service provider, generally known as sub-contractor. Ser-vice tax is paid by the service provider for the total work. In such cases, whether service tax is liable to be paid by the service provider known as sub-contractor who undertakes only part of the whole work.

service provider for completion of his work does not in any way alter the fact of provision of taxable service by the sub-contractor. Services provided by sub-contractors are in the nature of input services.

Service tax is, therefore, leviable on any taxable services provided, whether or not the services are provided by a person in his capacity as a sub-contractor and whether or not such services are used as input services. The fact that a given taxable service is intended for use as an input service by another service provider does not alter the taxability of the service provided.

4. Therefore, it is clarified that the services provided by the subcontractors/consultants and other service providers are classifiable as per Section 65A of the Finance Act, 1994 under respective sub-clauses (105) of Section 65 of the Finance Act, 1994 and chargeable to service tax accordingly.”

45. Further, I find that in the show cause notice dated 12.04.2013, at Para 4.2.1 under WORK ORDER provided by M/s CWC to M/s S.V. Enterprise, in the scanned copy, it is seen that in the contract awarded by M/s CWC to M/s S. V. Enterprise , the tender amount is inclusive of Service Tax and Education cess, under Schedule “B”. Thus it is clear that M/s SV Enterprise has to charge service tax on M/s CWC, on their Invoices; and M/s CCG had to charge service tax on M/s SV Enterprise. Therefore, the certificate of the CA dated 31.10.2013, claiming that M/s SV Enterprise had deducted the service tax from the running bills of M/s CCG does not absolve the noticee from payment of service tax. Obligation to pay tax is cast on the noticee by statute. Therefore it is the noticee who has to pay the tax. Somebody else has paid or not paid is of no consequence.

46. M/s CCG has pleaded that they should be given the benefit of ‘cum-tax value’ and has cited the case of M/s Advantage Media Consultants (supra) and M/s Robot Detective & Security Agency (supra) . While acknowledging the decision of the hon’ble Apex Court in the matter, I also place reliance on the judgement of M/s Amrit Agro Industries Limited reported at 2007 (210) E.L.T. 183 (S.C.), wherein the hon’ble Apex Court, on the issue and applicability of the principle of cum-duty price has held that “…..the assessee will have to show as to how he has determined the value. What the appellant has really done in the instant case has to be examined. Whether the price charged by him to his customers contains profit element or duty element will have to be examined…” I find that in this case, M/s CCG has not shown as to how they have determined the value and also the CA’s certificate dated 31.10.2013 makes the noticee more unreliable.

47. As discussed above, the entire demand has been held to be sustainable on merits . Thus I find that it was the duty of the noticee to declare such activities, and receipt towards the same in their ST-3 returns filed by them from time to time. ST-3 returns are prescribed under the statute so that department can form view with regard to the taxability of the services. I find that the noticee had failed to provide the same to the department. The said service tax is not discharged by them as provided under section 68 of the Finance Act, 1994. Had it not been for the search conducted by the DGCEI to verify the facts, the same would have remained suppressed. Further, I find that the said service provider has deliberately not got itself registered under the categories of “Construction Service in respect of Commercial and Industrial Service and Civil Structure” and “Works Contract Service” from 2007 onwards, and not paid Service Tax on the aforesaid Services,


, and thereby evading payment of service tax. Only after the searches conducted by the DGCEI, did the noticee obtain a registration on 02.01.2013.

48. All these acts of contravention of the provisions of Section 66, 68, 69 and 70 of the Finance Act, 1994 read with Rules 4, 5, 6 and 7 of the Service Tax Rules, 1994 are to be punishable under the provisions of Section 76 and 77 of the Finance Act, 1994. Moreover, in addition to the contravention, omission and commissions on the part of the noticee as stated in the foregoing paras, I find that they have willfully suppressed the facts, nature and value of service provided by them with an intent to evade the payment of Service Tax, rendering themselves liable for penalty under Section 78 of the Finance Act, 1994.Under the circumstances, I find that they suppressed material facts with intent to evade service tax, and I find that the demand of service tax is also sustainable on limitation. Therefore, I find that the charge of suppression of material facts with intention to evade service tax has been conclusively established herein above. In view of the above, I find that extended period for demand of service tax under the proviso to section 73(1) of the Finance Act, 1994 was rightly invoked and the SCN is sustainable on limitation. Therefore demand of Service tax of Rs. 35,24,213/- is recoverable from the noticee/M/s CCG along with Interest as provided in proviso to Section 73(1) of the Finance Act, 1994 read with Section 75 of the Act ibid.

49. Since M/s CCG had not discharged service tax liability on the amount of taxable value on the services mentioned in the foregoing paras and as demanded under the show cause notice and therefore, they have contravened the provisions of Section 67, 68 and 70 of the Finance Act, 1994 and thereby rendered themselves liable to penal action under Sections 76, 77 & 78 of Finance Act 1994.

50. As regards the issue of imposition of penalty under Section 76 of the Finance Act, 1994, I observe that penalty under Section 76 and 78 of the Finance Act, 1994 are mutually exclusive w.e.f. 10.05.2008 and once penalty under Section 78 is imposed, no penalty under Section 76 can be imposed in terms of the proviso inserted in Section 78 w.e.f 10.5.2008 in this regard. Therefore, no penalty under Section 76 is imposable for the period from 10.5.2008 onwards. In the case before me, the demand of service tax is for the period from 03.10.2007 to 31.03.2011, therefore, I hold that penalty under Section 76 of the said Act is imposable on the said service provider for the period from 03.10.2007 to 09.5.2008. I find that the said service provider have not paid service tax within the stipulated time period as prescribed under Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, I hold them liable to penalty under Section 76 of the Finance Act, 1994. My conclusion is also based on various decisions of Hon’ble High Courts & Tribunals as mentioned below ;

CCE & ST Vs First Flight Couriers Ltd reported at 2007(8) STR 225 (Kar.) UOI Vs Aakar Advertising, reported at 2008 (11) STR.5 (Raj.) UOI Vs Shiv Ratan Advertisers reported at 2008 (12) STR 690 (Raj.) Shiv Network Vs CCE, Daman reported at 2009 (14) STR 680 (Tri-Ahmd) CCE, Vapi Vs Ajay Sales Agencies reported at 2009 (13) STR 40 (Tri–Ahmd) Siddhi Motors Vs CCE, Rajkot reported at 2009 (15) STR 422 (Tri-Ahmd)

51. I further observe that the Hon’ble CESTAT in the case of M/s Gujarat Industrial Security Force Society Vs CST, Ahmedabad, vide order No. A/1110/WZB/AHD/2010 dated 05.08.2010, has held that no lenient view can be taken under section 76 of the Finance Act, 1994. The relevant paras are reproduced below;

“2. After hearing both the sides, I find that in this case, the assessee was registered more than 6 years back and no explanation has been given by them for delayed filing of return and delayed payment of service tax. Under these circumstances, I am not finding


fault in stand taken by the lower authority that penalty is imposable under section 76 and once it is held that penalty is imposable under section 76, the amount fixed as per the provision of section 76 is required to be imposed. Under these circumstances, even though the Ld. Advocate submitted that the appellant is a non profit organization, no lenient view can be taken in view of the provisions of law.

3. Accordingly, the appeal is rejected.” Hon’ble High Court of Gujarat in the case of CCE & Cus. Vs Port Officer, reported at 2010 (19) STR 641 (Guj) has now settled the issue of penalty under Section 76. The relevant para is reproduced below ;

“10. A plain reading of Section 76 of the Act indicates that a person who is liable to pay service tax and who has failed to pay such tax is under an obligation to pay, in addition to the tax so payable and interest on such tax, a penalty for such failure. The quantum of penalty has been specified in the provision by laying down the minimum and the maximum limits with a further cap in so far as the maximum limit is concerned. The provision stipulates that the person, who has failed to pay service tax, shall pay, in addition to the tax and interest, a penalty which shall not be less than one hundred rupees per day but which may extend to two hundred rupees for everyday during which the failure continues, subject to the maximum penalty not exceeding the amount of service tax which was not paid. So far as Section 76 of the Act is concerned, it is not possible to read any further discretion, further than the discretion provided by the legislature when legislature has prescribed the minimum and the maximum limits. The discretion vested in the authority is to levy minimum penalty commencing from one hundred rupees per day on default, which is extendable to two hundred rupees per day, subject to a cap of not exceeding the amount of service tax payable. From this discretion it is not possible to read a further discretion being vested in the authority so as to entitle the authority to levy a penalty below the stipulated limit of one hundred rupees per day. The moment one reads such further discretion in the provision it would amount to re-writing the provision which, as per settled canon of interpretation, is not permissible. It is not as if the provision is couched in a manner so as to lead to absurdity if it is read in a plain manner. Nor is it possible to state that the provision does not further the object of the Statute or violates the legislative intent when read as it stands. Hence, Section 76 of the Act as it stands does not give any discretion to the authority to reduce the penalty below the minimum prescribed.”

51.1 The Hon’ble High Court of Gujarat has further confirmed the above view in the case of CCE Vs S J Mehta & Co., reported at 2011 (21) STR 105 (Guj.) and CCE Vs Bhavani Enterprises reported at 2011 (21) STR 107 (Guj.).

52. I further find that it is a matter of fact that M/s CCG had failed to file prescribed Service Tax return within the stipulated time, failure to furnish the records and failed to take Service Tax Registration under the category of ““Construction Service in respect of Commercial and Industrial Service and Civil Structure” and “Works Contract Service””. Further they neither paid the service tax payable thereof and nor obtained Service Tax Registration for such services for the period from 03.10.2007 onwards. Therefore, I hold them liable to penalty under Section 77 of the Finance Act,1994.

53. As regards imposition of penalty under Section 78, I find that as the noticee had suppressed the facts with intention to evade payment of service tax, penalty under Section 78 of the Finance Act, 1994 is mandatorily imposable as has been held by the Apex court in the case of Dharmendra Textile Mills Ltd-2008 (231) ELT 3 (SC) and Rajasthan Spinning & Weaving Mills Ltd-2009 (238) ELT 3 (SC). Therefore, I hold that penalty is imposable on the said assessee under Section 78 of the Finance Act, 1994. I, therefore, hold that they have rendered themselves liable to penalty under Section 78 of the Finance Act, 1994. My above view gets support from below mentioned case laws;


Shiv Network Vs CCE, Daman reported in 2009 (14) STR 680 (Tri.Ahmd.) CCE, Vapi Vs Ajay Sales Agencies reported in 2009 (13) STR 40 (Tri. Ahmd.) Order No. A/754/WZB/AHD/2010 dt. 09.06.2010 / 23.06.2010 in the case of M/s Bajrang

Security Services Vs CST, Ahmedabad. Order No. A/1937/WZB/AHD/2010 dated 08.10.2010 / 20.12.2010 in the case of M/s

Dhaval Corporation Vs CST, Ahmedabad.

54. I further observe that recently hon’ble High Court of Punjab & Haryana, in the case of CCE Vs Haryana Industrial Security Services reported at 2011 (21) STR 210 (P&H), has also upheld the penalty equal to service tax imposed under Section 78 of the Finance Act, 1994. Hon’ble Karnataka High Court has also taken similar view in the case of CCE, Mangalore Vs K Vijaya C Rai reported at 2011 (21) STR 224 (Kar.)

55. I also find that penalty under Section 76 ibid is provided for failure to pay service tax whereas penalty under Section 78 ibid is for suppressing value of taxable service. In the instant case, service tax liable to be paid in terms of Section 68 read with Rule 6 of the Service tax Rules, 1994, have not been found paid as well as service tax has not been paid / short paid by suppressing value of taxable service by reason of wilful mis-statement and suppression of facts. Of course these two offences may arise in the course of same transaction, or from the same action of the person concerned. But the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act the penalty is imposable for ingredients of both offences, this aspect was also considered by the Hon’ble High Court of Kerala in the case of Assistant Commissioner, C.Ex. Vs Krishna Poduval – 2006 (1) STR 185 (Ker). I also find that the Hon’ble Mumbai Tribunal in the case of Golden Horn Container Services Pvt. Ltd. v/s Commr. of C. Ex., Raipur reported at 2009 (16) S.T.R. 422 (Tri.-Mumbai), has held that Section 76 provides for a penalty who commits default simpliciter in payment of the tax whereas section 78 is a more stringent penal provision, which provides harsher penalty who commits default with mens rea. Since in this case also, the said service provider has committed default with mens rea, the decision of the tribunal is squarely applicable.

56. Further, as regards imposition of simultaneous penalty, I place my reliance on the judgment of Hon’ble High Court of Kerala in the case of Assistant Commissioner of Central Excise v. Krishna Poduval (supra) which is aptly applicable to the present case. I find that the imposition of penalty under sections 76 and 78 of the Act is for non payment of service tax and suppression of value of taxable service respectively which are two distinct and separate offences attracting separate penalties. I find that the said assessee have committed both the offences and therefore penalties under section 76 and 78 of the Finance Act, 1994 are imposable on the said service provider/noticee for the period upto 9.5.2008. Therefore, I am of the view that in the facts and circumstances of the case, it is justifiable, if the penalty is imposed under the provisions of Section 76 and 78 of the Finance Act, 1994, separately, following the decisions of Hon’ble Kerala High Court and Mumbai tribunal (supra). My views are also further supported by various decisions of tribunals in the cases of ;

a) Shiv Network v/s Commissioner of Central Excise & Customs, Daman reported at 2009 (14) S.T.R. 680 (Tri.-Ahmd.)

b) Commissioner of Central Excise, Vapi v/s Ajay Sales Agencies reported at 2009 (13) S.T.R. 40 (Tri.-Ahmd.), and

c) Mett Macdonald Ltd. v/s Commissioner of Central Excise, Jaipur reported at 2001 (134) E.L.T. 799 (Tri.-Del.).

d) M S Shah & Co., Vs CST, Ahmedabad – Order No. A/1328/ WZB/ Ahd/ 2010 dated


30.06.2010 / 26.08.2010. e) Bajarang Security Services Vs CST, Ahmedabad – Order No. A/745/ WZB/Ahd/2010 dated

09.06.2010 / 23.06.2010. f) CESTAT, Principal Bench, New Delhi in the case of Bajaj Travels Ltd., Vs CCE, Chandigarh –

2009 (16) STR 183 (Tri.Del.)

57. As regards invoking Section 80 of the Finance Act, 1994 for waiver of penalty, I find that M/s CCG has not produced any reasonable cause for the failure to pay service tax except that it was their bonafide belief that service tax was not payable by them. I have already discussed the issue of taxability of services in the foregoing paras. I observe that if M/s CCG had any doubt with regard to taxability of services, then being a registered assessee they should have approached the authorities for clarification of doubt to ascertain the taxability of the services provided by them.

57.1 On this issue I find that the reported that the Hon’ble Tribunal { reported at 2013- TIOL—1160-CESTAT-AHM } on the issue whether “bonafide’ impression” would prevail over legislation observed as under :

“5. The learned counsel for the appellant strenuously contends that since provisions of Section 66A were in challenge before various Courts, the appellant assessee was under a bonafide impression that compliance with the said provisions is not mandatory. This contention is stated to be rejected. It is axiomatic. Legislation is operative proprio vigore on its enactment and effectuation. The operation of legislation is not contingent upon affirmation by the judicial branch, even where a challenge to its constitutionality is presented before the Courts. No person therefore, could reasonably harbour any manner of doubt that when legislation is under challenge, the challenged legislation is in eclipse to be upheld… The appellate authority has rightly rejected the appellant's claim in this regard and has rightly reversed the order of adjudicating authority on a true and fair construction of Section 73(4) of the Act. The order of the Appellate Commissioner is impeccable and warrants no interference."

58. In light of the aforesaid discussions and findings, I hold that the service tax amount of Rs. 35,24,213/- along with interest is liable to be confirmed under Section 73(1) of the Finance Act,1994 read with Section 75 of the Act ibid and they are also liable to penalty under the provisions of Section 76, 77 and 78 of the Finance Act,1994.

59. Accordingly, I pass the following order:-

ORDER

(i) I confirm the demand of Rs. 35,24,213/- (Rupees Thirty Five Lacs Twenty Four Thousand Two Hundred and Thirteen only) and order it to be recovered from them under proviso to Section 73 (1) of the Finance Act, 1994 on the noticee. The Service Tax of Rs. 3,00,000/-, {paid vide GAR 7 Challan dated 18.01.2013}, by the noticee against the said demand of Rs. 35,24,213/- is hereby appropriated.

(ii) I direct the noticee to pay the interest as applicable on the amount of their service tax liability of Rs. 35,24,213/- under Section 75 of the Finance Act, 1994.

(iii) I impose a penalty of Rs. 200/- (Rupees Two Hundreds Only) per day or at the rate of 2% of the service tax amount per month, whichever is higher, subject to maximum of the outstanding tax amount, from the date on which such tax was due


till 09.05.2008 or the actual payment of outstanding tax amount, whichever is earlier, under the provisions of Section 76 of the Finance Act, 1994, as amended, for failure to pay Service Tax within the stipulated period as required under the provisions of Section 68 (1) of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994, as amended

(iv) I impose a penalty of Rs. 10,000/- (Rupees Ten Thousand Only) under Section 77 of the Finance Act, 1994 .

(v) I also impose a penalty of Rs. 35,24,213/- (Rupees Thirty Five Lacs Twenty Four Thousand Two Hundred and Thirteen only) upon them under Section 78 of the Finance Act, 1994 for suppressing the value of taxable services provided by them with an intent to evade payment of service tax. If the service tax amount is paid along with appropriate interest as applicable, within 30 days from the date of receipt of this order, then the amount of penalty under Section 78 shall be reduced to 25% of the service tax amount, provided if such penalty is also paid within such period of 30 days.

[J S Negi)

Additional CommissionerService Tax : Ahmedabad

F.No: STC/15-18/DGCEI/VAPI/2012-13 Date : 20.11.2013

By R.P.A.D/Hand Delivery

To,

M/s CCG Constructions, 1004, Shyamvrund Apartment, Shyamal Road, Opp.-Dhananjay Tower, Ahmedabad.

Copy to :

(i) The Commissioner Service Tax, Ahmedabad. (Attention Review Cell). (ii) The Joint Director, DGCEI, Ahmedabad Zonal Unit, 1st Floor, Preema

Chambers, Nr. Mithakhali Six Roads, Navrangpura, Ahmedabad. (iii) The Assistant Commissioner, Service Tax, Division-I, Ahmedabad. (iv) The Superintendent, Service Tax, A.R.-II, Division-I, Ahmedabad along with

an extra copy of OIO to be delivered to the noticee and submit the acknowledgement to this office.

(v) Guard File.

· web viewm/s. ccg constructions, 1004, shyamvrund apartment, shyamal road, opp.-dhananjay...

Documents