M/s. Prabhu Dayal Kanojiya vs CCE, Jaipur

Assessee has preferred this appeal against the order dated 18.03.2013 passed by the Commissioner of Central Excise, Jaipur-I confirming a service

tax of Rs.4,18,665/- under Section 73A(4) of the Finance Act, 1994 apart from interest under Section 73(B) and penalties under Sections 76 and 77(2)

of the Act.

At the hearing of the stay applications, having regard to the very short issue that falls for consideration, we proceed to dispose of the appeal itself,

with the consent of the parties and after a hearing on merits.

Proceedings were initiated by the show cause notice dated 21.10.2011 proposing service tax levy of Rs.55,79,681/- apart from interest and penalties

for having provided - Erection, Commissioning, or Installation Services; Commercial or Industrial Construction Services; or work contracts service

during the period 2010-2011, to several organizations. The appellant submitted its response thereto asserting that all the services provided under

several agreements entered into with several entities fall within the general scope of Commercial or Industrial Construction Service but the works

executed fall outside the ambit of the definition of “Commercial or Industrial Construction†Service, since the works were not for commercial or

industrial purposes but were executed as public works, for reservoirs, sewerage treatment plants or municipalities including ERA Jammu, Jaipur

Municipal Corporation, and Delhi Jal Board, etc. The ld. Adjudicating Authority accepted the classification of the taxable service proposed by the

appellant and concluded that the services fall within the ambit of Commercial or Industrial Construction Service. The Adjudicating Authority also

accepted that the several works executed by the appellant fall outside the ambit of the taxable service as defined in the Act. Consequently, the

substantive demand for service tax was dropped.

However, in para-39 of the impugned order, the Authority confirmed a demand for Rs.4,18,665/- on the ground that this amount is the service tax

component on the work executed by the appellant under work order no.MB6 PO-2817 dated 4.3.2010, involving construction of “digester domesâ€

for the Delhi Jal Board. The Adjudicating Authority observed that since the relevant agreement contains a term that service tax element if payable is

extra, it must be inferred that the appellant had collected the amount of service tax; the appellant had not furnished any evidence to prove that no

service tax was collected from the recipient under this contract, hence, Rs.4,18,665/- must be remitted, in terms of Section 73A(2) of the Act.

Section 73A of the Act enumerates provisions for liability to remit service tax collected by a person. Sub-section (2) of this provision enacts:

“where any person, who has collected any amount, which is not required to be collected, from any other person, in any manner, as representing

service tax, such person shall forthwith pay the amount so collected to the credit of the Central Governmentâ€. On a true and fair construction of this

provision, the legislative intent is clear. The conditions precedent for ordering any person to remit (an amount collected as service tax, which is not

required to be so collected), is a finding of fact that the person had in fact collected an amount towards service tax even though no service tax liability

arises under the transaction qua which such collection is made. This finding of fact must be recorded by the Revenue. The liability to remit service tax

under Section 73A(2) does not arise on the basis of a mere permission in an agreement that the liability to compensate/reimburse to service tax liability

of the service provider, is on the service recipient. A factual finding that a person has collected service tax is a condition precedent for passing an

order under Section 73A(2) read with sub-section (4) thereof. Sub-section (4) specifically enjoins that an order should be passed under this provision

only after considering the representation, if any, made by the person on whom the notice is served under sub-section (3) and to determine the amount

due from such person, not being in excess of the amount specified in the notice. Sub-section (3) of Section 73(A) requires a notice to be issued to

show cause why the amount, as specified in the notice, in respect of a liability arising under Section 1 and 2, should not be paid by the Noticee to the

credit the Central Government.

The show cause notice in this case failed to allege that the appellant had collected service tax of Rs.41,18,665/- from the Delhi Jal Board.

On the aforesaid analysis, the impugned order is unsustainable and is accordingly, quashed. The appeal is allowed. No costs.