2026-VIL-691-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Works Contract service, Service Tax on Agency Charges, Discharge of service tax through CENVAT credit, Invoking of extended period of limitation against PSU – Demand of service tax under various categories like commercial and industrial construction services, erection, commissioning and installation services, and consulting engineering services, along with denial of CENVAT credit - Whether the services provided by the appellant to BHEL, SAIL, CLW, and Rajendra Agricultural University are classifiable as works contract services and not commercial and industrial construction services, erection, commissioning and installation services, or consulting engineering services – HELD - The appellant was responsible to provide labour, materials, consumables, and to use their own equipments, construct temporary storage sheds etc. This shows that material supply is an essential part of the Agreement. It is not a mere contract for providing the service alone - The services provided by the appellant to BHEL and SAIL are in the nature of works contract services and not the other categories proposed by the revenue. Relying on the Supreme Court decision in Larsen & Toubro, it is observed that the contracts involved supply of materials and were not mere service contracts. Therefore, the demands under commercial and industrial construction services, erection, commissioning and installation services, and consulting engineering services are set aside on merits - In respect of the demand on account of services rendered to BHEL, the same stands set aside both on account of merits as well as on account of time bar - In respect of services rendered to SAIL, balance confirmed demand stands admitted by the appellant. The service tax payment by way of debiting the Cenvat Credit account is to be verified by the Adjudicating authority. Once the debit gets confirmed, irrespective of whether it is shown in the ST 3 Return or not, the same is to be treated as proper discharge of the tax liability by the appellant - The appeal is disposed of - Service Tax on Agency Charges - Demand on services rendered to Rajendra Agricultural University – HELD - The appellant is the “Executing Agency?, who is responsible for the overall completion of the project, including appointing of sub-contractor, supply of materials, completion of the project as per the specified by the University. The sole responsibility to complete the project with proper quality and workmanship of the said project, is on the appellant. The appellant has raised the initial issue of the quantification of the demand. As per the appellant, while 8.5% has been mentioned as the “Agency Charges?, payable to the appellant, the same is nothing but the profit margin of the appellant. The Service Tax demand, if any, should have been made only on this 8.5% Agency Charges. However, the demand has been raised on the full construction value plus the 8.5% agency charges, because of which the quantification has been highly inflated – The demand could not have been made on value of the Project Cost + 8.5% thereon. Thus the Service Tax has been demanded on Rs.108.50, whereas the Service Tax, if any, would be demandable only on Rs.8.50 if the same is treated as “Consultancy Service?. Hence, the quantification of the value and Service Tax is required to be re-worked out - In respect of Consultancy Service except for the demand on the consideration of 8.5% [Agency Commission], no other amount can be added to arrive at the demand. Therefore, re-quantification of demand is required to be done and Service Tax is required to be paid on the Agency Charges - Invoking of extended period of limitation against Public Sector Undertaking (PSU) - Whether the extended period of limitation can be invoked to demand service tax - HELD - The appellant is a reputed PSU and is in the business of taking of Works Contract and other works for other PSUs and others. Prima facie, being a Govt. entity, they would not have any willful intent to evade the Service Tax payment - The extended period of limitation cannot be invoked against the appellant in the absence of any fraud or suppression of facts with the intent to evade tax. The appellant, being a government-owned entity, cannot be charged with suppression or fraud even if the tax was legally payable. Therefore, the demands for the extended period are set aside on the ground of limitation.
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