2026-VIL-1880-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax - Classification of services as Consulting Engineer Service or Real Estate Agent Service - Appellant, registered under Consulting Engineer's Service, provided services of preparation of bills of quantities, quantity take-off, verification of specifications and analysis of rates to an overseas associated enterprise for a project in India - Department classified the services as Real Estate Agent Service, treated them as provided in India, and confirmed the demand - Whether the services are classifiable as Consulting Engineer Service or Real Estate Agent Service - HELD - The services were advice, consultancy or technical assistance in relation to design, development and construction of real estate, and sale, purchase or leasing is not necessary for a service to fall within real estate agent service. The same services also fall within consulting engineer service as technical assistance in a discipline of engineering. Since the service is prima facie classifiable under two sub-clauses, Section 65A(2) applies. Clause (a) does not resolve the dispute because the services are specific both from the engineering view and from the real estate view, and clause (b) does not apply as there is no composite service. Under clause (c) the sub-clause which occurs first among those equally meriting consideration is to be adopted, and Consulting Engineer Service under Section 65(105)(g) occurs before Real Estate Agent Service. The place of provision of service is therefore the location of the service recipient outside India and no service tax is payable - The demand on this count is set aside - Service tax on reimbursable expenses - Rule 5(1) of the Service Tax (Determination of Value) Rules, 2006 - Department alleged short payment of service tax on reimbursable expenses in terms of Rule 5(1) - Entire period of dispute was before the amendment of Section 67 - Whether service tax is payable on reimbursable expenses for the period of dispute - HELD - During the relevant period Section 67 provided for service tax only on the consideration received for the services. Rule 5(1) which provided for levy on reimbursable expenses was ultra vires the Act. Section 67 was amended to make reimbursable expenses taxable only with effect from 14.05.2015. Since the entire period of dispute was before that date, no service tax was payable on reimbursable expenses - The demand on this count is set aside - Short payment of service tax on debtors reconciliation difference - Section 73(1) of the Finance Act, 1994 - Department, on audit, reconciled the debtors under the mercantile system of accounting and alleged unreported income on the basis of a difference between opening balance plus billing less receipts and the closing balance - Appellant contended that service tax was considered in the balances and in billing but was ignored in receipts, and that accounting adjustments were not considered - Whether the demand on the reconciliation difference is sustainable - HELD - Under the mercantile system the opening balance, billings, receipts and closing balance must tally, but the figures must be correctly considered. The difference arose because the service tax received from the service recipients was not considered among the receipts while the service tax billed was considered. Service tax law does not stipulate any manner of maintenance of accounts apart from the statutory returns and records. If the Department seeks to establish short payment on the basis of reconciliation, it must establish that the Appellant received greater consideration than what it declared. It is not open to the Department to ignore some figures or to insist on the records being maintained in any particular fashion - The demand on this count is set aside - Extended period of limitation - Proviso to Section 73(1) of the Finance Act, 1994 - SCN invoked the extended period alleging deliberate misclassification, non-inclusion of reimbursable expenses and incorrect value in the ST-3 returns, which came to light only on reconciliation of records - Appellant was registered, maintained its accounts and filed ST-3 returns regularly - Whether the extended period of limitation was correctly invoked - HELD - The Revenue's case is essentially that the Appellant did not correctly self-assess and pay service tax. Section 72 provides that where a person fails to assess the tax correctly the Central Excise Officer may call for accounts and records and make the assessment. All the data on which the SCN was based was in the records of the Appellant, and had the officer scrutinised the returns the SCN could have been issued within time. The extended period can be invoked only if one of the elements of fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade is established, and it cannot be presumed merely because the assessee operates under self-assessment. Incorrect self-assessment by itself does not establish wilful suppression with intent to evade. There was no evidence of any such element and the responsibility for time bar rests with the officer who failed to scrutinise the returns in time - The extended period is not invocable, the Appellant succeeds on merits and on limitation, and the appeal is allowed.
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