2026-VIL-1711-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Construction of hospital for a society as commercial or industrial construction service – Appellant, registered for construction services, had not filed returns nor paid service tax, and constructed a hospital for a welfare society during April 2012 to June 2012 – Whether construction of the hospital is not commercial or industrial construction service in view of the CBIC Circular dated 17.09.2004 – HELD - The Appellant was engaged in construction of commercial or industrial structures in both periods, and these services were chargeable to service tax. Hospitals can be charitable or commercial. Unless there is evidence that the hospital was meant to be a charitable hospital, its construction would qualify as commercial or industrial construction service, as running hospitals is a big source of commerce. The Appellant is not entitled to exemption - The demand is upheld, as abatement was already allowed and liability was reduced where the service recipient was to discharge the tax - Service Tax – Works contract service – Valuation under Rule 2A of the Service Tax (Determination of Value) Rules, 2006 – Appellant provided works contract services during July 2012 to March 2013 and contended that tax is to be determined under Rule 2A by deducting the actual value of goods or on presumptive basis – Whether the demand was correctly determined having regard to abatement and Notification No. 30/2012-ST – HELD - Under Rule 2A, the value of goods is excluded from the gross amount charged if possible, and if not, tax is charged on the prescribed percentage. As per Notification No. 30/2012-ST, 50% of the tax liability is discharged by the service recipient. The Commissioner had calculated the tax after considering the abatement and the recipient's 50% liability wherever applicable. Nothing was shown to prove that the actual value of goods used exceeded the abatement allowed - There is no infirmity in the impugned order and the demand is upheld - Service Tax – Free of cost material supplied by service recipients in works contract – Demand was confirmed on the value of free of cost material supplied by customers while allowing abatement under works contract – Whether such value is includible in the gross amount charged for the works contract – HELD - Following the decision of the Larger Bench of the Tribunal in Bhayana Builders Pvt Ltd vs Commissioner of Service Tax, Delhi, the value of free of cost material supplied by customers cannot be included in the gross amount charged - The demand on such material is set aside and the appeal is allowed to this extent - Service Tax – Classification of services as exclusive service contracts or works contracts – Commissioner treated certain contracts as exclusive service contracts and confirmed demand, whereas Appellant contended that these were works contracts – Whether such services can be treated as works contracts without substantiation – HELD - There is nothing in the appeal to substantiate the assertion that these services were works contracts, and the Commissioner is not shown to have erroneously considered them as services simpliciter - The demand on this part is upheld - Service Tax – Appropriation of amounts deposited during investigation – Appellant contended that amounts deposited through challans during investigation need to be appropriated against the confirmed demand – Whether such amounts are to be appropriated – HELD - This is a matter of verification. If the amounts have indeed been deposited as service tax, they shall be appropriated towards the confirmed demand - Service Tax – Penalty under section 76 of the Finance Act, 1994 – Appellant had not paid the service tax, nor filed returns, nor declared the services provided, and everything came to light only as a result of investigation – Whether penalty under section 76 can be set aside – HELD - Since the Appellant neither paid the tax, filed returns nor declared the services, and the facts came to light only through investigation, there is no reason to set aside the penalty - The penalty is upheld, the impugned order is modified only to set aside the demand on free of cost materials, the rest is upheld and the appeal is allowed to that extent.
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