2026-VIL-1794-CESTAT-ALH-ST
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SERVICE TAX CESTAT Cases

Service Tax - Exemption to works contract services for construction provided to Railways - Entry 14(a) of Notification No. 25/2012-ST - Adjudication beyond the scope of remand - Appellant provided works contract services for construction of a training school and a hostel to Railways - Whether the services provided to Railways are liable to service tax and whether the Adjudicating Authority could re-open the issue in de novo proceedings - HELD - The services are exempt under Entry 14(a), which covers construction of original works pertaining to railways. The Railways Act, 1989 defines railway to include stations, offices, hostels and other works constructed for the purpose of or in connection with a railway. The training school and the hostel fall within that definition. By confirming the demand, the Adjudicating Authority acted beyond the scope of the remand directions. An authority acting on remand is bound by the directions of the Appellate Authority and cannot revisit settled issues. The finding of exemption, not having been challenged by the Department, had attained finality, and the Department is barred by estoppel from re-agitating it - The demand is set aside and the appeal is allowed - Exemption to works contract services for construction of government buildings provided to State Government corporations - Entries 12/12A and 29(h) of Notification No. 25/2012-ST - Section 102 of Finance Act, 1994 - Contracts entered prior to 01.03.2015 - Appellant provided works contract services to State Government undertakings for construction of Government clinical and educational establishments, offices and residential buildings for Government staff. The lower authorities denied the exemption on the ground that mere Government ownership does not make the entity a Governmental Authority and that the entities did not carry out functions entrusted to a municipality - Whether exemption under Entry 12A can be extended to these works contract services for contracts awarded prior to 01.03.2015 - HELD - The State Government undertakings having over 90% equity are a Governmental Authority as defined in the Notification. The services were for construction of non-commercial Government buildings, which are covered by Entry 12/12A read with the retrospective validation under Section 102. The Appellant is also eligible for exemption as a sub-contractor under Entry 29(h), as the main contractors provided exempt services to the Government. Taxability has to be decided according to the service rendered to the client, whether rendered directly by the main contractor or through a sub-contractor. The Hon'ble Supreme Court has held that the exemption cannot be restricted to authorities carrying out functions entrusted to a municipality, as plain and unambiguous provisions must be interpreted as they stand - The demand on these services is set aside and the appeal is allowed - Cum-tax benefit under Section 67(2) of Finance Act, 1994 - Works contract services under contracts awarded after 01.03.2015 - The first Adjudicating Authority allowed cum-tax benefit on the strength of a certificate from the service recipient and the work orders and payment certificates, which showed that no service tax was paid. The Department did not challenge this. In the de novo proceedings, the benefit was denied on the ground that the Appellant failed to conclusively establish that the amounts received were inclusive of service tax - Whether the Appellant is entitled to cum-tax benefit - HELD - The Appellant had not collected any service tax separately from its clients, and the Department failed to produce any document showing that service tax was charged or received. The gross amount received must therefore be treated as inclusive of service tax in terms of Section 67(2). The benefit, having been correctly allowed in the first Order-in-Original and not challenged by the Department, had attained finality and could not be denied in the de novo proceedings - The Appellant is entitled to cum-tax benefit and the appeal is allowed on this issue - Demand on differential between receipts as per Income Tax Return and Form 26AS - Determination of value of services - The Adjudicating Authority in de novo proceedings treated the gross receipts declared in the ITR as higher than the receipts in Form 26AS and confirmed demand at the full rate on the differential. The FAA had earlier recorded the gross receipts in the ITR as a lower figure - Whether service tax is leviable on the alleged differential between the ITR and Form 26AS - HELD - The ITR for the relevant year shows a total gross receipt lower than the figure adopted by the Adjudicating Authority, as already noted by the FAA. The alleged differential does not exist, as the ITR figure was wrongly quoted by the Department. The demand on the differential is improper and illegal - The demand is set aside and the appeal is allowed on this issue - Threshold exemption under Notification No. 33/2012-ST for the financial year 2016-17 - The FAA denied the threshold exemption on the ground that it is not available once the taxable turnover exceeds the prescribed limit. The Appellant contended that its services in the preceding year were entirely exempt - Whether the Appellant is entitled to threshold exemption in the financial year 2016-17 - HELD - Eligibility for the exemption is determined based on the taxable turnover of the preceding financial year. In the preceding year, the Appellant's services were entirely exempt and the aggregate value of taxable services was nil. The Appellant is therefore entitled to the threshold exemption. The authorities below failed to grant this statutory exemption without any valid reason - The appeal is allowed on this issue - Invocation of extended period of limitation and imposition of penalties under Sections 77, 78 and 70 of Finance Act, 1994 - Bona fide belief on exemption - The exemption under Entry 12(a) for works contract services of construction of Government buildings was omitted by Notification No. 6/2015-ST and reinserted by Notification No. 9/2016-ST as Entry 12A with retrospective effect, subject to a condition regarding contracts entered into prior to 01.03.2015. The Appellant did not take registration or file ST-3 returns, believing its services to be exempt, but declared all its receipts in its financial statements and ITRs. The SCN invoked the extended period and proposed penalties, and a late fee under Section 70 was also imposed - Whether the extended period and penalties can be sustained - HELD - The SCN was issued without any tangible evidence of fraud, collusion, willful misstatement or suppression of facts with intent to evade tax. It merely reproduces statutory language, and the burden of proving willful intent lies on the Department. Suppression of facts must be construed strictly and requires a deliberate and willful act to evade tax, not mere omission or non-payment. The withdrawal and reinstatement of the exemption created an impression that the exemption was still available, and the case is one of bona fide belief arising from an interpretational dispute. The extended period and penalty under Section 78 cannot be invoked in such a case. Penalties under Section 77 are also not imposable. The late fee under Section 70 read with Rule 7C of the Service Tax Rules, 1994 is illegal, as Rule 7C prescribes a penalty for delay in filing returns and not for non-filing of returns - The extended period is not invocable, the penalties and late fee are set aside, and the appeal is allowed - Validity of SCN issued without pre-SCN consultation - Board Instruction and Master Circular - SCN proposed a demand above the monetary threshold prescribed in the Board's instructions and circulars, for which pre-SCN consultation is mandatory. The record did not show that any consultation was held. The FAA held that pre-SCN consultation was not necessary, as the Board had excluded fraud and collusion cases from the process - W
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