Ajab Singh & Co. Vs Principal Commissioner of Service Tax (CESTAT Delhi)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi, allowed the appeal of the assessee and rejected the cross-appeal filed by the Revenue, setting aside the confirmed service tax demand under Works Contract Service (WCS) and upholding exemption for certain construction activities.
The appellant, a contractor engaged by the Delhi Development Authority (DDA), executed various construction works including roads, drains, boundary walls, residential complexes, and development works at Coronation Park. The department initially issued a show cause notice proposing a demand of service tax under the category of “Construction of Residential Complex Services.” However, the adjudicating authority partly dropped the demand and confirmed a portion of ₹9,59,565/- under the category of Works Contract Service, along with interest and penalties.
The Tribunal examined whether such confirmation was legally sustainable. It held that a demand cannot be confirmed under a classification different from that proposed in the show cause notice. The show cause notice forms the foundation of the case, and deviation from the proposed classification violates principles of natural justice. Since the demand was raised under “Construction of Residential Complex Services” but confirmed under “Works Contract Service,” the Tribunal held that the demand itself was unsustainable and liable to be set aside.
