Commissioner of CGST And Central Excise Vs Modern Road Makers Pvt. Ltd. (CESTAT Mumbai)
The Revenue filed an appeal before the CESTAT, Mumbai against an Order-in-Original dated 11 August 2021 passed by the Principal Commissioner of Service Tax, Mumbai, whereby a substantial service tax demand was dropped. The respondent filed a cross appeal challenging the confirmation of service tax demand of ₹87,676 along with the related interest and penalties.
The respondent was registered under the Service Tax law. Revenue received data relating to the respondent’s turnover for the financial year 2013-14 from the income-tax return and the corresponding Form 26AS. It noticed a mismatch between the turnover reflected in those records and the value of services declared in the respondent’s ST-3 returns, which reflected nil taxable services for that year. Proceeding on the assumption that the entire turnover of approximately ₹2,369 crore shown in Form 26AS represented consideration for taxable services, Revenue calculated service tax at 12.36% and issued a show cause notice dated 16 April 2019 demanding service tax of ₹292,87,51,316.
The respondent submitted its reply to the show cause notice. After examining the reply, the adjudicating authority concluded that approximately ₹2,295 crore of the turnover related to works contracts for construction, operation, repair and maintenance of national highways and expressways for public use, which were exempt under Entry No. 13(a) of Notification No. 25/2012-ST dated 20 June 2012. Accordingly, the adjudicating authority dropped the service tax demand of ₹292,86,63,640. However, it confirmed service tax of ₹87,676 on commission income and certain written-off income, ordered recovery of interest, imposed an equal penalty under Section 78 of the Finance Act, 1994, and imposed penalties of ₹10,000 each under Section 77(1)(d) for failure to pay service tax electronically and for failure to furnish correct returns. Revenue challenged the dropping of the major demand, while the respondent challenged the confirmed demand and consequential penalties through its cross appeal.
