Hindustan Steel Works Construction Ltd. Vs Commissioner of Central Excise CGST (CESTAT Delhi)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, allowed the appeal filed by Hindustan Steel Works Construction Ltd. against a service tax demand arising from services received under the reverse charge mechanism (RCM). The Department alleged non-payment of service tax on manpower supply, works contract, legal, rent-a-cab and security services under Notification No. 30/2012-ST dated 20 June 2012. The appellant accepted the demands concerning legal, rent-a-cab and security services but contested the demands relating to manpower supply and works contract services. On merits, the Tribunal rejected the appellant’s claim that it acted merely as an intermediary between subcontractors and public sector undertakings. The appellant contracted to supply services to the undertakings and separately procured services from subcontractors, creating two distinct taxable transactions. The Tribunal held that paying service tax as a provider did not eliminate its separate reverse charge liability as a recipient, and revenue neutrality did not extinguish primary liability.
Nevertheless, the Tribunal found the extended limitation period unsustainable. The appellant was registered, regularly filed returns and paid service tax. Incorrect self-assessment did not by itself prove deliberate suppression or intent to evade. Revenue neutrality also weighed against an inference of evasion. Applying the principle explained in Pushpam Pharmaceuticals, the Tribunal held the show cause notice time-barred, set aside the impugned order and allowed the appeal.
However, the Tribunal found that the Department had wrongly invoked the extended period of limitation under Section 73(1) of the Finance Act, 1994. Referring to the Supreme Court’s decision in Pushpam Pharmaceuticals Company v. Collector of Central Excise, it reiterated that suppression of facts must involve deliberate withholding of information with an intention to evade tax. The appellant was registered with the Service Tax Department, regularly filed returns and discharged service tax liabilities. The Tribunal held that incorrect self-assessment alone could not establish deliberate suppression, particularly when the Department possessed statutory powers to examine records and determine the correct liability. Further, the revenue-neutral nature of the transactions weighed against any allegation of intention to evade payment of service tax.
Cases Discussed
- PSV Polymers Pvt. Ltd. v. Commissioner of CGST and Central Excise, Jodhpur, 2025 (394) E.L.T. 311 (Tri.–Del.), Appeal ST/53350/2018, decided 03.06.2025 — Cited by the appellant on revenue neutrality.
- Nizam Sugar Factory v. Collector of Central Excise, A.P., 2006 (197) E.L.T. 465 (S.C.) — Cited by the appellant regarding extended limitation.
- Pushpam Pharmaceuticals Company v. Collector of Central Excise, Bombay, 1995 (78) E.L.T. 401 (S.C.) — Discussed by the Tribunal concerning deliberate suppression of facts.
Appearance: Advocate Tarun Chatterjee, Mr. Saurav Basu, Advocates and Ms. Sneha Dass, Consultant for the respondent
FULL TEXT OF THE CESTAT DELHI ORDER
The present appeal is filed to assail the Order-in-Original bearing number 014/2022 dated 13 March 2022.
1. The facts which have culminated into the said order are that M/s Hindustan Steel Works Construction Ltd1 are registered with service tax department being engaged in providing various services as that of Manpower Supply Service erection Commissioning and installation service, works contract Service, Construction Service, Consulting Engineer service supply of tangible goods service etc. The appellants have entered into contracts with various public sector undertakings and government projects for providing aforementioned various services and had also engaged subcontractor for providing such services.
2. During the audit of appellants’ records for the period from February 2014 to January 2017 department observed that the appellants had received various services as that of manpower Supply Service, Rent a Cab Service, Works contract Service and Security Guard Services, however the appellant had not discharged service tax liability in accordance to notification 30/2012 St dated 20 Jun 2012. According to the said notification in case of receiving manpower Supply Service 75 Per cent of service tax was to be paid by the appellant/service recipient 100 per cent liability of service tax was of the recipient/appellant in respect of receiving legal services. Notification 30/2012 requires the service recipient/appellant, to pay 40 per cent of the service tax the said liability got increased to 50 per cent with effect from 01.10.2014. For receiving works contract services also recipient liability to pay service tax is to the extent of 50 per cent. However the appellant was found to have not discharged the liability in the aforesaid manner as their service tax returns were silent to the said effect.
3. A show cause notice bearing number 15-4/2019/2007 dated 11.04.2019 was served upon the appellant proposing as follows.
i. Service Tax amounting to Rs. 9,93,02,818/- ED Cess / SB Cess Rs.20,88,325/- SHE Cess / KK Cess Rs. 10,45,842/- Total Rs. 10,24,36,985/- (Rs.Ten Crore Twenty Four Lakh Thirty Six Thousand Nine Hundred Eighty Five only) on Manpower Recruitment and Supply Service received by the Appellant “)
ii. Service Tax amounting to Rs.4,77,151/- ED Cess / SB Cess Rs.8,198/- SHE Cess /KK Cess Rs. 3154/- Total Rs.4,88,503/- (Rs. Four Lakh Eighty Eight of Thousand Five Hundred and Three only) on Legal Service received by the Appellant.
iii. Service Tax amounting to Rs.2,61,254/- ED Cess / SB Cess Rs.4,233/- SHE Cess /KK Cess Rs.1,912/- Total Rs.2,67,399/- (Rs. Two Lakh Sixty Seven Thousand Three Hundred Ninety Nine only) on Rent-a Cab Operator Service received by the Appellant ST/51539 OF 2022
iv. Service Tax amounting to Rs. 11,30,939/- ED Cess / SB Cess Rs.25,416/- SHE Cess / KK Cess Rs.17,780/- Total Rs.11,74,135 /- ( Rs. Eleven Lakh Seventy Four Thousand One Hundred Thirty Five only) on Works Contract Service received by the Appellant
v. Service Tax amounting to Rs.1,69,204/- ED Cess / SB Cess Rs.3,780/- SHE Cess / <K Cess Rs.1,539/- Total Rs.1,74,523 /- (Rs. One Lakh Seventy Four Thousand Five Hundred Twenty Three only) on Security Service received by the Appellant
4. The aforesaid amounts were proposed to be recovered along with under section 75 of the finance Act 1994 and the penalties of Section 77 and 78(1) of the Finance Act 1994 read with Section 174 Central Goods and Service Tax Acts 2017. The said proposal has been confirmed vide the impugn order being aggrieved the appellant is before this tribunal.
5. We have heard Mr. Tarun Chatterjee, Mr. Saurav Basu, Advocates and Ms. Sneha Dass, Consultant for the respondent and Mr. Mihir Ranjan, Learned Counsel of the Department.
6. Learned Counsel for the appellant has foremost acknowledged that demands of service tax has been confirmed against the appellant under RCM for receiving 5 different kinds of services i.e. Manpower Supply Service, Works Contract Service, Legal Consultancy Service, Rent a Cab Service and Security Guard Services. It is foremost acknowledged that the appellant are not disputing the demand on legal service, rent a cab service and security guard services. While objecting the confirmation of service tax demand with respect to receiving Manpower Supply Service and Works Contract Services under RCM, learned counsel has submitted that appellant is a public sector undertaking which entered into a contract of supplying skill/unskilled labour to other public sector undertakings. It is further mentioned that the appellant company had paid service tax as service provider also on supply of Manpower service and Works contract service. Demanding service tax on the same services again under the reverse charge basis is bad in law.
The demand of tax of Rs. 10, 24, 36,985/- under the category of Manpower Supply and of Rs. 11, 74,135/- under the category of WCS under reverse charges mechanism is objected on two grounds. Firstly that the appellant are not the recipient of the service but are the intermediary between the sub-contractors and the recipient public sector undertakings. The sub contractors are the service provider and the other PSUs like the Bhilai Steel Plants are the recipients of the said service. Secondly, the appellant had paid the service tax of Rs. 13,53,389 on the same service as provider. Therefore, at the same time appellant cannot be made liable once as the recipient and as the provider of the same service, also.
7. Learned counsel also impressed upon that the appellant, if at all is liable to pay service tax under RCM, the very same amount is available as cenvit credit hence it is a revenue neutral situation. Learned council has relied upon the decision of this tribunal in the case of PSV Polymers Pvt ltd. v/s Commissioner of CGST and Central Excise Jodhpur reported as 2025(394) ELT 311 (Tribunal Delhi) dated 03.06.2025 in appeal number ST/53350 of 2018.
8. Learned Counsel further submitted that the impugned show cause notice has wrongly invoked the larger period of limitation despite the fact that the appellant was regular in furnishing the returns and the requisite payment of tax otherwise also the show cause notice in question is issued based on the scrutiny of returns and the records of the appeal. It is clear that the activity of appellant was well within the knowledge of the department. An earlier show cause notice dated 05.12.2016 bearing number 08/2013-14/9546 was also served upon the appellant. The second show cause notice on the same allegation account issued invoking the extended period of limitation.
9. Learned Counsel has relied upon the decision of Hon’ble Supreme Court in the case of Nizam Sugar Factory vs Collector of Central Excise AP reported as 2006(197) ELT 465 Supreme Court with the Submissions the order under challenge is prayed to be set aside and the appeal is prayed to be allowed.
10. While rebutting the submissions of the appellant. Learned DR has foremost reiterated the findings arrived at by the original adjudicating authority. It is submitted that the appellant has already acknowledged its liability viz-a-viz 3 out of 5 alleged services received by the appellants. The only issue is about service tax liability of appellant under RCM for receiving Manpower Supply Service and Works Contract Service the issue is also about penalty imposed on the appellant for alleged suppression of relevant facts.
11. Learned DR has submitted with respect to the service tax liability that as per appellant’s own admission there exist 2 distinct taxable transactions i.e sub contractor supplied services to the appellant and appellants then supplied services to other PSUs (Bhilai Steel Plants and TATA Steel Authority) etc. In such circumstances the appellant cannot take the plea of it being an intermediary between its sub-contractors and the other PSUs the final service recipients nor can take the plea of discharging service tax liability as service provider on the very same service. The findings to these fact in the impugn order, therefore, have no infirmity. The Plea of revenue neutrality also does not extinguish the primary tax liability. With respect to invocation of extended period of limitation, Learned DR has submitted that the as per audit the appellant was found to have declared lower taxable value in its service tax return then the value in their own ledgers. The said under declaration is rightly held to not be a mere interpretational dispute but a concrete non-disclosure of taxable value. The extended period as rightly been invoked while issuing the impugn show cause notice number 30 of 2012 clearly defines the service recipients liability to pay service tax with respect to services mentioned therein to such extent/percentage has mentioned therein. Hence the appellant is not allowed to take the benefit of any interpretational dispute. With these submissions the order under challenge is prayed to be upheld and the appeal is prayed to be dismissed.
12. Having heard both the parties the partial demand confirmed under the impugn order has been accepted by the appellants hence we need not to interfere with the findings with respect to the service tax liability of the appellant on receiving legal service, rent a cab operator service and security guard services. The findings and the confirmation of demand of service tax amounting to Rs. 4, 77,151, Rs. 2, 61,254 and Rs. 1,69,204 respectively is hereby upheld.
13. Coming to the disputed demand of Rs. 9,93,02,818/- for receiving Manpower Supply Service and of Rs. 11,30,939/- on receiving Works Contract Service, the findings are as follows. Both the demands has been confirmed invoking notification no. 30 of 2012 dated 20 June 2012.It is observed from the notification that for receiving the Manpower Supply Service the recipient of the service is liable to pay 75% of the service tax. In case of receiving the Works Contract Service the notification requires recipient to discharge 50 per cent liability of the Service Tax. There is no dispute that both the aforesaid services the department has alleged the appellant to be the recipient of both these services. On the contrary the appellant claims itself to be the provider of these services to other PSUs as an intermediary between the said PSUs and the sub contractor engaged by the appellant. To adjudicate the justification of the said plea we have foremost perused meaning of intermediary as given in sub rule (f) of rule 2 of the place of provision of service rules 2012, according to which intermediary means.
“a broker, an agent or any other person by whatever name called, who arranges or facilitates a provision of service (herein called the main service) or a supply of goods between two or more person but does not include a person who provides the main service. The bare perusal of the definition clarifies that the main provider of service cannot be called as intermediary. In the present case the appellant has entered into an agreement with other PSUs like the Bhilai Steel Plant and the Tata Steel Authority of India etc. for providing Manpower Supply Service and Works Contract Services to them. For the said provision the appellant had engaged the sub contractors. Under the later arrangement the appellant was receiving both those services from the sub contractors. These facts, to our opinion, takes the position of the appellant outside the scope of intermediary. The education guidance note of June 20, 2012 has also clarified the meaning of intermediary in para 5.9.6 thereof. The definition of intermediary has been analyzed in the following manner:
1. An intermediary arranges or facilitates a provision of a ‘main service’ between two more persons;
2. An intermediary is involved with two supplies at any one time: (i) the supply between the principal and the third party; and (ii) the supply of his own service (agency service) to his principal, for which a fee or commission is usually charged;
3. An intermediary cannot alter the nature or value of service, the supply of which he facilitates on behalf of his principal, although the principal may authorize to negotiate a different price;
4. The consideration for an intermediary’s service is separately identifiable from the main supply of service that he is arranging and is in the nature of fee or commission charged by him;
5. The test of agency must be satisfied between the principal and the agent i.e. the intermediary. The Guidance note states that the intermediary or the agent must have documentary evidence authorizing him to act on behalf of the provider of the ‘main service’;
6. The payment for such services is received by way of commission;
14. From the facts in the present case the appellant is not merely a facilitator but the main service provider. There is admittedly no arrangements between the said contractors engaged by the appellants and the PSUs like Bhilai Steel Plant and Tata Steel authority, about the services in question. These observations are sufficient for us to discard the only plea raised by the appellant for denying their liability under reverse charge mechanism As rightly pointed out in the impugned order that the transaction between the three are two separate legs of same transaction and each leg has its own liability. We do not find any infirmity when the service tax demand under reverse charge mechanism has been confirmed against the appellant. The revenue neutrality plea also does not extinguish the primarily tax liability. Hence we do not find any infirmity when the demand has been confirmed.
15. In order to invoke extended period of limitation under the proviso to section 73(1) of the Finance Act, 1994, one of the factors (1) fraud; or (2) collusion; or (3) wilful misstatement; or (4) suppression of facts; or (5) violation of the provisions of the Act or Rules with an intent to evade has to be proven. Mens rea iS inherent in all of the above terms except ‘suppression of facts’. While interpreting section 11A of the Central Excise Act, (which also used the same expressions), this expression, was, however, held by the Supreme Court in Pushpam Pharmaceuticals company vs Collector of Central Excise, Bombay [995 (78) E.L.T. 401 (S.C.)] to include intent as an essential part. Relevant portion of the judgment is reproduced below:
“Section 11A empowers the Department to re-open proceedings if the levy has been short-levied or not levied within six months from the relevant date. But the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has been used in company of such strong words as fraud, collusion or wilful default. In fact it is the mildest expression used in the proviso. Yet the surroundings in which it has been used it has to be construed strictly. It does not meanany omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression.
Therefore, whenever, the tax or duty is revenue neutral at the hands of the same assessee, i.e., where it had to pay tax or duty with one hand and could take credit with the other, there cannot be any intent to evade and for that reason, extended period of limitation cannot be invoked. This has been the consistent position in various judgments.
Secondly, there is no dispute that the appellant was registered with the department, was paying service tax and filing returns regularly under section 70 of the Finance Act. If the tax has not been self-assessed and paid correctly, remedy for that lies in section 72 of the Act (Best judgment assessment) and for that reason, the central excise officer can call for any records and accounts from the assessee. Incorrect self- assessment, by itself cannot result in invoking extended period of limitation. The central excise officer in the range was supposed to do what the audit has done much later. For both these reasons, it does not appear correct to uphold invocation of extended period of limitation under the proviso to section 73(1) or the penalty under section 78 of the Act in this case.
16. In view of the above discussion and keeping in view that the period in dispute in the present case, is from 01.10.2013 to 30.09.2014. Service tax for the said period has been demanded vide Show Cause Notice dated 11.04.2019 has been proposed thus it is clear that Show Cause Notice has extended period of limitation. Show Cause Notice has invoked the extended period of limitation. In view of the above discussion the Show Cause Notice is already barred by time. The order confirming demand of such a Show Cause Notice is therefore not sustainable. Same is hereby set aside. Consequent thereto the appeal is allowed.
Notes:
1 The Appellant
