Service Tax Demand Requires Accurate Service Specification in SCN

Goyal & Co Construction Pvt Ltd Vs C.S.T (CESTAT Ahmedabad)

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) in Ahmedabad recently issued a ruling in the case of Goyal & Co Construction Pvt Ltd Vs C.S.T, quashing the service tax demand on commercial or industrial construction service and renting of immovable property services, citing discrepancies in the show cause notice.

The case revolved around a service tax demand on Goyal & Co Construction, amounting to Rs. 13,55,364/- for commercial or industrial construction service (2005-06), and Rs. 57,068/- for renting of immovable property services (2009-10). The appellant’s counsel argued that the show cause notice had inaccurately classified the service under ‘construction of residential complex services’. The tribunal agreed that the adjudication order cannot change the proposed classification in the show cause notice, and hence, the demand was not sustainable.

Furthermore, the Tribunal held that the appellant provided construction service along with material, and as such, it should be classified under ‘works contract service’, which was only subjected to Service Tax from June 1, 2007, hence making the demand for the period of 2005-06 unsustainable. Regarding the demand on renting of immovable property, the tribunal ruled that since the demand was raised during an audit of the appellant’s records, it implied there was no suppression of facts by the appellant and the demand was also barred by the limitation period.

Conclusion: The judgement delivered by CESTAT Ahmedabad in the case of Goyal & Co Construction Pvt Ltd Vs C.S.T is significant, as it stresses the importance of accurately stating the type of services in the show cause notice. By quashing the demand, the tribunal has provided crucial clarity and guidance on the principles for service tax applicability and has set an important precedent for similar cases in the future.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

1. By the impugned order demand of Service Tax amounting to Rs. 13,55,364/- was confirmed under Commercial or Industrial Construction Service (for the year 2005-06) and the demand of Rs. 57,068/- was confirmed under Renting of Immovable Property Services (for the year 2009-10)

2. Shri Hardik Modh, Learned Counsel appearing on behalf of the appellant submits that the show cause notice has raised the demand, under the head of construction of residential complex services, whereas in the impugned order, the demand was confirmed under different head i.e. Commercial or Industrial Construction Services. It is a submission that in the adjudication order, the classification which was proposed in the show cause notice cannot be changed. Therefore, the demand under Commercial or Industrial Construction Services is liable to be set aside on this ground alone.

2.1 Without prejudice, he further submits that the appellant have provided the construction service along with material, for this reason only in the show cause notice the demand was raised under Construction of Residential Complex. In this fact the service provided by the appellant falls under works contract service, on which the Service Tax was levied with effect from 01.06.2007. Accordingly, the demand for the period 2005-06 is not sustainable. As regard the demand of Rs 57,068/- on renting of immovable property. He submitted that the demand was raised during audit of the appellant’s records. Therefore, there is no suppression of fact on the part of the appellant. Accordingly, this demand as well as the demand under Commercial or Industrial Construction Service is hit by limitation also. He placed reliance on the following Judgments and board circular:

• Circular: 108/2/2009-S.T. dated 29-Jan-2009
• Circular: 151/2/2012-S.T. dated 10-Feb-2012
• Ben Foundation Pvt. Ltd. Versus Commissioner of C.EX.& S.T., Chennai -2019 (31) G.S.T.L. 434 (Tri. Chennai)
• National Building Construction Corporation Ltd. Versus Commissioner Of Central Excise, Shillong- 2022 (66) G.S.T.L. 476 (Tri. – Kolkata)
• Jagdish Pala Versus Commissioner of C. EX. & S.T., Rajkot -2022 (65) G.S.T.L. 471 (Tri. – Ahmd.)
• Saumya Construction Pvt. Ltd. Versus C.S.T., Ahmedabad – 2016 (46) S.T.R. 723 (Tri. – Ahmd.)
• Tamil Nadu Housing Board Versus Collector Of Central Excise, Madras – 1994 (74) E.L.T. 9 (SC)
• Punj Lloyd Ltd. Versus Commissioner of C. EX. & S.T., Rohtak 2015 (40) S.T.R. 1028 (Tri. – Del.)

3. Shri Ajay Kumar Samota, Learned Superintendent (AR) appearing on behalf of the revenue reiterates the findings of the impugned order.

4. On careful consideration of the submission made by both the sides and perusal of records, we find that it is an admitted fact that the show cause notice has proposed the demand of Service Tax under construction of residential complex. However, in the impugned order the demand was confirmed under Commercial or Industrial Construction Service. Thus, the impugned order has travelled beyond the scope of show cause notice.

4.1 We are of the view that the show cause notice cannot be rectified by way of Adjudication Order passed in such show cause notice, therefore, on this ground alone demand is not sustainable. Moreover, the period involved is 2005-06, even if it is assumed that the appellant had provided commercial or industrial construction service but undisputedly the service was provided along with material, therefore, it is falling under works contract Service. The levy of Service Tax on Works Contract was brought under the statute only with effect from 0 1.06.2007. The Hon’ble Supreme Court in the case of CCE Vs. L & T Ltd.- 2015 (39) S.T.R. 913 (S.C) clearly held that if the nature of the services is of works contract, the same is not levy to service prior to 01.06.2007.

 4.2 As regard the demand of Rs 57,068/- under head of renting of immovable property, we find that the levy of service Tax on renting of immovable property was not free from doubt, there were contrary judgments on this issue and finally the matter seized by the Hon’ble Supreme Court. Therefore, the issue involved is of interpretation of the definition of renting of immovable property service. Moreover, the demand was raised on the basis of scrutiny of the documents of the appellant during the audit. This also shows that appellant have no intention to hide their transaction with intent to evade payment of Service Tax, therefore, in absence of any suppression of fact, fraud or collusion etc. the demand for the extended period cannot be sustained. Therefore, this demand under renting of immovable property service is set aside on the ground of limitation.

5. As a result, the impugned order stands modified to the above extent. The appeal is allowed.

(Pronounced in the open court on 24.07.2023)