In Service Tax Appeal No. 49 of 2012- CESTAT- CESTAT (Chennai) upholds rightful invocation of extended limitation period under Section 73 of Finance Act, as Anti-Evasion Unit detected and investigated non-payment of Service Tax
Members P. Dinesha (Judicial) & Vasa Seshagiri Rao (Technical) [03-05-2023]

Read Order: K. Villaudam v. The Commissioner of Central Excise

Chahat Varma

New Delhi, May 16, 2023: The Chennai bench of the Customs, Excise and Service Tax Appellate Tribunal has ruled that since the appellant had not obtained service tax registration and had failed to pay service tax on the considerations received for the services rendered to M/s. BSNL, CPWD, National Institute of Technology, etc and the Anti-evasion Unit of the Commissionerate detected and investigated this non-payment of service tax, therefore, the extended period of limitation under section 73(1) of the Finance Act had been rightfully invoked.

In the matter at hand, it was alleged that the appellant was engaged in construction activities, including the construction of office buildings, erection of cell phone towers, and civil work related to maintenance of office buildings, without obtaining service tax registration, making service tax payments, or filing ST-3 returns. A show cause notice was issued based on an intelligence collected by the Anti-evasion Unit of the Commissionerate. The notice proposed to demand service tax amounting to Rs. 8,70,873/- for construction service, commercial or industrial construction service, works contract service, and cleaning activity provided by the appellant during the period from April 2005 to March 2009. The Joint Commissioner of Central Excise and Service Tax, Tiruchirappalli, determined that the services provided by the appellant fell under the category of ‘construction service’ under section 65(30a) of the Finance Act, 1994, effective from April 2005, ‘commercial or industrial construction service’ under section 65(25b) of the Finance Act, effective from 16.06.2005, and ‘works contract service’ under Section 65(105) (zzzza) of the Finance Act, effective from 01.06.2007.

The Tribunal considered the appellant's admission that the services provided by them fell under the category of 'works contract service' from 01.06.2007 onwards, both in their grounds of appeal and before the lower authority. Consequently, the Tribunal concluded that since the appellant's activities were in the nature of a works contract, the demands made under the categories of construction service and commercial or industrial construction service until 31.05.2007 were not valid. The Tribunal relied on the case of Real Value Promoters Pvt. Ltd. & Others v. Commissioner of GST & Central Excise, Chennai [LQ/CESTAT/2018/71], which held that the demand of service tax for 'construction service' and 'commercial or industrial construction service' in relation to composite contracts prior to 01.06.2007 was not legally sustainable.

The Tribunal modified the impugned order, holding that the demand of service tax for the period from April 2005 to 31.05.2007 under 'construction service' and 'commercial or industrial construction service' is to be set aside. However, the demand of service tax under 'works contract service' from 01.06.2007 onwards is held to be payable, along with applicable interest. The appellant was also liable to pay a penalty of Rs.5,000 under section 77 of the Finance Act and a penalty equivalent to the amount of service tax payable towards works contract service and cleaning activity, under section 78 of the Act.