The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench set aside service tax demand as there was bonafide belief in eligibility of exemption being Governmental work.
The brief facts of the case are that the Appellant, Nexcel Infra is engaged in undertaking construction activities, mainly for various Government / Local authority related projects. The issue involved is whether the Appellant is liable to pay Service Tax on differential value in comparing Form 26AS/ITR statement and taxable value declared in the ST-3 returns for the year 2016-17.
The Appellant acted merely as a sub-contractor to the main contractor, one M/s. Shantilal B. Patel & Co., on whom no demand of Service Tax has been raised till date, leading to their bonafide belief that they were exempt from payment of Service Tax in the capacity of Sub-Contractor.
The Counsel for the appellant, Saurabh Dixit, submitted that in none of the cases the main contractor has either paid Service Tax nor any demand was admittedly raised on them, and the Appellant always entertained a bonafide belief in this regard regarding eligibility of exemption being Governmental work.
The Appellant has mainly contended that they were under bonafide belief that no Service Tax was payable on the work in question, being exclusively Governmental construction and when the main contractor too had not paid any Service Tax thereon without any adverse view being taken by Service Tax department.
Dinesh M. Prithiani, Assistant Commissioner (Authorised Representative) reiterated the findings recorded by the lower authority and submitted that since apart from affordable housing, even marginal commercial construction was involved, for which no breakup is provided by the Appellant, the exemption is not available to them.
A Coram consisting of Ramesh Nair, Judicial Member and Raju, Technical Member observed that “We find force in the submissions made by the Advocate on this count. In the given set of facts and circumstances, the bonafide belief entertained by the Appellant cannot be questioned. Also, if the Appellant was liable to pay Service Tax, back to back, even the main contractor would have also been liable to pay the same. Whatever Service Tax, if paid by the Appellant, would have been back to back availed as Cenvat Credit by the main contractor anyway.”
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