CESTAT Remands Case Over Incorrect Service Classification under VCES for Fresh Adjudication [Read Order]

The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) remanded a case for fresh adjudication due to incorrect service classification under the Voluntary Compliance Encouragement Scheme ( VCES ).

N J Patel Associates, appellant-assessee, registered under "Works Contract Service," filed a Voluntary Compliance Encouragement Scheme ( VCES ) application on December 28, 2013, declaring service tax dues of ₹9,988. However, the department rejected the declaration, alleging it was false.

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It found that the assessee wrongly claimed a 75% abatement and applied a 50% reverse charge abatement, which was invalid for the period from October to December 2012, as the service category was amended only on January 17, 2014. The department calculated the taxable value at ₹2,08,92,785, with a service tax liability of ₹25,82,348, while the assessee declared only ₹9,988 and failed to provide proof of ₹12,81,186 claimed as paid.

A show cause notice was issued, demanding ₹25,82,348 in service tax with interest and penalties. The Adjudicating Authority ( AA ) confirmed the demand in its March 24, 2015 order, holding that the assessee deliberately made a false declaration and missed the second VCES installment due by June 30, 2014, making it ineligible for VCES benefits.

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A single member bench comprising C L Mahar(Technical Member) found that the AA failed to consider the assessee's work invoices or clearly determine whether the service fell under "Works Contract Service" or "Construction Service." It noted that the Authority categorized it as "Commercial Construction Service" but did not grant the abatement benefit under Notification No. 13/2012-ST dated June 28, 2012.

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CESTAT ruled that the matter required fresh adjudication and directed the Authority to give the assessee another opportunity to present its case with all relevant invoices and work orders. The appeal was allowed by way of remand.

To Read the full text of the Order CLICK HERE

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