CESTAT Sets Aside Service Tax Demand on Electrification Work Over Unjustified Extended Limitation [Read Order]

The Chennai Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) set aside a service tax demand on electrification work, ruling that the extended limitation period was unjustified.

P & C Constructions (P) Ltd.,appellant-assessee,provided construction services. The Revenue verified its records for the period from April 10, 2004, to November 31, 2007, and issued a letter on February 21, 2007, stating that the electrification work for the Civil Court Complex at Pondicherry was taxable under "Erection, Commissioning, or Installation Service" (ECIS). A Show Cause Notice (SCN) dated October 22, 2012, was later issued, demanding service tax along with interest and penalties by invoking the extended limitation period.

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In response, the assessee argued that the electrification work was part of the main construction and fell under "Commercial or Industrial Construction Service" (CICS). It cited a government circular exempting such projects and contested the extended limitation, stating that the initial tax liability notice was issued in 2007, while the SCN came nearly five years later.

Read More: Extended Limitation cannot be Invoked Twice for the Same Issue: CESTAT

The Adjudicating Authority(AA) confirmed the demands through an order dated July 29, 2013, without addressing key contentions. The Commissioner (Appeals) upheld this decision on January 28, 2014. Aggrieved, the assessee filed the appeal before the tribunal.

The two member bench comprising P.Dinesha(Judicial Member) and M.Ajit Kumar(Technical Member) reviewed the impugned order, the OIO, and the SCN, along with the Delhi Bench’s decision in International Metro Civil Contractors vs. Commissioner of Service Tax, Delhi (2019), cited by the assessee. It identified two key issues—whether the service tax demand was justified and whether the extended limitation period applied.

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The assessee did not dispute doing the electrification work but claimed it was a sub-work. The first notice about tax liability was sent on February 21, 2007, followed by reminders. The assessee stated that verbal submissions were made, but there was no proof.

The SCN was issued on October 22, 2012, beyond the normal time limit. The appellate tribunal found that the Revenue failed to prove suppression of facts with intent to evade tax. The demand was based only on non-compliance despite reminders, and Circular No. 80/10/2004-ST was not considered.

Since the extended limitation period was not justified, the CESTAT set aside the demand and the impugned order.

To Read the full text of the Order CLICK HERE

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