CESTAT sets aside Service Tax upheld by Commissioner Which was Shown In Books of Accounts as a Work in Progress [Read Order]

The New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal,( CESTAT ) set aside the Service Tax upheld by the Commissioner Which was Shown In the Books of Accounts as a Work in Progress.

M/s Haskoningdhv Nederland B.V., the appellant challenged the order passed by the Commissioner (Appeals). While one issue has been remanded to the adjudicating authority for a fresh consideration after verification of records, the other two issues have been decided against the appellant and the demand confirmed by the adjudicating authority has been upheld.

The issue that arose for consideration was that the non-payment of service tax on Rs. 31,84,835/- which was shown as a “work-in-progress” in the books of account of the appellant. 

According to the appellant, as per accounting standards, a developer is required to recognize revenue based on part work done and thus the balance sheet indicated the revenue based on part of the work done.  The submission is that as the appellant had not received any advance payment in that particular year, it was not required to pay service tax.  

The Commissioner (Appeals), after having noted all the submissions, recorded a finding that it was for the appellant to have shown by positive evidence that it had not received the amount as advance and since it could not substantiate this fact, the demand had to be upheld. 

The Commissioner (Appeals) completely erred in recording this finding.  It was for the Department to have established that the appellant had received the payment in that particular year, more particularly when the appellant contended that it had not received any payment and the amount was only shown as “work-in-progress” in the balance sheet. 

A two-member bench of Justice Dilip Gupta, President and Mr P V Subba Rao, Member (Technical) set aside the demand that has been confirmed. Further set aside the penalty and interest imposed by the Commissioner (Appeals) and it would be for the adjudicating authority to examine these two components also based on the findings.

To Read the full text of the Order CLICK HERE

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