Mere assumptions that entering into two separate contracts was intentionally to evade Service Tax is not tenable unless it is proved: CESTAT remands matter [Read Order]

The Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that mere assumptions that entering into two separate contracts was intentionally to evade service tax is not tenable unless it is proved.

Shri Ramnath Prabhu, Counsel with Ms Dimple Gohil Advocate, appeared on behalf of the appellant Alok Infrastructure Limited submitted that the major work of construction falls under the category of the ‘Works Contract Service’ whereas the demand was made under ‘commercial or Industrial Construction Service’. Therefore, the demand is not sustainable on the ground alone.

Shri Rajesh Nathan, Assistant Commissioner ( AR ) appeared for the revenue and reiterated the finding of the impugned order.

It was evident that the appellant heavily claimed that the service in question provided by them falls under ‘Works Contract Service’ and for that reason, the same is not taxable under ‘commercial or industrial construction service’. 

The question of whether service is classifiable under ‘work contract service’ has not been examined properly by the Adjudicating authority. Whether a service is classified as ‘work contract service’ depends on various facts such as whether the contract is executed with service and material, whether the appellant has paid the State VAT, etc.

The two-member bench comprising of Mr Ramesh Nair, Member ( Judicial ) and Mr Raju, Member ( Technical ) observed that the finding of the adjudicating authority in this regard is not correct. For levy of service tax individual contracts have to be taken into account. Accordingly, the service tax demand can be determined.

Therefore, merely the assumption that the appellant has entered into two separate contracts intentionally to evade the service tax is prima facie not tenable. Since the important aspect of works contract service needs to be reconsidered, in our considered view, the matter needs to be decided afresh. 

The CESTAT set aside the impugned order and allowed the appeal by way of remand to the Adjudicating Authority considering, the facts and the law laid down in various judgments, as cited by the appellant.

To Read the full text of the Order CLICK HERE

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