No Service Tax Collected: CESTAT quashes Invoking Extended Period of Limitation to Reconsider Demands on Work Orders [Read Order]

The Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT )  quashed invoking an extended period of limitation to reconsider demands on work orders as the appellant had not collected service tax from its customers.

The appellant, M/s. N.K. Constructions, was involved in constructing factory sheds and other industrial buildings around Guwahati. Following an investigation by the Anti-Evasion Unit of the Guwahati Commissionerate, a show cause notice ( SCN ) dated 12.04.2013 was issued, demanding a service tax of Rs. 2,20,40,827 under the category of ‘commercial or industrial construction service’ for the period from 01.10.2007 to 30.09.2012.

The Commissioner confirmed the demand, alleged in SCN, for the service tax of Rs. 2,20,40,827 and also confirmed the demand for service tax under the categories of 'Technical Testing and Analysis Service and 'Consulting Engineer Service'. He also imposed an equal amount of tax confirmed as a penalty under Section 78 of the Finance Act, 1994, and Rs. 10,000 as a penalty under Section 77 of the Finance Act.

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The appellant submitted that an extended period for demanding service tax should not apply, as there was no intent to evade payment or mens rea on their part.

The CESTAT bench, comprising R. Muralidhar ( Member Judicial ) and K. Anpazhakan ( Member Technical ) observed that the appellant has not collected service tax from its customers and thus held that the demand of service tax from the appellant by invoking the extended period of limitation cannot be sustained.

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The bench directed to set aside the demands confirmed in the impugned order and remanded the case to the adjudicating authority to verify the use of materials for work orders where the benefit of Notification No. 01/2006-S.T. was denied. The bench also held that as the invocation of an extended period of limitation is not sustainable, this verification should only apply to work orders executed within the normal limitation period.

To Read the full text of the Order CLICK HERE

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