Dept. Treated Exempt Road and Irrigation Work Services as Taxable Manpower Supply: Gauhati HC dismisses Writ to Determine Facts [Read Order]

The Gauhati High Court recently dismissed a writ petition that challenged a demand order that had classified numerous contractual services which were liable to and exempt from service tax under the same category. The High Court held that the question whether the contractual work was an exempt construction activity or taxable manpower supply required fact-finding, which was beyond the jurisdiction of the writ court.

The petitioner, Md. Baharul Islam was a subcontractor engaged by M/s Simplex Infrastructures Ltd. for work on the National Highway-31 as well as related irrigation work. According to the petitioner, the work entrusted to him was in the nature of construction, including included bed preparation, concreting etc. which were squarely covered by the exemption granted under Notification No. 25/2012-ST, particularly Clauses 13(a), 12(d) and 29(h).

The Department, however, construed the entire job as one of supply of manpower and treated it as a taxable service. Referring to specific work orders, including one dated 15.10.2009, the Department held that the contracts were in substance manpower supply, raising a demand of ₹8,44,789 through an Order passed by the Deputy Commissioner, CGST and Central Excise, Guwahati.

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Dr. A. Todi, appearing for the petitioner, submitted that the demand notice itself contained construction measurements such as “cubic meter” and “running meter” and that the authority had wrongly relied on Tax Deducted at Source (TDS) entries within Form 26AS without recognising that the work was covered by the exemption notifications. It was thus contended that construing the entire contract as manpower supply was erroneous.

S.C. Keyal, appearing for the department, argued that the adjudicating authority had considered the documents and correctly concluded that the relevant contracts pertained to manpower supply. He further contested the premises on which the present writ was instituted, contending that the matter was already settled by the Gauhati High Court in Laxmi Narayan Sahu vs. Union of India and Ors. (2018).

Justice Sanjay Kumar Medhi observed that the adjudicating authority had noted the existence of construction and irrigation works but had treated a part of the contracts as manpower supply and levied tax accordingly.

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The Gauhati High Court held that determining whether the contracts fell within the scope of exemption or constituted manpower supply required factual assessment which could not be undertaken by the High Court in writ jurisdiction. Referring to the limited scope of certiorari, the Court concluded that the petitioner had an efficacious appellate remedy under the statute.

Accordingly, the writ petition was dismissed with liberty to the petitioner to pursue the statutory appeal.

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