Due to Improper Investigation, Details of Service not Rendered: CESTAT Allows Appeal as 50% Service Tax Liability with Recipient [Read Order]
CESTAT allowed an appeal as proper investigation had not been conducted to reveal the nature of the assessee-appellant. The tribunal noted that proprietorship firms are liable to 50% of the service tax as the other half lies with the recipient.
![Due to Improper Investigation, Details of Service not Rendered: CESTAT Allows Appeal as 50% Service Tax Liability with Recipient [Read Order]](https://images.taxscan.in/h-upload/2026/02/21/2126613-due-to-improper-investigation-details-of-service-not-rendered-taxscan.webp "Due to Improper Investigation, Details of Service not Rendered: CESTAT Allows Appeal as 50% Service Tax Liability with Recipient [Read Order]")
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, allowed an appeal on the rationale that half of the service tax liability was with the recipient as details of service have not been rendered when the investigations were conducted. Also Read:Income Tax Reassessment Based Solely on Audit Objection After Scrutiny is Change of Opinion: Delhi HC...
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench, allowed an appeal on the rationale that half of the service tax liability was with the recipient as details of service have not been rendered when the investigations were conducted.
The appellant was issued a show cause notice(SCN) on 04.11.2019 but after due process the lower authorities confirmed the demand at INR 3,24,432/- along with interest and penalty. The counsel for the appellant had submitted that since the appellant was a proprietorship firm, 50% of the tax liability is required to be paid by the recipient of the service on RCM basis. Further, it was submitted that the entire demand is hit by the time bar.
The tribunal observed that the SCN of 2019 has been issued against the Income Tax Returns filed in 2014-15 and investigation/verification is missing to know the details of services rendered by the appellant. If it had been done so, then the appellant could have had the opportunity to submit the Works Contract undertaken by them, that they were a proprietorship firm and part of the service liability lies with the recipient of the service.
The single bench of R. Muralidhar relied on Tabassum Enterprises v. C , CGST & CX (2025) and held that the demand is set aside and the appeal is allowed. The appellant would be eligible for any consequential relief as per law.
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