Service Tax Demand Unsustainable as SCN did not Categorize Construction Services under WCS: CESTAT Allows Appeal [Read Order]

The Customs, Excise and Service Tax AppellateTribunal (CESTAT), Kolkata Bench, allowed an appeal wherein it held that the demand for service tax was unsustainable due to the fact that the show cause notice (SCN) did not categorise the services rendered by the appellant under Works Contract Service (WCS).

The facts of the case are that the appellant, M/s Mondal Construction, was asked to file copies of balance sheet and sample copy of invoices for the period 2004-05 to 2008-09 for scrutiny. It was found that after providing table service since 2004, the appellant neither declared the full facts in ST-3 returns nor paid full amount of service tax.

The order of the Adjudicating Authority which held the appellant liable to pay service tax along with interest and penalties was challenged before the Commissioner (Appeals) on the ground that the value of exempted services have not been deducted in valuation of service tax. Notification No. 12/2003-ST dated 20.06.2003 was not considered, even despite the fact that the appellant produced necessary documents.

The Commissioner (Appeals) held that the appellant was engaged in construction services and other allied works and asked to pay service tax. The matter was then appealed before the CESTAT.

The counsel for the appellant submits that the services have been supplied along with material thus making their activity classifiable under WCS. It was argued that since no demand has been raised under WCS therefore, demand of service tax is not sustainable.

The CESTAT relied on the Supreme Court classification under WCS in the case of Larsen & Toubro Ltd. (2015). Accordingly, the bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) merited that the classification of the services rendered by the appellant is to be done under WCS and held that since no demand has been raised to that effect, the same is liable to be set aside.

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