Service Tax Demand upheld for Willful Suppression and Non-Filing of Returns: CESTAT Confirms ₹1.30 Lakh on Works Contract and Erection Services [Read Order]

The Allahabad Bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) upheld a ₹1.30 lakh service tax demand for FY 2016-17, invoking extended limitation under Section 73(1) due to willful suppression and held that non-filing of ST-3 returns and non-response to inquiries despite ₹1.61 crore receipts showed intent to evade tax.

Demand on works contract services to IRCON and erection services to IL&FS was sustained, while services to UPPCL were excluded under reverse charge.

The Appeal filed by the Appellant challenges the Order-in-Appeal dated 09.02.2024 passed by the Commissioner, CGST (Appeals), Dehradun.

TheSection 73(1) of the Central Goods and Services Act (CGST) Act, 2017, explained that: Determination of tax, pertaining to the period up to Financial Year 2023-24, not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful-misstatement or suppression of facts

“(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.”

The Appellant, M/s Om Electrical, registered with the service tax department and engaged in providing taxable services (Registration No. BLOPS6705EST001), received ₹1,61,00,138/- towards provision of services during FY 2016-17 but paid no service tax.

Based on information from the Income Tax Department, the department issued letters dated 31.03.2021 and 07.06.2021 seeking reconciliation and documents including Form 26AS, ITRs, ST-3 returns, balance sheets, trial balance, and partnership deed. The appellant failed to respond or file ST-3 returns for the period.

A show cause notice dated 29.09.2021 was issued proposing a service tax demand of ₹25,15,021/- (including cess) under extended limitation, along with interest, penalties under Sections 78 and 77(1)(c), and late fees under Section 70(1). The Adjudicating Authority confirmed the entire demand vide Order-in-Original dated 31.01.2023.

On appeal, the Commissioner (Appeals) vide order dated 09.02.2024 granted partial relief by dropping the demand on services provided to UPPCL (covered under reverse charge mechanism) but confirmed ₹1,30,356/- as service tax on services rendered to IRCON International Ltd (works contract service) and IL&FS Engineering & Construction Co. Ltd (erection services), along with interest, penalties, and late fees. Aggrieved by this order, the appellant filed the present appeal before CESTAT.

The Proxy Counsel for the Appellant, Nitin Kesharwani, stated that the service tax demand was barred by limitation and relied on the Supreme Court decision in Continental Foundation Joint Venture [2007 (216) ELT 177 (SC)] to support this contention.

On the other hand, the Authorised Representative for the Respondent, Chitra Srivastava, reiterated and supported the findings recorded in the impugned order.

The Tribunal consisted of Technical Member, Sanjiv Srivastava, heard and reviewed the matter filed by the appellant.

The Tribunal, after considering the submissions made, upheld the Commissioner (Appeals)'s order which granted partial relief by dropping the demand on services to UPPCL covered under reverse charge mechanism per Notification No. 30/2012-ST but confirmed ₹1,30,356/- as service tax on services to IL&FS Engineering & Construction Co. Ltd (₹1,19,556/- on erection services) and IRCON International Ltd (₹10,800/- on works contract services computed at 40% of contract value under Rule 2A with 50% liability under partial reverse charge).

On the issue of limitation, the Tribunal held that the extended period under Section 73(1) was rightly invoked as the appellant deliberately failed to file ST-3 returns for FY 2016-17 and intentionally refused to respond to departmental letters seeking reconciliation and documents, demonstrating willful suppression with intent to evade service tax.

Further, the Tribunal confirmed the penalty under Section 78 equal to tax, interest under Section 75, late fees of ₹40,000 under Section 70(1), and penalty of ₹10,000 under Section 77(1)(c) for non-cooperation.

Accordingly, the Tribunal found no merit in the appeal and the appeal was dismissed. The Order was pronounced in open court on-18 December, 2025.

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