Taxpayer Already Paid Liability Under Work Contract Services: CESTAT set Asides Service Tax Demand on Earth Excavation Services [Read Order]

The Allahabad Bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has set aside a service tax demand on Earth Excavation Services and observed that the taxpayer had already discharged the tax liability by including the value of said services under the category of Works Contract Services.

Abhilasha Enterprises (appellant), is a registered provider of construction services. The dispute arose following an investigation alleging that the appellant had not deposited service tax properly and had utilized inadmissible CENVAT credit.

Consequently, a Show Cause Notice was issued demanding Service Tax of Rs. 30,34,350 on "Earth Excavation Services" and proposing the recovery of inadmissible CENVAT credit amounting to Rs. 93,41,381. The adjudicating authority confirmed both demands and imposed equal penalties. Aggrieved by the order, the appellant approached the Tribunal.

Regarding the demand on Earth Excavation, the Revenue alleged that the appellant received Rs. 2,45,49,758 for excavation activities during 2014-15 but failed to declare it in their returns under "Site Formation and Clearance Services".

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The Counsel for the appellant contended that the appellant had paid the service tax in respect of these services but had included the value under the category of Works Contract Services instead of a separate head.

The appellant produced a Chartered Accountant’s certificate and a reconciliation statement showing that the "Sales against Earth Excavation" were included in the gross value declared in their ST-3 returns.

The Tribunal Bench comprising Mr. S.K. Mohanty (Judicial Member) and Mr. Sanjiv Srivastava (Technical Member) taking note of the submission directed the jurisdictional officers to conduct a verification.

The Additional Commissioner (Review) submitted a report confirming that the tax liability on works Contract Service, comprising sales against works contract and sales of Earth Excavation mentioned in the Balance Sheet, had been paid by the party.

The tribunal relied on the verification report and held that the jurisdictional officers are in agreement with the submissions made by the appellant in respect of this demand that the service tax towards Earth Excavation Services has been paid by the appellant.

Consequently, the Tribunal allowed the appeal partially. The demand of Rs. 30,34,350/- regarding Earth Excavation was set aside. In the result, the appeal of the appellant was partially allowed.

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