Works Contract Executed for RVPNL Taxable: CESTAT upholds Invocation of Extended Period [Read Order]
The Bench found that Authorities had Correctly Treated Activity as Works Contract Service and Calculated Tax Accordingly
The New Delhi Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has upheld the service tax demand, rejecting the assessee’s plea that the extended period was wrongly invoked.
The Tribunal held that the confusion regarding taxability of works contract services stood settled after the Supreme Court’s decision in Larsen & Toubro (2015), and therefore the assessee could not claim bona fide belief or ignorance of law.
The appeal arose out of an Order-in-Appeal confirming the revised demand of ₹1,81,995 (after granting partial relief) along with interest and penalties under Sections 77 and 78 of the Finance Act, 1994.
The appellant, M/s Shri Mohmd. Shafik Contractor, engaged in providing works contract services to Rajasthan Vidyut Prasaran Nigam Ltd. (RVPNL), had filed NIL returns for April-September 2015 and failed to file ST-3 returns thereafter till June 2017. The department alleged non-payment of service tax amounting to ₹4,16,572 on services provided to RVPNL and invoked the extended limitation period.
The assessee argued that the taxability of composite contracts was unsettled until the Supreme Court’s decision in L&T, and due to this confusion they were unaware of the service tax implications. It was contended that all transactions were recorded in books and balance sheets, and absence of any suppression meant extended limitation could not be invoked. The appellant relied on a series of judicial precedents including Cosmic Dye Chemicals, Chemphar Drugs, Padmini Products, and decisions of the Delhi High Court to argue that mere non-declaration does not amount to wilful suppression.
They also contended that services provided to a government entity engaged in power distribution were exempt under Notification No. 11/2010, and that the department failed in its duty by not examining records earlier.
The Revenue, however, countered that the period in dispute (2015-2017) was entirely post the L&T ruling, and therefore no confusion regarding works contract taxability existed. It argued that the assessee failed to file statutory returns during the self-assessment regime, resulting in non-payment of tax that would have remained unnoticed but for departmental audit. Reliance was placed on decisions such as Rajesh v. AC CGST, Hakim Singh Contractor, and Warsi Buildcon to justify invocation of the extended period.
The Bench, presided over by Dr. Rachna Gupta (Judicial Member) observed that the adjudicating authority had already extended partial relief by recalculating the liability under Notifications 24/2012-ST and 30/2012-ST, revising the demand to ₹1,81,995. It held that the authorities had correctly treated the activity as works contract service and calculated tax accordingly.
On the limitation issue, the Bench said that the L&T judgment, delivered in 2015, conclusively settled the legal position regarding composite contracts. As the dispute period was subsequent to this judgment, the appellant could not claim confusion or bona fide belief.
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The Tribunal held that ignorance of law was not a valid defence, and the non-filing of returns amounted to deliberate non-compliance, justifying the extended period.
Finding no infirmity in the adjudication or the appellate order, the Tribunal upheld the confirmed demand and penalties, and dismissed the appeal.
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