The Delhi bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that service tax is not leviable on composite works contracts executed prior to June 1, 2007, and that the extended period of limitation cannot be invoked where legal ambiguity prevailed.
The bench of Justice Dilip Gupta (President) and P. V. Subba Rao (Technical Member) has observed that all work orders involved material supply and transfer of property in goods, and thus fell under works contracts—not pure service contracts. The Tribunal ruled that tax demands for the period up to May 31, 2007, must be set aside.
The ruling came in a dispute involving a contractor who executed electrification projects—including installation of streetlights and wiring—for government authorities between 2005 and 2009. The contractor had neither obtained service tax registration nor paid applicable service tax during the period. The department had demanded over ₹22 lakh in tax, interest, and penalties, alleging suppression of facts.
The appellant submitted that demand was hit by limitation. He submitted that there were divergent views regarding the taxability of Works Contract Services and matter had been referred to different Larger Bench of the Tribunal. the dispute was resolved by Supreme Court in the judgement in Larson & Turbo case in 2014. Hence, he contended that in such cases, the allegation of suppression of facts with intent to evade tax was not present. Therefore, the extended period was not invokable in view of decisions of the Tribunal.
The Tribunal, however, cited the Supreme Court’s decision in Larsen & Toubro Ltd., which clarified that service tax on composite contracts involving transfer of goods and services was not leviable prior to the introduction of the specific provision for “Works Contract Service” on June 1, 2007.
The CESTAT rejected the department’s attempt to invoke the extended limitation period, noting that the issue was subject to substantial litigation and interpretational uncertainty. “Mere non-payment of tax is not suppression,” the Tribunal emphasized, setting aside all penalties imposed under Sections 76, 77, and 78 of the Finance Act, 1994.
Case Details
Case Title: Unmaid Electricals Versus Commissioner of Central Goods, Service Tax & Central Excise, Jodhpur
Case No.: Service Tax Appeal No.54021 Of 2018
Date: 27.06.2025
Counsel For Appellant: Om. P. Agarwal, Chartered Accountant
Counsel For Respondent: Aejaz Ahmad, Shri Anand Narayan, Authorized Representative
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