Service Tax Demand on Works Contract Services Upheld: CESTAT

The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has upheld a service tax demand against a contractor after concluding that the services rendered were correctly classifiable as “Works Contract Service”. The bench of Dr. Rachna Gupta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that the adjudicating authority had properly re-determined the tax liability in accordance with the law laid down by the Supreme Court in Larsen & Toubro Ltd. The appeal was filed by M/s. Sundardas Gyanchand against an Order-in-Original passed by the Commissioner of CGST and Central Excise, Jabalpur, in de novo proceedings. The matter originated from a show cause notice issued on 7 October 2010 proposing service tax demand of ₹58.56 lakh. Earlier, the Tribunal had remanded the matter back to the Commissioner in September 2017 with directions to reconsider the issue in light of the Supreme Court’s landmark judgment in Larsen & Toubro Ltd., which clarified the taxability of composite works contracts under the service tax regime. Following the remand, the Commissioner granted multiple opportunities of personal hearing to the appellant. While adjournments were sought on two occasions, an advocate eventually appeared and submitted a written reply. After examining the contracts and the nature of the activities undertaken, the Commissioner concluded that the contracts were composite works contracts involving both goods and services. Consequently, the benefit of abatement was extended and the service tax demand was substantially reduced from the proposed ₹58.56 lakh to ₹10.93 lakh, along with applicable interest and penalties. When the matter came before the Tribunal again, no one appeared on behalf of the appellant despite repeated opportunities. The Tribunal therefore proceeded to hear the Revenue and examine the grounds raised in the appeal. One of the principal grounds advanced by the appellant was that the Commissioner had failed to determine the correct classification of the service rendered. The Tribunal rejected this contention, observing that the Commissioner had undertaken a detailed examination of the contracts and had expressly held that the activities fell within the category of “Works Contract Service.” The Tribunal noted that this finding formed the very basis for granting relief by reducing the demand substantially. The appellant had also argued that the services did not fall under the category of “Construction of Residential Complex Service.” However, the Tribunal found that the demand had ultimately not been confirmed under that taxable category. Instead, the liability was confirmed under “Works Contract Service,” making the contention irrelevant to the impugned order. Another argument raised was that the Jaipur Development Authority (JDA) had collected service tax and therefore should bear the tax liability. The Tribunal dismissed this plea, explaining that the appellant was the service provider that had rendered services to JDA and received consideration for those services. According to the Bench, the assertion that JDA had collected service tax was legally untenable because JDA was the service recipient and not the provider of taxable services. Therefore, the tax liability remained with the appellant. The appellant further contended that the demand was barred by limitation as there was no intention to evade payment of service tax. The Tribunal rejected this defence as well. It observed that the appellant had neither obtained service tax registration nor paid service tax or filed statutory returns. The liability came to light only as a result of departmental investigation. In such circumstances, the Tribunal held that the extended period of limitation had been rightly invoked. Interestingly, the appellant also argued that the activities were in the nature of works contract services. The Tribunal pointed out that this argument actually supported, rather than undermined, the Commissioner’s findings because the impugned order had already classified the services as works contracts and confirmed the reduced demand on that basis. The tribunal found no reason to interfere with the Commissioner’s order. The Tribunal accordingly sustained the impugned order and dismissed the appeal. Case Details Case Title: M/S. Sundardas Gyanchand Versus Commissioner Of CGST & Central Excise Citation: JURISHOUR-1465-CES-2026(DEL) Case No.: Service Tax Appeal No. 50705 Of 2019 Date: 29/05/2026 Counsel For Appellant: None Counsel For Respondent: Rajeev Kapoor, Authorised Representative Click Here To Read Order Read More: Modular Kitchen Accessories Not Furniture Parts; CESTAT Quashes Customs Duty Demand

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