General Information about the case:
Name of the Case: Civil Associates vs Allahabad
Date of order: 5 December, 2025
Name of the Court: Customs, Excise & Service Tax Appellate Tribunal, Allahabad
Case no.: Service Tax Appeal No.70480 of 2024
Original matter: Arising out of Order-in-Appeal No.780/ST/Alld/2022 dated 15/03/2023 passed by Commissioner (Appeals) Customs, Central Excise & Service Tax, Allahabad
Advocates of various parties: Shri Sanjay Kumar, Advocate for the Appellant Shri Santosh Kumar, Authorised Representative for the Respondent
Coram: Hon’ble Mr. Sanjiv Srivastava, member (technical)
Precedent referred:
1. International Merchandise [2022 (67) G.S.T.L. 129 (S.C.)]
2. Burn Standard Co. Ltd. [2011 (267) E.L.T. 193 (Tri. – Kolkata)]
3. Cochin Minerals & Rutiles Ltd. [2010 (259) E.L.T. 182 (Ker.)]
Explanation of order of Additional Commissioner:
The Additional Commissioner confirms to pay 10,85,542 rupees in unpaid service tax. This includes the base tax plus education cesses. This is demanded under Section 73(1), read with Sections 142, 173, and 174 of the CGST Act. The Additional Commissioner has dropped a very large portion of the initial demand, amounting to 1,10,59,914 rupees.
It was ordered to pay interest on the confirmed tax amount of 10.85 lakh rupees u/s Section 75 of the Finance Act. A penalty of 10,85,542 rupees is imposed. This is equal to 100% of the confirmed tax under Section 78. The Additional Commissioner dropped the specific charge that appellant collected tax from customers but kept it instead of giving it to the government under 73A and 73B of the Finance Act, 1994 read with Section 142, Section 173 and Section 174 of CGST Act, 2017
Two separate penalties of 10,000 rupees each are imposed under Section 77(1)(b) and 77(1)(c) of the Finance Act read with Section 142, Section 173 and Section 174 of CGST Act, 2017. In short, while appellant successfully avoided paying over 1.1 crore rupees, he have been ordered to pay roughly 10.85 lakh in tax, an equal amount in penalties, plus 20,000 rupees in smaller procedural penalties and interest on the due tax.
Facts of the matter:
1. The appellant is registered with the Department under the category of “Manpower Recruitment/ Supply Agency Service and work Contract Service”
2. An audit of the Electricity Department revealed they hired contractors for electrical works but provided materials like cables and pipes for free. When paying service tax under the reverse charge mechanism, the department claimed a 60% discount (abatement) on the contract price. However, they failed to include the market value of the free materials in the taxable total. This exclusion resulted in an underpayment of service tax.
3. The tax department found that the appellant performed contract work for M/s Purvanchal Vidvut Vitran Nigam Limited (PVVNL) from 2014 to 2017 but failed to provide invoices or work orders despite multiple summons. A comparison of Form 26AS with ST-3 returns revealed much higher actual earnings than reported, suggesting an intentional under-reporting of income. Additionally, the appellant refused to provide details regarding free materials supplied by the Electricity Department, which are required for correct tax calculation. Consequently, the appellant is accused of tax evasion by hiding a large portion of their revenue and material costs.
4. Disqualification of the PVVNL:
Under Rule 2A Service Tax (Determination of Value) Rules, 2006, if a customer provides free materials to a contractor, the value of those materials must be included in the total project cost for tax purposes. Because the department left out the value of these free materials, they were legally disqualified from claiming the 60% tax discount. Additionally, according to Notification 30/2012, service tax for this type of work must be split 50-50 between the person doing the work and the person receiving the service. Because the rules for calculating the total value were broken, the tax authorities decided to cancel the discount entirely, meaning tax must be paid on the full value of the service.
5. Show Cause Notice dated 30.12.2020
After finding that during the period of Oct-2014 to June-2017, appellant had not paid service tax of Rs. 1,21,45,456/-. Hence a show cause notice was issued to the appellant and asked to show causes why
(i) Service Tax amounting to Rs. 1,21,45,456/- including Education Cess, Secondary & Higher Education Cess Service Tax should not be demanded and recovered from them under proviso to Section 73(1) of the Finance Act, 1994.
(ii) Due interest on the amount of Service Tax mentioned at (i) above should not be demanded and recovered from them under Section 75 of the Finance Act, 1994.
(iii) Penalty should not be imposed upon them under Section 78 of the Finance Act 1994 for failure to pay service tax & suppressing the facts and value of taxable service with intent to evade payment of service tax.
(iv) The service tax so collected from the customers and not deposited with the Government Exchequer, if any, should not be demanded and recovered from them under Section 73A of the Finance Act, 1994.
(v) The interest due thereon on the amount of service tax collected and non deposited by the party to the credit of Central Government, if any, should not be demanded and recovered from then under Section 73B of the Finance Act, 1994.
(vi) Penalty should not be imposed upon them under Section 77(b) of the Finance Act, 1994 as amended for non- maintenance of books of accounts, and other documents, as required in accordance with the provisions of the Finance Act, 1994.
(vii) Penalty should not be imposed upon them under Section 77(1)(c) of the Finance Act, 1994, for non-submission of the required documents and not complying to the summons issued to them.
The show cause notice has been adjudicated as per the impugned order explained above. Aggrieved appellant filed an appeal before the Commissioner (Appeal) which has been disposed off as per the impugned order. As appellant, who had not paid complete service tax, was aggrieved even dropping of huge tax amount of about 1.1 crore, again file appeal before the Tribunal.
Contentions of Appellant:
It was contended by the appellant that the benefits of exemption in respect of construction of check dams for UP Project Corporation Ltd, electrification and high mast light works executed for Krishi Utpadan Mandi Parishad (KUMP); confirmation of demand on supply of material to Indian Railways; etc. had been denied by the Additional Commissioner and Commissioner. Appellant claimed that non grant of credit of Service Tax already deposited while confirming the demand that against the appellant and Penalties imposed are unsustainable in law.
Continue to Part 2
This is not a legal advice. This article is based on the judgment and order of the Court.