Custom, Excise & Service Tax Tribunal
K Anantha Rao And Co vs The Principal Commissioner Of Central ... on 31 July, 2025
(1)
ST/30050/2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
REGIONAL BENCH AT HYDERABAD
Division Bench - Court No. - I
Service Tax Appeal No. 30050 of 2024
(Arising out of Order-in-Original No. VSP-EXCUS-COM-009-23-24 dt.30.10.2023 passed by
Principal Commissioner of Central Tax, Visakhapatnam)
M/s K. Anantha Rao & Co.
D.No.16-1-154, Opp Industrial Estate, ......Appellant
Amadalavalasa, Srikakulam, AP - 532 185
VERSUS
Pr. Commissioner of Central Tax
Visakhapatnam - GST
Port Area, Visakhapatnam,
......Respondent
Andhra Pradesh - 530 035 Appearance Shri M. Srinivasa Rao, CMA for the Appellant.
Shri B. Sangameshwar Rao, AR for the Respondent.
Coram: HON'BLE MR. A.K. JYOTISHI, MEMBER (TECHNICAL) HON'BLE MR. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. _A/30250/2025__ Date of Hearing: 08.05.2025 Date of Decision: 31.07.2025 [Order per: A.K. JYOTISHI] M/s K. Anantha Rao & Co., (hereinafter referred to as the appellant) are in appeal against the OIO dt.30.10.2023 (impugned order), whereby, as against the demand of Rs.8,48,58,681/-, the Adjudicating Authority has examined their submissions and evidence and thereafter, allowed certain abatement by treating entire work as 'Works Contract' and thereafter, confirmed demand of Rs.1,71,33,433/- only along with equal penalty under section 78 of the Finance Act, 1994 (Act). Admittedly, department has not come in appeal against the impugned order.
2. The brief facts of the case are that the department noticed certain difference in the income reflected by the appellant in their annual returns filed under Income Tax Act for the FY 2016-17 and the amount declared in their ST3 Return filed for the same period. Similar differences were also (2) ST/30050/2024 noticed for the period 2017-18. The department, thereafter, called for certain information/clarification from the appellant, however, the appellant, according to the department, did not furnish the relevant documents. However, in terms of Board's policy vide the circular dt.10.03.2017, an opportunity for pre-notice consultation was given to the appellant on 30.09.2021, where they claimed benefit under certain notification i.e., 25/2012 in relation to services provided to various recipients and applicable abatement also. They also submitted the contracts executed with their service recipient and the related invoices. However, the SCN issuing authority felt that the said exemption and abatement claimed by the appellant were not verifiable based on partial documents submitted on record and it was also observed that issue of SCN is the first step in dispute resolution process and noticee would have ample opportunities to present their case in case they wish to establish that incomes declared in Income Tax Returns are not taxable under Service Tax law.
3. On adjudication, the adjudicating authority has gone through the entire submissions and documents submitted by the appellant and has, inter alia, observed that they have provided certain services to various recipients as per the details below:
Value of services Service Recipient 2017-18 (up 2016-17 to June) AP Industrial Infrastructure Corporation 23627625 (APIIC) AP Medical Services & Infrastructure Development Corporation 60738745 31639317 (APMSIDC/APHMIDC) AP State Housing Corporation Ltd (APSHCL) 195755770 179250040 AP State Police Housing Corporation Ltd 59306464 (APSPHCL) K. Aruna 5390000 Visakhapatnam Urban Development 4888989 Authority (VUDA) AP Education & Welfare Infrastructure 4272050 Development Corporation (APEWIDC) Total 349707593 215161407
4. Further, he has also examined the bills raised during the period under 19 different agreements, details of which are available at Para 16.1 of the OIO. After going through those contracts, the adjudicating authority has (3) ST/30050/2024 held that the works executed by the appellant were construction activities, which also included transfer of property in goods in execution of works. Therefore, the services were rightly classifiable in the category of 'Works Contract Service' (WCS). Thereafter, he proceeded to determine the taxable service and liability in terms of Rule 2A of Service Tax (Determination of Value) Rules, 2006, and allowed abatement of 60%. Further, he also considered that since all the recipients covered in the SCN were body corporate and therefore, the appellant would be liable to pay only 50% of the Service Tax payable as per Notification No.30/2012-ST dt.20.06.2012 in respect of services rendered to these corporations and accordingly re- determined the demanded amount.
5. He has also examined the claim made by the appellant that they are covered within the purview of S.No.12(a) of Notification No.25/2012-ST dt.20.06.2012 and after going through various conditions that are required to be fulfilled, held that since in this case the services were provided in terms of contract, which was post 01.03.2015 and therefore, the said provision would not be applicable.
6. Learned Advocate for the appellant has mainly contested on the grounds that the department has raised the SCN merely based on third party information and has not carried out any independent investigation to arrive at the conclusion as to whether they were providing any taxable service or otherwise. Notwithstanding this submission, he has also submitted that on merits also, they had clearly explained that they have already paid certain service tax in respect of certain contracts and have not paid certain service tax assuming that these were non-taxable service being covered under notification 25/2012. He has further submitted that in respect of agreement from S.No.1 to 8 and from S.No.15 to 19, they had already discharged their service tax liability as was required during the relevant period before due date and that is reflected in their relevant ST3 Returns. He pointed out that even in the chart given at Para 13 in the SCN, there is an admitted fact that they have paid service tax of Rs.97,64,200/-. Some of these agreements and not as indicated in their appeal memorandum.
7. Further, he has mainly contested the charge of service tax in relation to agreement appearing at S.No.9 to 14 in respect of AP State Housing (4) ST/30050/2024 Corporation Ltd (APSHCL). His primary submission is that in all these works, they were engaged in constructing houses of less than 60 sq. mtr in terms of order placed by APSHCL and therefore, they are clearly covered in terms of S.No.14(c) of Notification No.25/2012-ST. He has also shown various agreements correlating the agreements with the services provided to APSHCL in relation to works executed by the appellant. They are available from Page 156 to Page 215 of the appeal paperbook. He has taken us through the agreement between the appellant and APSHCL in relation to this agreement from where it was obvious that these works were awarded for 'NTR Housing scheme', which is a rural housing programme. He has shown that all these constructions were of less than 60 sq. mtr and in fact, they were only 30 sq. mtr in plinth size. He has shown a schematic diagram for NTR Housing scheme. Therefore, in terms of the said agreement, which was awarded for NTR Housing scheme, the size of the flat is only 30 sq. mtr. This notification has not been analyzed or examined by the adjudicating authority. However, from the documents submitted by them, the learned Advocate has submitted that they are entitled for benefit of notification on this housing scheme.
8. Learned AR, on the other hand, pointed out that the appellants have not disclosed relevant details to the adjudicating authority or even during the pre-notice consultation and that is why department was constrained to issue the SCN based on whatever information was available with them. He has also submitted that the adjudicating authority has already extended all possible relief by allowing abatement of 60% as well as restricting total liability to 50% of service tax demand confirmed by him. He has also pointed out that though a plain reading would not make them entitled for the benefit under S.No.14(c) of notification 25/2012-ST, however, w.e.f. 01.04.2016 a new entry has been inserted in the said notification, which allows the benefit to any housing scheme of a State Government. However, there is no corroboration or incidence to consider whether they have provided this housing scheme of less than 60 sq. mtr or otherwise.
9. Heard both sides and perused the records.
10. The core issues for determination in this case is whether in respect of agreements at S.No.9 to 14, the appellants are entitled for the benefit under (5) ST/30050/2024 S.No.14(c) of notification 25/2012-ST in terms of insertion of Clause (ca) w.e.f. 01.04.2016 insofar as supply of services to APSHCL is concerned. Admittedly, in this case, the entire disputed period is post this amendment. As regards services to other recipient covered in demand, the same has to be seen whether there is any exemption available to them or otherwise.
11. The appellants are mainly contesting the demand on the grounds that the department has raised the demand for the period April, 2016 to June, 2017 on the basis of income as per ITR, income as per 26AS and the service tax paid as per ST3 filed by them. In fact, they have taken higher value among ITR and 26AS and compared the same with service tax paid as per the ST3 returns to work out the differential service tax required to be paid without having conducted any independent enquiry or investigation as to the nature of the services provided by them to different recipients or working out the taxable value in accordance with the provisions under Service Tax Act and Rules. He further submits that there is catena of judgments in their support that any demand based merely on ITR/26AS is not sustainable and therefore, the entire demand is liable to be dropped on this ground itself. He has relied on various judgments as under:-
a) Cricket Club of India Ltd Vs CST, Mumbai [2015 (40) STR 973 (Tri- Mumbai)]
b) Deltax Enterprises Vs CCE, Delhi [2018 (10) GSTL 392 (Tri-Del)]
c) M/s Go Bindas Entertainment Pvt Ltd Vs CST, Noida [2019 (5) TMI 1487]
d) Kush Constructions Vs CGST NACIN [2019 (24) GSTL 606 (Tri-All)]
12. We find that in this case there is clear force in the submission that the entire demand is based on ITR & 26AS. This is apparent from the SCN as well as pre-notice consultation dt.24.09.2021, where it was specifically mentioned that an SCN demanding service tax on gross value on sale of service during the period April, 2016 to June, 2017 as reported in the ITRs or as reported in the 26AS is being proposed under proviso to section 73(1), section 75 and section 78 of the Finance Act. Further, as per the table the service tax payable was indicated as Rs.8,48,58,681/-. Thus, we find that the entire SCN has been issued based on difference noticed by the department between ST3 returns and ITRs/26AS. We also find that in the (6) ST/30050/2024 SCN, there is nothing on record to suggest that any independent detailed investigation was carried out to work out as to the nature of services, value of services, etc. The adjudicating authority has mentioned that the appellants did not furnish the information being one of the grounds for considering that there was deliberate suppression or withholding of information. We find that in this case, there was clear cut pre-notice consultation, wherein, the appellants had participated and relevant documents were also shown and thereafter only, SCN was issued demanding same amount as indicated in the pre-notice consultation. Thus, there is no additional investigation or ground on the basis of which SCNs have been issued. We find that this issue is no longer res integra in view of the decisions of Coordinate Benches with regard to non-maintainability of demand where the demand is based solely on the ITRs/26AS, etc. We find that reliance placed on various judgments, as above, are relevant and therefore, the entire demand is not maintainable on this ground itself. However, we intend to examine the issue on merit also.
13. The appellants have contested the demand on the grounds of limitation and invocation of proviso to section 73(1) of the Finance Act, 1994. Their main contention is that in this case since entire demand is based on their own record and there is no other cogent or positive evidence by the department of their having deliberately withholding the information or suppression of any facts with an intent to evade payment of service tax and therefore, invoking extended period is bad in law as held in catena of judgments. We find that in this case, the SCN was served on 20.10.2021, whereas, the due date for filing ST3 return for the subject period is 15.08.2017 and therefore, the date of issuance is clearly beyond the normal time period allowed for serving notice, where the department is unable to substantiate any grounds for invoking extended period. Therefore, in view of the same, demand for the period 2016-17 and 2017-18 (up to June, 2017) is clearly beyond 30 months. We find force in the reliance placed by the appellant on the judgment of Continental Foundation Jt. Venture Vs CCE [2007 (216) ELT 177 (SC)], wherein, inter alia, it was held that suppression means failure to disclose full information with the intent to evade payment of duty. The reliance placed by the appellant in support that mere non- payment of tax itself does not mean that appellants had suppressed information. He has relied on various judgments as under:
(7)ST/30050/2024
a) Jaiprakash Industries Ltd Vs CCE [2002 (146) ELT 481 (SC)]
b) Cosmic Dye Chemical Vs CCE [1995 (75) ELT 721 (SC)]
c) T.N. Dadha Pharmaceuticals Vs CCE [2003 (152) ELT 251 (SC)]
d) Tamil Nadu Housing Board Vs CCE [1994 (74) ELT 9 (SC)]
e) Padmini Products Vs CCE [1989 (43) ELT 195 (SC)]
f) Pahwa Products Vs CCE [1989 (43) ELT 195 (SC)]
g) Gopal Zarda Udyog Vs CCE [2005 (188) ELT 251 (SC)]
h) Kolety Gum Industries Vs CCE [2005 (183) ELT 440 (T)]
i) GTN Enterprises Ltd Vs CCE [2006 (200) ELT 76 (Tri-Bang)]
14. We find that in the OIO, the adjudicating authority has observed that extended period is invokable in view of the fact that there was delay in submission of documents requested by the department, which establishes the intent of the assessee to avoid verification by the department, which they knew would lead to identification of the non-payment/short-payment of service tax by them and that but for the persistence of the department and verification of records by the department, the short-payment/non-payment of service tax would not have come to light. Further, appellant failed to declare actual amounts billed by them in the ST3 returns even when they were having some belief that they were eligible for exemption. The details of the amount and the notification under which they believed that service tax was exempted were required to be quoted. On going through the submissions from the appellant as well as order passed by the adjudicating authority, we find that there was no sufficient ground in this matter for invoking extended period. The adjudicating authority has relied on some of the decisions of the Coordinate Benches but we find that in the facts of the case, deliberate suppression with intent to evade service tax payment has not been duly established by the department. Therefore, extended period could not be invoked for demand of service tax. Therefore, on this ground also, demand for normal period is not sustainable and apparently, the entire demand is beyond the normal period, therefore, the demand will not sustain on this ground also.
15. We have also examined the applicability of various notifications and entries claimed by the appellants in their support that the services provided by them to certain entities were otherwise exempted from service tax in terms of Notification No. 25/2012-ST. We find that in terms of Mega (8) ST/30050/2024 Exemption Notification No.25/2012-ST dt.20.06.2012, various services were exempted. This exemption notification was further amended by Notification No.09/2016 dt.01.03.2016, whereby, one additional entry was inserted at S.No.14 as under:-
"(ca) low cost houses up to a carpet area of 60 square metres per house in a housing project approved by the competent authority under:
(i) The "Affordable Housing in Partnership" component of the Housing for All (Urban) Mission/ Pradhan Mantri Awaas Yojana;
(ii) Any housing scheme of a State Government."
16. Therefore, as per this entry, low cost houses up to carpet area of 60 sq mtr per house in a housing project approved by the competent authority under the 'Affordable Housing in Partnership' component of the Housing for All (Urban) Mission/ Pradhan Mantri Awaas Yojana or any housing scheme of a State Government was covered.
17. Learned Advocate has mainly contested that they had been providing construction services to APSHCL for construction of low cost houses up to a carpet area of 60 sq mtr residential houses under NTR special housing scheme dovetailing with Pradhan Mantri Awaas Yojana for Hudhud victims. He has also relied on certain documents in support of his contention.
18. We have gone through the documents submitted along with appeal memorandum and we find that APSHCL is a wholly owned State Government company mainly to formulate and undertake housing schemes for rural poor and weaker sections of society and create other infrastructure facilities required for housing schemes. They are implementing various housing schemes sponsored by the State Governments and Central Government like Rural Permanent Housing (RPH), Semi-permanent Rural (SPR) Housing, Urban Permanent Housing (UPH) and special housing schemes for artisans and beedi workers, Indira Awas Yojana (IAY), Pradhan Mantri Gramodaya Yojana (PMGY), etc. The appellants have, inter alia, implemented various schemes including NTR Rural Housing Programme. We have also gone through G.O.Ms. No.58 dt.06.02.2018 issued by the Government of Andhra Pradesh, wherein, inter alia, a programme called PMAY-NTR Nagar in the State, dovetailing with PMAY (U) of Government of India was formulated, wherein, three models of houses were to be constructed with built-up area ranging from 300 sft to 430 sft. We have also gone through the agreements (9) ST/30050/2024 between APSHCL and the appellant, which have been examined and considered for calculating service tax payable in the impugned order. In all these agreements, the reference has been made to administrative sanction issued by the Government of Andhra Pradesh and also technical sanction approved by Chief Engineer, APSHCL, Hyderabad. It has also mentioned the details of notice inviting tender, pursuant thereto which the agreement has been signed. In the said column, they have indicated it as PMU/NTR Housing. The appellants were required to complete the work as per the drawings and specifications covered in these agreements. We have also perused specimen schematic diagram of G+ Structure Plan of APSHCL from which it appears that plinth area of each flat is about 30 sq mt. In addition, a common area of 3.30 sq mt is also available. Further, while the carpet area of each flat remains the same irrespective of the flats are in the mode of G+1 or G+2 or G+3. Therefore, a holistic evaluation of all these documents would indicate that the construction of flats by the appellant in terms of agreements with APSHCL would get covered within the ambit of entry under S.No. 14(ca) of Notification No.25/2012-ST dt.20.06.2012 as amended by Notification No.09/2016 dt.01.03.2016 because housing schemes are approved by the Government of Andhra Pradesh and the carpet area of individual flat is less than 60 sq mt. Therefore, on this count, the services provided to APSHCL would be exempted. We note that the adjudicating authority has considered all these agreements and has not doubted the authenticity or the amount indicated therein and in fact, he also held that these were in the nature of WCS. Therefore, we find that the demand of service tax amounting to Rs.1,12,50,172/- in respect of services provided to APSHCL would not sustain as the same would be covered under the exemption notification. It is also noted that appellants have already paid an amount of Rs.44,33,308/- in respect of said services.
19. The appellants have also claimed exemption in respect of services provided to other agencies, as under:-
a) APSPHCL: Demand of Rs.17,79,192/- has been confirmed and the same has also been paid by the appellant. The appellants are relying on the judgment of Coordinate Bench in the case of M/s R D Contractor & Co Vs CCE & ST dt.22.02.2023, wherein, it was held that construction services provided to Gujarat State Police Housing (10) ST/30050/2024 Corporation Ltd for construction of residential complex for the police staff is not liable to pay service tax. He has also relied on various other judgments as under:
1) R B Chy Ruchi Ram Khattar & Sons Vs CST, New Delhi [2015 (38) STR 583 (Tri-Del)]
2) Khurana Engineering Ltd Vs CCE, Ahmedabad [2011 (21) STR 115 (Tri-Ahmd)]
3) Tax Appeal No.926 of 2011 in the case of CCE Vs Khurana Engineering Ltd (Order dt.14.09.2018)
4) Sh. DH Patel & Sh. RN Dobariya Vs CCE & ST, Surat [2013 (10) TMI 815 - CESTAT Ahmedabad]
5) Shri S. Kadirvel Vs CCE & ST, Trichy [Final Order No.41504/ 2018 dt.11.05.2018]
6) Brahma Developers Vs CCE, Tirunelveli [2018 (10) GSTL 27 (Tri-
Chennai)]
7) CCE, Aurangabad Vs Mall Enterprises [2016 (41) STR 199 (Tri- Mumbai)]
8) Mittal Construction Vs CCE & ST, Jaipur-I [2018 (11) GSTL 334 (Tri-Del)]
9) Kanubhai Ramjibhai Makwana Vs CCE & ST, Vadodara-I [2022 (8) TMI 645 (CESTAT-Ahmedabad)]
10) Sima Engg Constructions Vs CCE, Trichy [2011 (21) STR 179 (Tri-Chennai)] We find that services provided towards construction of police quarters to APSPHC Ltd., is not liable to service tax as it is to Governmental Authority and also it is for non-commercial purpose. Therefore, in view of various citations and factual matrix, we find no demand can sustain in respect of services provided to APSPHC Ltd., and is therefore set aside.
b) VUDA: Demand confirmed was Rs.1,51,069/- and the appellants have already paid the same before the due date and have also field ST3 return in relation to the same. This confirmation of demand as well as payment thereof is not being contested by the appellant.
c) APEWIDC: In this case, appellants provided services for construction of Zilla Parishad Schools, Government Polytechnic Colleges and (11) ST/30050/2024 students hostels where the demand confirmed is Rs.1,28,162/- and the appellants have already paid the same. However, they are claiming exemption under the category of construction of government schools relying on the judgment in the case of Banana Ram Choudhary Vs CCE [Final Order No.53149/2017 dt.01.05.2017], wherein, the Tribunal set aside the demand for service tax in respect of construction work carried out for educational institutions. In the facts of the case, it was obvious that services were provided for construction of schools, hostels, etc. Therefore, demand would not be sustainable.
d) APHMIDC: In this case also as against confirmed demand of Rs.27,71,345/-, appellants have already paid the same. However, though they are claiming exemption towards construction of hospital, they have not categorically brought out the notification or the provisions under which such services could be exempted and therefore, in view of the same, we are not inclined to accept their explanation that services provided by them to APHMIDC are exempted.
e) K. Aruna: In this case, demand confirmed is Rs.3,23,400/- and the same has already been paid before the due date and they have also filed ST3 return. The appellants are not contesting either confirmation of demand or payment of service tax.
f) APIIC: In this case, the demand confirmed is Rs.7,30,093/- and the same has already been paid before the due date and they have also filed ST3 return. The appellants are not contesting either confirmation of demand or payment of service tax.
19. Therefore, in respect of supplies made to APIIC, VUDA and K. Aruna, they are not contesting the confirmation of demand in this appeal. Therefore, to that extent, the demand confirmed is upheld. However, since in all these three cases, they had paid the duty before the due date and also filed ST3 return, we find that there is no sufficient ground for imposing any penalty. Insofar as other supplies are concerned, we find that except for confirmation of Rs.27,71,345/- in APHMIDC, where we find that appellants are not able to prove any entry for exemption or grounds for exemption for (12) ST/30050/2024 the services, the rest of the services are exempted. However, in this case also, we find that, as held supra, demand will not sustain on account of the fact that demand has been raised on ITR/26AS information only and the fact that demand is beyond the limitation period. Therefore, on this ground, though on merit demand is sustained, but on the ground of limitation, the demand would not be tenable.
20. Therefore, the demand to the extent where demand as well as payment thereof, has not been contested, the impugned order is upheld. The other demands will not sustain in view of the discussions in the foregoing paras. The penalty will also not sustain in respect of non- contested demand. Thus, the impugned order is set aside, except to the extent indicated, supra.
21. Appeal is allowed partly with consequential relief, if any, as per law.
(Pronounced in the Open Court on __31.07.2025_____) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Veda