Custom, Excise & Service Tax Tribunal
Sheladia Rites Jv vs Visakhapatnam-Ii on 6 February, 2026
(1)
ST/25344/2013
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
Division Bench - Court No. - I
Service Tax Appeal No. 25344 of 2013
(Arising out of Order-in- Appeal No.23/2012 (V-I) ST dt.30.10.2012 passed by
Commissioner of Customs, Central Excise & Service Tax (Appeals), Visakhapatnam)
M/s Sheladia Rites (JV)
NHAI Enclave, Near Old Diary Farm Compound, ......Appellant
Hanumantavaka, Visakhapatnam, AP - 530 040
VERSUS
Commissioner of Central Excise &
Service Tax, Visakhapatnam - II
Port Area, Visakhapatnam,
......Respondent
Andhra Pradesh - 530 035 Appearance:-
None for the Appellant.
Shri V.R. Pavan Kumar, AR for the Respondent.
Coram: HON'BLE MR. A.K. JYOTISHI, MEMBER (TECHNICAL) HON'BLE MR. ANGAD PRASAD, MEMBER (JUDICIAL) FINAL ORDER No. A/30078/2026 Date of Hearing: 04.12.2025 Date of Decision: 06.02.2026 [Order per: ANGAD PRASAD] M/s Sheladi Rites (JV) (hereinafter referred to as the appellant) are in appeal against OIA dt.30.10.2012, whereby, the Commissioner (Appeals) has upheld the demand of Rs.3,85,930/- along with interest under section 75 of the Finance Act, 1994 (impugned order).
2. The brief facts of the case are that the appellants had entered into a contract with M/s National Highway Authority of India (NHAI) for rendering Consulting Engineering Services in respect of laying of roads widening to 4/6 lanes and upgrading the existing 2 lane road including minor bridges, service roads and auxiliary works in the state of Andhra Pradesh. As per the contract, NHAI is responsible for making payment of any taxes, duties, fees, levies on behalf of the appellant. Accordingly, NHAI had paid income tax (TDS) on behalf of the appellant but the appellants had not included the TDS amounts, which were paid by NHAI, while arriving at the taxable value.
(2)ST/25344/2013 Hence, SCN dt.08.04.2009 for the period April, 2007 to March, 2008 and SCN dt.08.10.2009 for the period April, 2008 to March, 2009 were issued demanding an amount of Rs.1,88,053/- along with interest under section 75 and penalties under section 76 and 77 of the Finance Act, 1994. The appellants contested the SCNs and thereafter, the Original Adjudicating Authority, after taking into account the submissions made by both sides, confirmed the demand along with interest and imposed penalties as raised in the SCNs. The appellants preferred an appeal before the Commissioner (Appeals), who has placed reliance on the order of the Tribunal in the case of CCE, Jaipur-I Vs Louis Berger International Inc. [2008 (9) TMI 144 - CESTAT New Delhi] and held that the demand of service tax on TDS portion during the material period, along with interest is legally sustainable on merits. He further relied on the order of the Tribunal in the case of Cosmos Detective & Security Services Vs CCE, Ahmedabad [2010 (19) STR 414 (Tri- Ahmd)] and waived the penalties under section 76 & 77 confirmed in the OIO. The appellants are against this order of the Commissioner (Appeals) before this Tribunal.
3. Nobody appeared on behalf of the appellant. On perusal of records, we find that on last several occasions, the appellant was not present for hearing and accordingly, we proceed to dispose of the appeal on merit. It is noted that learned Counsel for the appellant has submitted written submissions on 15.12.2025 in compliance with the order dt.04.12.2025. The appellant filed this appeal on the following grounds.
a) The OIA is erroneous, arbitrary and against the settled principles of law.
b) The adjudicating authority failed to appreciate that in the SCN dt.08.04.2009 proposing to levy service tax for the period 2007-08, the department has not invoked proviso to section 73(1), which is mandatory to issue SCN after one year from the relevant date specified in section 73.
c) Section 73(1) is not invokable as the present case is covered under section 73(3) of the Act.
d) The adjudicating authority failed to appreciate that section 73(3) deals with the situation where if an assessee, who has not paid service tax fully or who has not levied service tax fully or to any person the (3) ST/25344/2013 amount of service tax has erroneously been refunded, if such person makes the payment to the department either on account of own ascertainment or as directed by the Central Excise officer, then there is no requirement to issue SCN.
e) The adjudicating authority failed to appreciate that none of the ingredients specified in section 73(3) have been met and hence the service tax levied is not liable to be paid.
f) The adjudicating authority failed to appreciate the settled principle of law that if a particular provision is not invoked in the SCN, the assessee is denied with an opportunity to defend on that count and hence the same amounts to violation of natural justice and any order which is in violation of the principles of natural justice is void ab initio.
g) The adjudicating authority failed to appreciate that Hon'ble Supreme Court in the case of Larsen & Toubro Ltd Vs CCE [2007 (211) ELT 513] held that invocation of extended period of limitation entails both civil and criminal consequences and therefore must be specifically stated in the SCN.
h) The adjudicating authority failed to appreciate that Tribunal in the case of Patel Coating Industries Pvt Ltd Vs CCE [1993 (67) ELT 605] has held that failure to indicate proposed classification in SCN amounts to violation of principles of natural justice.
i) The adjudicating authority failed to appreciate that SCN proposing to levy service tax on the amount of TDS in the value of taxable service for the period 2007-08 is time barred since SCN was dt.08.04.2009.
4. It is further submitted that in the instant case, NHAI has paid income tax, over and above the agreed contract value and service tax liability is only on the gross amount charged for such services. It is therefore cannot be said that the appellant had charged NHAI for TDS. Reliance is placed on the decision of Hon'ble Supreme Court in the case of Bhayana Builders Pvt Ltd [2018 (10) GSTL 118], wherein the issue before the Apex Court was whether the value of goods/material supplied or provided free of cost by a service recipient and used for providing a taxable service of construction or industrial complex was to be included in computation of gross amount charged by the service provider for valuation of the taxable service under section 67 of the Finance Act. Explanation (C) to section 67 provides that contract value cannot be ignored in the instant case, the contract value is (4) ST/25344/2013 the invoice value and that service tax has been discharged on the same. No TDS has been deducted from the invoice value. The TDS so paid from out of pocket of the service recipient is only a statutory obligation discharged by the service recipient. Reliance is also placed on the order of Coordinate Bench at Chennai in the case of M/s Indian Additives Ltd [Final Order No. 40853/2025 dt.28.05.2025], wherein the issue of whether the appellant in the case was liable to pay service tax on TDS portion borne by them independent of the Royalty amount paid to the foreign company was examined and the appeal filed by the appellant was allowed. Therefore, it is submitted that the TDS paid by NHAI is a statutory/contractual obligation and it cannot form part of the taxable value for the purpose of service tax. Since the NHAI has paid the appellant 100% of the invoiced amount without any deduction, the taxable value is the invoice amount. The appellant have also contested on the ground of limitation.
5. Learned AR has reiterated the findings of the Commissioner (Appeals) and has submitted that the issue in the present appeal is already decided by this Tribunal and other Coordinate Benches in the following cases.
a. Sheladia Rites Vs CCCE & ST, Visakhapatnam-I [2018 (12) TMI 1244 - CESTAT Hyderabad] b. CCE & ST, LTU, Chennai Vs Sify Technologies Ltd [2018 (17) GSTL 24 (Mad)] c. CCE, Jaipur-I Vs Louis Berger International Inc. [2008 (9) TMI 144 - CESTAT New Delhi] d. SBI Cards & Payment Services Pvt Ltd Vs CCE & CGST, Gurugram [2025 (2) TMI 264 - CESTAT Chandigarh]
5. Heard Learned AR and perused the records as well as the written submissions of both the sides.
6. The principle issue for consideration in the present case is whether Revenue Authorities were correct in demanding service tax on the amount paid as TDS on behalf of the appellant is justified or otherwise.
7. Learned Counsel for the appellant contended that as per clauses of their agreement with NHAI, they were receiving the total amount charged by them from their principal i.e., NHAI and that the TDS amounts were being (5) ST/25344/2013 borne by NHAI directly, in which case, as per the provision under section 67 of the Finance Act, such TDS amounts are not includible in the value for calculating the service tax payable on the services provided.
8. The TDS being paid by NHAI to the Government is as per the provisions of the Income Tax Act, 1961. Tax Deducted at Source (TDS) is a way of collection of income tax under the provision of Chapter XVII of the Income Tax Act. Section 198 provides that all the sums deducted in accordance with provisions of the chapter shall for the purpose of computing the income of the assessee, be deemed to be the income received.
9. Hon'ble Madras High Court in the case of Sify Technologies Ltd (supra) held that 'the service tax could not have been calculated on the basis of the amount received from the clients minus TDS'.
10. The Coordinate Bench at Delhi in the case of Louis Berger International Inc. (supra), held that 'the TDS amount deducted was payable only on behalf of the appellant to the income tax department. We do not find any justification to exclude the said amount from the gross amount for the purpose of determining the service tax and we allow the appeal of the department in this regard. We hold that the service tax and interest shall be determined by the original authority.'
11. Earlier, this Bench, in appellant's own case for the period February, 2002 to February, 2007, decided this issue by Final Order No. A/31604/2018 dt.21.12.2018, relied upon by the department and admitted by the appellant, wherein, it was held that TDS amount paid by NHAI into the Government Treasury on behalf of the appellant herein was amount paid towards consideration for the services rendered. The relevant paras of the decision are as under.
"13. It can be seen from the above reproduced section 67 of the Finance Act that service tax shall be chargeable on the gross amount charged by the service provider for such services rendered. In the case in hand, the contention of the appellant that they had charged fully for the services rendered and the invoices raised also indicate the discharge of service tax liability on the total consideration agreed, has overlooked the provisions which indicate that "gross amount charged is for such services".
Undisputedly, the TDS deducted by NHAI and paid on behalf of the appellant is the amount received for the services rendered as amount of TDS which has been paid by NHAI gets reflected as income in the books of the appellant. It is undisputed that appellant has no other income other than amounts received as consideration from NHAI. If that be so, (6) ST/25344/2013 the amount of tax deducted and paid is shown as income and is directly related to the contract entered by the appellant with NHAI, it can be said that the amount of TDS is charged by the appellant to NHAI for services rendered and is definitely liable to the service tax.
14. Our above findings is fortified by the judgment of the Apex Court in the case of Bhayana Builders Pvt. Ltd. [2018 (10) G.S.T.L. 118] wherein the Apex Court has clearly held that the phrase "gross amount" only refers to the entire contract value between the parties, if something is not charged by the service provider it cannot be included in the value, after referring to explanation 'C' to Sec. 67, observed that plain reading of explanation 'C' made in the gross amount charges inclusive to certain other payment including other modes of payments in whatever form. Applying the ratio of the aforesaid judgment, in the facts and circumstances of this case, it can definitely be said that TDS amount paid by NHAI into the Government Treasury on behalf of the appellant herein was an amount paid towards consideration for the services rendered.
15. In view of the above analysis, we find that the impugned order is correct and no interference is called for."
12. Learned Counsel has submitted that in the instant case, TDS has not been deducted from the amount invoiced. NHAI has paid income tax, over and above the agreed contract value. Service tax liability is only on the gross amount charged for such services. Therefore, it cannot be said that appellant had charged NHAI for TDS. Thus, facts are different from earlier decision of this Bench in appellant's own case.
13. Hon'ble Supreme Court in the case of Bhayana Builders Pvt Ltd (supra), held as under.
"12. On a reading of the above definition, it is clear that both prior and after amendment, the value on which service tax is payable has to satisfy the following ingredients:
a. Service tax is payable on the gross amount charged:- the words "gross amount" only refers to the entire contract value between the service provider and the service recipient. The word "gross" is only meant to indicate that it is the total amount charged without deduction of any expenses. Merely by use of the word "gross" the Department does not get any jurisdiction to go beyond the contract value to arrive at the value of taxable services. Further, by the use of the word "charged", it is clear that the same refers to the amount billed by the service provider to the service receiver. Therefore, in terms of Section 67, unless an amount is charged by the service provider to the service recipient, it does not enter into the equation for determining the value on which service tax is payable.
b. The amount charged should be for "for such service provided": Section 67 clearly indicates that the gross amount charged by the service provider has to be for the service provided. Therefore, it is not any amount charged which can become the basis of value on which service tax becomes payable but the amount charged has to be necessarily a consideration for the service provided which is (7) ST/25344/2013 taxable under the Act. By using the words "for such service provided" the Act has provided for a nexus between the amount charged and the service provided. Therefore, any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable under Section 67. The cost of free supply goods provided by the service recipient to the service provider is neither an amount "charged" by the service provider nor can it be regarded as a consideration for the service provided by the service provider. In fact, it has no nexus whatsoever with the taxable services for which value is sought to be determined."
14. Therefore, service tax is payable on the entire contract value between the service provider and the service recipient. In the present case, NHAI has paid income tax, over and above the agreed contract value. The appellant has paid service tax on the invoices.
15. Thus, in the present case, the deductions by the NHAI do not form part of the consideration. Therefore, the appellant's contention that such amount cannot be added for the purpose of service tax is correct.
16. Learned Counsel has relied on the decision of the Coordinate Bench in the case of M/s Indian Additives Ltd (supra), wherein, it was held that TDS deposited, which is over and above the invoice value, cannot be charged to service tax.
17. In view of the above discussion, we find that the facts are quite different from the earlier decision of this Bench. In the present case, TDS/deductions are not part of the agreed contractual value and therefore, not liable to service tax.
18. Therefore, appeal is liable to be allowed and is accordingly, allowed.
(Pronounced in the Open Court on 06.02.2026) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Veda