Custom, Excise & Service Tax Tribunal
M|S. Shomuk Engineering And ... vs Kolkata South on 26 February, 2026
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH: KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 75220 of 2024
(Arising out of Order-in-Original No. 01/COMMR/ST-II/KOL/2022-23 dated
31.05.2022 passed by the Principal Commissioner of C.G.S.T. and C.X., Kolkata
South, G.S.T. Bhawan, 180, Rajdanga Main Road, Shantipally, Kolkata - 700 107)
M/s. Shomuk Engineering & Consultancy Services : Appellant
Shobhakul, 5A, Palm Avenue, Ballygunge,
Kolkata - 700 019
VERSUS
Principal Commissioner of C.G.S.T. and C.X., : Respondent
Kolkata South Commissionerate,
180, Rajdanga Main Road, Shantipally,
Kolkata - 700 107
APPEARANCE:
Shri Sushil Kr. Goyal, Chartered Accountant, for the Appellant
Shri R.K. Agarwal, Authorized Representative, for the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 75300 / 2026
DATE OF HEARING: 18.02.2026
DATE OF DECISION: 26.02.2026
ORDER:[PER SHRI K. ANPAZHAKAN] The present appeal has been filed against the Order-in-Original No. 01/COMMR/ST-II/KOL/2022-23 dated 31.05.2022 passed by the Ld. Principal Commissioner of C.G.S.T. and C.X., Kolkata South, G.S.T. Bhawan, 180, Rajdanga Main Road, Shantipally, Kolkata - 700 107.
Page 2 of 20Appeal No.: ST/75220/2024-DB
2. The facts of the case are that M/s. Shomuk Engineering & Consultancy Services, Shobhakul, 5A, Palm Avenue, Ballygunge, Kolkata - 700 019 (hereinafter referred to as the "appellant") is a proprietorship concern, registered with the Service Tax Department for provision of taxable services of 'management consultancy service' and 'manpower recruitment or supply agency service'.
3. Initially, an audit was conducted on the financial documents of the appellant for the period from 01.01.2013 to 31.03.2014 by the officers of the Service Tax Audit Commissionerate, Kolkata. During the course of audit, it was noticed that the appellant had entered into (i) a job contract with M/s. Northern Railway Authority on 12.01.2012 and 12.11.2012 for providing "Linen Distribution Service" ('LDS' for short) at the coaches of various trains originating from New Delhi, and (ii) an agreement with M/s. Indian Railway Catering and Tourism Corporation Limited (IRCTCL) for rendering similar services. The audit officials gathered that the appellant had not paid Service Tax on the above said services rendered by them. With effect from 01.04.2014, the appellant has entered into an agreement with M/s. RailTel Corporation of India Limited ('RailTel' for short), a Company incorporated under the Companies Act 1956, for rendering the LDS services. Accordingly, a letter dated 18.12.2015 was issued, seeking clarification from the appellant regarding their Service Tax payments on the above services. Subsequently, a letter dated 23.02.2016 and a Spot Memo dated 15.09.2016 was issued, directing the appellant to pay Service Tax for the period from 01.01.2013 to 31.03.2015 on LDS. The appellant was also issued letters dated 20.01.2017 and 09.03.2017 Page 3 of 20 Appeal No.: ST/75220/2024-DB for pre-Show Cause Notice Consultations on 07.02.2017/08.02.2017 and 03.04.2017/04.04.2017.
4. The issue was taken up by the Kolkata Audit-I Commissionerate. On the ground that the appellant has not paid Service Tax on the "LDS" rendered by them. The audit took up the said issue of non- payment of Service Tax on "LDS" against the appellant pertaining to the period from 01.04.2015 to 30.06.2017. Thereafter, a letter dated 10.05.2018 was issued, seeking payment of Service Tax on the said services, along with interest and penalty, for the entire period from 01.01.2013 to 30.06.2017.
5. On the ground of non-payment of Service Tax on "LDS" during the period under dispute, a Show Cause Notice bearing No. 06/COMMR/AUDIT- 1/SECS/KOL/18-19 dated 30.01.2019 was issued, proposing to demand Service Tax amounting to Rs.5,59,12,567/- (inclusive of cess) on the taxable value of Rs.43,72,26,690/-, for the period from January, 2013 to June, 2017, by invoking the extended period of limitation in terms of proviso to Section 73(1) of the Finance Ac, 1994.
5.1. The aforesaid Notice was adjudicated by the Ld. Principal Commissioner of C.G.S.T. and C.Ex., Kolkata South vide Order-in-Original No. 01/COMMR/ST- II/KOL/2022-23 dated 31.05.202 wherein the ld. adjudicating authority has confirmed the demand of Rs.5,59,12,567/- (inclusive of cess), along with interest. He has also imposed a penalty equivalent to the above demand of Service Tax confirmed, under Section 78 of the Finance Act, 1994.
5.2. Aggrieved by the confirmation of the above demands, the appellant has filed this appeal.
Page 4 of 20Appeal No.: ST/75220/2024-DB
6. The Ld. Counsel appearing on behalf of the appellant submits that they were providing various taxable services, to a number of clients, during the material period; however, the instant demand has been raised for provision of services in respect of M/s. Northern Railway Authority and M/s. IRCTCL. He has argued that the Department has ascertained the gross taxable value of services for the material period and calculated the Service Tax payable thereon without actually verifying the Service Tax liability for the same. He points out that no separate breakup has been given in respect of the services rendered to M/s. Northern Railway Authority and M/s. IRCTCL; the taxable value worked out by the Department in the Show Cause Notice is as per the table given below: -
Page 5 of 20Appeal No.: ST/75220/2024-DB 6.1. The appellant has stated that the services rendered by them, in the present case, are categorizable under 'supply of manpower service' and the value of the said services have been included by them in the ST-3 Returns filed by them for the period under dispute; that they have discharged their Service Tax liability for the said services as per Section 68(2) of the Finance Act, 1994 read with Notification No.30/2012-S.T. dated 20.06.2012, as amended.
7. The Ld. Counsel for the appellant has primarily contested the impugned demand on the ground of limitation. It is submitted that the appellant have declared the entire taxable value in the ST-3 Returns and not suppressed any information from the Department; hence, the allegations of suppression of facts with intention to evade the tax made by the Revenue are without any basis. He contends that the demand raised in the instant Show Cause Notice is hit by limitation; that the initial audit was conducted covering the period from 01.01.2013 to 31.03.2015;
even after issuance of the Spot Memo and Pre-Show Cause Notice Consultation after the audit, no Show Cause Notice had been issued to them for demanding the Service Tax; subsequently, another audit was conducted covering the period after 31.03.2015. It is stated that after the second audit, the instant Show Cause Notice was issued, covering the entire period from January, 2013 to June, 2017. The Ld. Counsel for the appellant has emphasized that the activities of the appellant were known to the Department during the course of the first audit held for the period from 01.01.2013 to 31.03.2015. Thus, it is contended that the demand notice issued to the appellant by invoking the extended period of limitation, covering the audit Page 6 of 20 Appeal No.: ST/75220/2024-DB conducted for the earlier period, is legally unsustainable.
7.1. As regards the demand pertaining to the normal period of limitation, the Ld. Counsel for the appellant submits that they have not rendered any services to M/s. Northern Railway Authority or M/s. IRCTCL during the during the said period; they have placed the list of invoices in respect of M/s. RailTel on record, which substantiates the claim that during the said period, the services were rendered only to M/s. RailTel. However, as far as the services rendered by them M/s. RailTel for the normal period of limitation are concerned, it is the appellant's contention that the liability to pay Service Tax is on M/s. RailTel only. On this score, the Ld. Counsel for the appellant submitted that the said service rendered by the appellant to M/s. RailTel qualifies as 'supply of manpower service'; that as per Rule 2(1)(d)(i) of the Service Tax Rules, 1994, the Service Tax liability on 'supply of manpower' by any individual or partnership firm, to a business entity registered as a 'body corporate' is on the recipient of service. The appellant has cited Notification No. 30/2012-ST dated 20.06.2012, as amended, as per which the Service Tax liability in respect of manpower supply services has been divided into "25%" and "75%" for the service provider and service recipient respectively, i.e., 25% on the provider of service and 75% on the receiver of service. Accordingly, the appellant contends that they were only liable to pay 25% of the Service Tax on the said services up to 31.03.2015. It is pointed out that subsequently, w.e.f. 01.04.2015, vide amended Notification No. 7/2015-S.T. dated 31.03.2015, the 100% Service Tax liability is on the recipient of service; since the appellant is a proprietorship firm, M/s. RailTel is a Page 7 of 20 Appeal No.: ST/75220/2024-DB body corporate and the appellant has provided 'manpower supply services' to a body corporate, the Service Tax liability on the manpower supply services is to be borne by the service recipient in terms of the above said Notifications. Thus, the Ld. Counsel for the appellant contends that for the period from 01.04.2016 to 31.03.2017, the entire Service Tax liability for the services provided by them to M/s. RailTel, is on the service recipient.
8. On the other hand, the Ld. Authorized Representative of the Revenue reiterated the findings in the impugned order. Accordingly, he justified the demands confirmed against the appellant and prayed for upholding the same.
9. Heard both sides and perused the records of the case.
10. We observe that the appellant has rendered 'Linen Distribution Service' (LDS) in the coaches of various trains. During the period under dispute, the appellant has rendered such services to M/s. Northern Railway Authority, M/s. IRCTCL and M/s. RailTel. The appellant has claimed that the services rendered by them are rightly classifiable as 'manpower supply services'.
10.1. We note that after 01.07.2012, categorization of services has been dispensed with. However, for the purpose of determining the service tax liability under 'reverse charge mechanism', services need to be classified under a particular category. In this regard, we have gone through the agreement submitted by the appellant. For ready reference, the scope of the Agreement dated 12.01.2012 is reproduced below: -
Page 8 of 20Appeal No.: ST/75220/2024-DB "It is agreed by and between the parties that the Contractor shall carry out a contract for "Linen distribution in coaches of trains originating from New Delhi station for a period of two years" under the observation of CDO, New Delhi as per accepted schedule of rates (as annexed) in accordance with the terms & conditions laid down in the tender document No. 116- S/LD/NDLS/P1-3/MC-IV dated 29/09/11 (copy attached).
PAYMENT:
1. Accepted rates for above work are annexed.
2. Payment will be made by Sr. DFM, N.RIY, DRM Office, New Delhi.
3. All bills in quadruplicate shall be submitted to concerned CDO on monthly basis.
4. Payment will be made only after verification and certification by the concerned CDO after ensuring that the contractor is fulfilling all statutory obligations mentioned in the contract agreement and providing minimum wages to his staff.
5. Service Tax being a statutory obligation will have to be considered as part of the cost of the services.
However, this portion of 10.3% of the monthly billed amount will be payable to the contractor only as a reimbursement on submission of sufficient proof of having deposited the same with the Government.
6. Payment will be made through cheque/ECS/EFT only; no cash payment will be made.
7. 2% Income Tax and 15% surcharge on Income Tax or applicable at the time of payment shall be deducted from bill and necessary I.T. deduction certificate will be issued by Sr. DFM/New Delhi.
8. 2% sales tax will be deducted from all bills at source as per provision of Delhi Sales Tax Act 1999.
9. No extra payment like CST/ST, Octrol or other taxes whatsoever will be made to the contractor.
10. An amount against security deposit @ 5% of the contract value i.e. Rs. 47,00,000/-shall be recovered at the rate of 10% of the bill amount till the full security deposit is recovered.
ACCEPTED SCEHDULE OF RATES No. : 116-S/LD/NDLS/Pt-3/MC-IV Name of Work : Linen distribution in coaches of trains originating from New Delhi Page 9 of 20 Appeal No.: ST/75220/2024-DB station for a period of two years (as per detailed scope of work) Period of Work : Two years (w.e.f. 12/11/2011 to 11/11/2013) Cost of Work : Rs. 6,33,82,770/-
Allocation : 08-0592-32
Period of Work : M/s. Shomuk Engineering &
Consultancy Services, C-31, 2 nd
Floor, South Ext, Part-I, New Delhi-
49
S. Item/Activity Approx. Unit Total value
No. Coach rate
hours in (per of work
Two coach-
years hour) (Rs.)
in Rs.
1 Linen 2112759 30.00/- 6,33,82,770/-
distribution
in coaches of
trains
originating
from New
DelhiStation
including
loading and
unloading
from linen
store to train
and vice-
versa
Rupees Six crore thirty three lakh eighty two thousand seven hundred seventy only."
10.2. A perusal of the above scope of work and payment terms indicates that the appellant has been paid service charges for the number of hours spent in each coach. The payment is worked out as per the number of persons deployed.
Page 10 of 20Appeal No.: ST/75220/2024-DB 10.2.1. This is also evident from the Completion Certificate issued for making the payments for the services rendered. For ready reference, the Completion Certificate dated 04.09.2014 submitted by the appellant to M/s. IRCTCL is reproduced below:-
10.2.1. A perusal of the above certificate clearly shows that the name of work has been specifically indicated as "supply of manpower services to non-core functional units across India" and strength of manpower has been indicated in numbers.Page 11 of 20
Appeal No.: ST/75220/2024-DB 10.3. We have also perused the Agreement between the appellant and M/s. RailTel. Some of the relevant clauses of the said Agreement are reproduced below:-
"1 Scope of AGREEMENT ....
1.4 The AGENCY agrees that if and when so requested by RAILTEL, it will provide the placement Services at the premises, or any other offices of RAILTEL, as may be required by RAILTEL and at rates not exceeding the prevailing rates agreed between the parties and referred to in Annexure-I hereto.
.
.
.
The Following are the terms and conditions of the engagement:-
a) The engagement if temporary is purely temporary and on Contract basis.
---------------------------------------------------------------
c) The service of the temporary engaged are liable to the transferred anywhere with in Northern Region from one job to another, one department to another, and one branch to another without any extra remuneration depending on the exigencies of the work.
---------------------------------------------------------------
f) The temporary engaged persons so deployed by the AGENCY in RAIL TEL shall not have claim to any regular employment in RAIL TEL
g) RAILTEL may at its discretion award/reward/incentives to efficient temporary engaged person(s) directly at any time."
10.4. From the scope of work and terms and conditions contained in the above agreement, we find that the appellant-agency has to deploy the manpower as required by M/s. RailTel. They are also required to supervise the work, but the manpower were under the control of M/s. RailTel, for deployment purpose.
Page 12 of 20Appeal No.: ST/75220/2024-DB 10.4.1. A perusal of the invoices raised by the appellant on M/s. RailTel indicates that the charges have been raised for "Providing Manpower on Outsourcing Basis at various establishments and premises of RailTel". For ready reference, sample copy of one such invoice raised by the appellant on M/s. RailTel is extracted below:
10.4.2. It can be observed from the above that the charges have been billed for the number of 'man days' and not for the services rendered. This evidences that the service rendered is in fact with respect to supply of manpower only.Page 13 of 20
Appeal No.: ST/75220/2024-DB 10.5. The definition of "manpower recruitment or supply agency" service, as provided under Section 65(68) of the Finance, Act, 1994, reads as under: -
"manpower recruitment or supply agency" means any person engaged in providing any service, directly or indirectly, in any manner for recruitment or supply of manpower, temporarily or otherwise, to any other person;"
10.6. With effect from 01.07.2012, no specific categorization of service is required, with the introduction of the comprehensive Service Tax regime; "supply of manpower" has thus been defined under Rule 2(1)(g) of the Service Tax Rules, 1994, which reads as follows: -
"Supply of Manpower means supply of manpower, temporarily or otherwise, to another person to work under his superintendence or control"
10.7. Further, as per Rule 2(1)(d)(i) of the Service Tax Rules, 1994, the Service Tax liability on 'supply of manpower' by any individual or partnership firm, to a business entity registered as a 'body corporate' is on the recipient of service. For ease of reference, the relevant portion of the above Rule is reproduced below: -
"Rule 2. Definitions (1) In these rules, unless the context otherwise requires, -
.
.
.
(d) "person liable for paying service tax", -
(i) in respect of the taxable services notified under sub-section (2) of section 68 of the Act, means,-
Page 14 of 20Appeal No.: ST/75220/2024-DB .
.
.
(F) in relation to services provided or agreed to be provided by way of:-
(a) renting of a motor vehicle designed to carry passengers, to any person who is not engaged in a similar business; or
(b) supply of manpower for any purpose or security services; or
(c) service portion in execution of a works contract-
by any individual, Hindu Undivided Family or partnership firm, whether registered or not, including association of persons, located in the taxable territory to a business entity registered as a body corporate, located in the taxable territory, both the service provider and the service recipient to the extent notified under sub-section (2) of section 68 of the Act, for each respectively."
10.7.1. We find that the Scope of Work and Terms and conditions of the agreement/s conform to the definition of 'manpower supply service' as defined above.
10.8. Hence, in view of the above, we hold that the services rendered by the appellant in this case are appropriately classifiable under the category of manpower recruitment or supply agency service.
11. Regarding the demand of Service Tax confirmed in the impugned order, we observe that the appellant has contested the demand on the ground of limitation.
11.1. From a perusal of the records, we find that initially, an audit had been conducted on the records of the appellant for the period from 01.01.2013 to Page 15 of 20 Appeal No.: ST/75220/2024-DB 31.03.2014. The issue of Service Tax liability on LDS was raised by the audit team and accordingly, an Audit Memo dated 18.12.2015 had been issued by the audit group regarding the Service Tax liability on the appellant on LDS. For ready reference, the said Audit Memo issued by the audit group to the appellant is reproduced below: -
Page 16 of 20Appeal No.: ST/75220/2024-DB 11.2. We find that even though the audit had raised the issue of Service Tax liability on the Linen Distribution Service (LDS) rendered by the appellant, no demand had been raised against the appellant thereupon for the period from 01.01.2013 to 31.03.2014. Subsequently, another audit was conducted, wherein the same issue was again raised.
After the second audit, the impugned Show Cause Notice has been issued, demanding Service tax for the entire period i.e., January, 2013 to June, 2017. It is evident that the issue of rendering of service to M/s. Northern Railway Authority and M/s. IRCTCL was known to the Department at the time of the first audit. Even after raising of the issue and issue of the Audit Memo vide letter dated 18.12.2015, no demand was raised. Thus, we are of the view that the issue of the Show Cause Notice in this case by invoking the extended period of limitation, after the second audit on the same issue, is legally not sustainable. Consequently, we hold that the demand confirmed in the impugned order by invocation of the extended period of limitation is not sustainable and thus, set aside the same.
12. Regarding the demand raised for the normal period, we find that the services in question i.e., "LDS", as rendered by the appellant, are liable to Service Tax. As already observed hereinabove, a perusal of the agreement and other documents submitted by the appellant indicates that the services rendered by the appellant squarely fall within the ambit of 'manpower supply service'. The appellant has also placed on record a work-sheet showing the details of manpower supply service rendered by them during the period from 01.04.2016 to 31.03.2017, to Page 17 of 20 Appeal No.: ST/75220/2024-DB M/s. RailTel. For ready reference, the said work sheet is extracted below: -
12.1. As per the work sheet, the demand for the normal period works out to Rs.64,18,891/-
[Rs.6,18,369/- + Rs.58,00,522/- (for 2016-17)]. We find that this amount tallies with the demand for the same period as calculated by the Department in the Show Cause Notice. We also observe that in support of receipt of the above amounts by them from M/s. RailTel during the period from 01.04.2016 to 31.03.2017, the appellant has furnished the invoices raised by them on M/s. RailTel, for the said services rendered.
Page 18 of 20Appeal No.: ST/75220/2024-DB 12.2. We therefore find that the demand for the above pertains only to services rendered to M/s. RailTel, and not to M/s. IRCTCL / M/s. Northern Railway Authority, as evidenced by the list of invoices produced by the appellant in support of their claim. As per the amended Notification No. 7/2015-ST dated 31.03.2015, in respect of 'manpower supply service', 100% Service Tax liability is cast on the recipient of service, under reverse charge mechanism, for this period. M/s. RailTel qualifies as a 'body corporate' and the appellant as a proprietorship firm. Thus, we agree with the submission of the appellant that there is no liability to Service Tax on them as regards the services rendered by the appellant to M/s. RailTel, under the category of 'manpower supply service' and that the liability therefor, if any, lies on the service recipient, under reverse charge mechanism.
12.3. As per the submission made by the appellant, during this period, the appellant have not rendered any services to M/s. Northern Railway Authority and to substantiate their claim, they have relied on the invoices raised on M/s. RailTel during the concerned period, which have been duly placed on record.
12.4. Having gone through the records placed before us as well as the submissions made, we hold that the entire liability to Service Tax for the normal period of limitation in respect of the services rendered by the appellant to M/s. RailTel, is on the recipient of service i.e., M/s. RailTel, in this case.
Page 19 of 20Appeal No.: ST/75220/2024-DB
13. We have also examined the contentions raised by the appellant on the issue of imposition of penalty under Section 78 of the Finance Act, 1994. It has been submitted that the appellant had already declared supply of manpower service in their periodical ST-3 returns and also declared regarding availment of benefit of Notification No.30/2012 (Sl. No.8), thus discharging Service Tax on 25% of the gross value of service as received by them. Therefore, we observe that the element of suppression of facts with intent to evade payment of tax as charged, as alleged in the instant Show Cause Notice, does not exist in this case. No corroborative evidence has also been brought on record by the Revenue to substantiate the imposition of penalty under Section 78 ibid. Considering the above, we hold that the penalty imposed on the appellant under Section 78 of the Act is unwarranted and accordingly, the same stands set aside.
14. In the result, we pass the following order: -
(i) The demand confirmed vide the impugned order by invoking the extended period of limitation is set aside.
(ii) The demand confirmed vide the impugned order as pertaining to the normal period of limitation, is upheld. However, the liability to Service Tax for the services rendered in respect of the normal period, is on the recipient of service viz., M/s. RailTel.
(iii) The penalty imposed under Section 78 of the Finance Act, 1994, stands set aside.Page 20 of 20
Appeal No.: ST/75220/2024-DB
15. The appeal stands disposed of in the above manner.
(Order pronounced in the open court on 26.02.2026) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd