Custom, Excise & Service Tax Tribunal
M/S Khwaja Enterprises vs Cgst Lucknow on 12 May, 2026
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.II
Service Tax Appeal No.70101 of 2026
(Arising out of Order-in-Appeal No.210-ST/APPL/LKO/2025 dated 30/06/2025
passed by Commissioner (Appeals) Customs, Central Excise & GST, Lucknow)
M/s Khwaja Enterprises, .....Appellant
(12A-Patel Nagar, Indira Nagar, Lucknow-226016)
VERSUS
Commissioner of Central Excise &
Service Tax, Lucknow ....Respondent
(7A, Ashok Marg, Hazratganj, Lucknow) APPEARANCE:
Shri A.K. Srivastava, Advocate & Shri Mukesh Kumar Yadav, Advocate for the Appellant Smt Chitra Srivastava, Authorised Representative for the Respondent CORAM: HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL) FINAL ORDER NO.70139/2026 DATE OF HEARING : 12 May, 2026 DATE OF DECISION : 12 May, 2026 SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No.210- ST/APPL/LKO/2025 dated 30/06/2025 passed by Commissioner (Appeals) Customs, Central Excise & GST, Lucknow. By the impugned order, Commissioner (Appeals) has upheld the Order- in-Original No.87/AC/CGST/LKO-III/23-24 dated 20.06.2023 wherein following has been held:-
"ORDER
(i) I confirm demand of Service Tax amounting to Rs.3,61,397/- (Rupees Three Lakh Sixty-One Thousand Three Hundred and Ninety-Seven Only) including Swachh Bharat Cess and Krishi Kalyan Cess under Section 73(2) of Service Tax Appeal No.70101 of 2026 2 the Finance Act, 1994 read with Section 142 and 174 of CGST Act, 2017.
(ii) I confirm demand of interest on the amount of Service Tax mentioned at (i) under Section 75 of the Finance Act, 1994 read with Section 142 & 174 of CGST Act, 2017.
(iii) I Impose penalty of Rs.3,61,397/- (Rupees Three Lakh Sixty-One Thousand Three Hundred and Ninety-Seven Only) under Section 78 of the Finance Act, 1994 read with Section 142 & 174 of CGST Act, 2017 for failure to pay Service Tax & suppressing the facts and contravening provisions or rules with intent to evade payment of service tax.
(iv) I impose penalty of Rs. 10,000/- under Section 77(1) (C) (i)(ii) (iii) of the finance Act, 1994 read with Section 142 & 174 of CGST Act, 2017 for not furnishing the information/not producing the documents/not appearing when issued with a summons before a Central Excise Officer.
(v) I impose penalty of Rs. 10,000/- under Section 77(1)
(d) of the finance Act, 1994 read with Section 142 & 174 of CGST Act, 2017 for fails to pay the Service Tax electronically.
(vi) I do not impose any penalty of ST-3 Returns within stipulated time and manner as per Rule 7C of the Service Tax Rules, 1994 read with Section 70 of the Finance Act, 1994 and read with Section 142 & 174 of CGST Act, 2017.
(vii) I impose penalty of Rs. 10,000/- under Section 77(2) of the finance Act, 1994 read with Section 142 & 174 of CGST Act, 2017 for non-filing of periodical ST-3 returns." 2.1 Appellant is registered with the Service Tax Department under registration No.BCNPK7331JST001 for providing services under the category of Maintenance or repair Service. 2.2 Information was received from the Income Tax Department to the effect that during the Financial Year 2016-17 appellant has received consideration towards provisions of services. However, on verification, it was observed that appellant Service Tax Appeal No.70101 of 2026 3 has not paid any service tax in respect of consideration so received.
2.3 Appellant vide letters dated 02.02.2021, 08.03.2021 and 09.06.2021 was asked to provide documents/information for the year 2016-17 and 2017-18 upto June, 2018 along with evidence to deposit of service tax. Summon dated 06.08.2021 was also issued to the appellant for providing the above information. 2.4 Appellant did not provide any information as sought for. Hence, service tax was determined as per the available information provided by the Income Tax as detailed in table below:-
(Amt. in Rs.) Financial Taxable Rate of Service Service Tax Service Service Tax Year Value of Tax (including liability Tax outstanding Services applicable Cess) Deposited 2016-17 24,09,313/- 15% 3,61,397/- Nil 3,61,397/-
2.5 From the records, it was observed that appellant has not filed ST-3 returns for the financial year 2016-17. So revenue was of the view that the appellant has suppressed material facts from the Department and have not declared the correct value of taxable services provided in the ST-3 return and contravened provisions of Finance Act, 1994 read with Rule 9 of rules with intent to evade payment of Service Tax despite being engaged in providing taxable services and receiving payments and not depositing Service Tax. Hence, extended period limitation is invokable in this case and proviso to Section 73(1) of the Finance Act, 1994, read with Section 142 & 174 of CGST Act, 2017 along with appropriate interest under Section 75 of the Finance Act, 1994 is invokable against the appellant.
2.6 Show cause notice dated 29.09.2021 was issued to the appellant asking them to show cause as to why:-
"(1) The Service Tax amounting to Rs.3,61,397/- (Three Lakh Sixty One Thousand Three Hundred Ninety Seven Only) including Swachh Bharat Cess and Krishi Kalyan Cess should not be demanded and recovered from them Service Tax Appeal No.70101 of 2026 4 under proviso to Section 73(1) of the Finance Act, 1994 read with Section 142 & 174 of CGST Act, 2017.
(ii) The 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 read with Section 142 & 174 of CGST Act, 2017.
(iii) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994 read with Section 142 & 174 of CGST Act, 2017 for failure to pay Service Tax & suppressing the facts and contravening provisions or rules with intent to evade payment of Service Tax.
(iv) Penalty should not be imposed upon them under Section 77(1)(C)(i)(ii)(iii) of the Finance Act, 1994 read with Section 142 & 174 of CGST Act, 2017 for not furnishing the information/ not producing the documents / not appearing when issued with a summon before a Central Excise officer.
(v) Penalty should not be imposed upon them under Section 77(1)(d) of the Finance Act, 1994 read with Section 142 & 174 of CGST Act, 2017 for fails to pay the Service tax electronically.
(vi) Late fee should not be imposed for late filing of ST-3 returns within stipulated time and manner as per Rule 7C of Service Tax Rules, 1994 read with Section 70 of the Finance Act, 1994 and read with Section 142 & 174 of CGST Act, 2017.
(vii) Penalty should not be imposed upon them under Section 77(2) of the Finance Act, 1994read with Section 142 & 174 of CGST Act, 2017 for non filing of periodical ST-3 returns."
2.7 The said show cause notice was adjudicated as per the Order-in-Original dated 20.06.2023 referred in para 1 above.
2.8 Aggrieved appellant have filed appeal before Commissioner (Appeals) which has been dismissed as per the impugned order.
Service Tax Appeal No.70101 of 2026 5 2.9 Aggrieved appellant have filed this appeal.
3.1 I have heard Shri A.K. Srivastava learned Counsel appearing for the appellant and Smt Chitra Srivastava learned Authorised Representative appearing for the revenue.
3.2 Arguing for the appellant learned Counsel submits that-
They are engaged in providing supervision services and also sale of goods. Major part of their income is from sale of goods and not from sale of services.
The total value of consideration received for providing services would be less than the threshold exemption limit provided as per Notification No.33/2012-ST. The fact that appellant's turnover for the previous year 2015-16 was less than the prescribed threshold limit is visible from the audited balance sheet, income tax return of the appellant.
Thus, appellant is entitled to exemption under Notification No.33/2012-ST.
3.3 Learned Authorised Representative reiterates the findings recorded in the orders of the lower authorities.
4.1 I have considered the impugned orders along with the submissions made in appeal and during the course of argument.
4.2 Impugned order records the findings as follows:-
"5.1 I have carefully gone through the case records. I find that the issue of demand of tax, interest and penalty on account of amount of Rs. 24,09,313/-on which TDS had been deducted in the Form 26AS of the Appellant is to be examined in the present appeal.
5.2 Per contra the Appellant has challenged said demand of tax, interest and penalty on the grounds that for the period of dispute they were engaged in trading of goods. Out of Rs. 24,09,313/-, Rs. 3,80,996/- was received in lieu of installation work and Rs. 5,25,727/- was received in lieu of commission, totaling to Rs.9,06,723/- which is below the threshold exemption limit of Rs.10 lacs and are Service Tax Appeal No.70101 of 2026 6 seeking benefit of Notification No. 33/2012-Service Tax dated 20.06.2012.
5.3 In order to support their claim the Appellant has submitted copy of invoices issued by them to Hotel Jawahar International P Ltd., NAR Indra Hotels P. Ltd., ADECCO India P. Ltd., Holisol Logistics P. Ltd., All India Radio and Blue Star Limited.
5.4 On going through the case records, I find that the Adjudication Authority failed to extend any relief to the Appellant on the finding that they had failed to submit copy of work order/agreement along with other related documents.
5.5 I also note that the Appellant has failed to submit even before me copy of work order/agreement in respect of Hotel Jawahar International P Ltd., NAR Indra Hotels P. Ltd., ADECCO India P. Ltd., Holisol Logistics P. Ltd., All India Radio and Blue Star Limited.
5.6 I further, note that the Appellant is seeking benefit of threshold limit provided under Notification No. 33/2012 Service Tax dated 20.06.2012 however, they have failed to substantiate whether following conditions laid down in Notification No. 33/2012-Service Tax dated 20.06.2012 are fulfilled in their case or not:
(i) the provider of taxable service has the option not to avail the exemption contained in this notification and pay service tax on the taxable services provided by him and such option, once exercised in a financial year, shall not be withdrawn during the remaining part of such financial year;
(ii) the provider of taxable service shall not avail the CENVAT credit of service tax paid on any input services, under rule 3 or rule 13 of the CENVAT Credit Rules, 2004 (herein after referred to as the said rules), used for providing the said taxable Service Tax Appeal No.70101 of 2026 7 service, for which exemption from payment of service tax under this notification is availed of;
(iii) the provider of taxable service shall not avail the CENVAT credit under rule 3 of the said rules, on capital goods received, during the period in which the service provider avails exemption from payment of service tax under this notification;
(iv) the provider of taxable service shall avail the CENVAT credit only on such inputs or input services received, on or after the date on which the service provider starts paying service tax, and used for the provision of taxable services for which service taxis payable;
(v) the provider of taxable service who starts availing exemption under this notification shall be required to pay an amount equivalent to the CENVAT credit taken by him, if any, in respect of such inputs lying in stock or in process on the date on which the provider of taxable service starts availing exemption under this notification;
(vi) the balance of CENVAT credit lying unutilised in the account of the taxable service provider after deducting the amount referred to in sub-paragraph
(v), if any, shall not be utilised in terms of provision under sub-rule (4) of rule 3 of the said rules and shall lapse on the day such service provider starts availing the exemption under this notification;
(vii) where a taxable service provider provides one or more taxable services from one or more premises, the exemption under this notification shall apply to the aggregate value of all such taxable services and from all such premises and not separately for each premises or each services; and Service Tax Appeal No.70101 of 2026 8
(viii) the aggregate value of taxable services rendered by a provider of taxable service from one or more premises, does not exceed ten lakh rupees in the preceding financial year."
5.7 From the above, it is clear that the benefit of Notification No. 33/2012-Service Tax dated 20.06.2012 is subject to the fulfilment of conditions as listed above and the appellant has failed to provide documents in order to substantiate their claim regarding fulfilment of conditions mentioned at S.No. (ii) to (v) above and further, they have not provided any proof to establish that the aggregate value of taxable services provided by them during the preceding financial year i.e. F.Y. 2015-16 had not exceeded the threshold limit of Rs. Ten Lakhs. Thus, the benefit of Notification No. 33/2012-Service Tax dated 20.06.2012 cannot be extended to the Appellant."
4.3 For the year 2016-17 appellant before the adjudicated authority submitted the details of services and the sale of goods as detailed in table below:-
Name of the Party Commission Installation Goods Total Hotel Jawahar International P Ltd. 0 0 37078 37078 NAR Indra Hotels P. Ltd. 0 0 46300 46300 ADECCO India P Ltd. 0 0 28700 28700 Holisol Logistics P Ltd. 0 8000 0 8000 All India Radio 0 0 461335 461335 Blue Star Ltd. 525727 372996 929177 1827900 Total 525727 380996 1502590 2409313 4.4 From perusal of the above table it is evidence that appellant claimed before the adjudicating authority by giving the brake up of the above. They had provided the copy of purchase and sale register.
4.5 Major part of services and goods provided by the appellant was to M/s Blue Star Ltd. They also provided bill wise details in Service Tax Appeal No.70101 of 2026 9 respect of goods and services provided to M/s Blue Star Ltd. the same as reproduced below:-
Service Tax Appeal No.70101 of 2026 10 Service Tax Appeal No.70101 of 2026 11 On sample base certain invoices were also provided which are reproduced below:-
Service Tax Appeal No.70101 of 2026 12 Service Tax Appeal No.70101 of 2026 13 Service Tax Appeal No.70101 of 2026 14 4.6 On perusal of the above, I have no hesitation in holding that appellant was engaged in providing services and also in sale of goods as has been claimed by them. The above argument has been rejected by the Original Authority by saying that appellant has in their income tax return reflected the amount of Rs.18,83,590/- + Rs.5,25,727/-=24,09,317/-. Thus, Original Authority had concluded that claim made by the appellant had been considered and rejected, appellant also for the same period i.e. 2016-17 has produced commercial tax declaration filed by them. As per the said declaration also the appellant has shown that the value of sale of goods by them was approximately Rs.1,05,34,811.47 and paid the VAT of Rs.15,27,548/-. From the above facts, I find that appellant has substantially established that they were engaged in the sale of goods and also in provision of services.
Service Tax Appeal No.70101 of 2026 15 4.7 Further from the sample invoices which have been reproduced above I observe that the services provided by the appellant were alongwith the supply of goods, then these services will qualify to be work contract services. From the 26AS of the appellant also it is observed that all the TDS has been deducted in terms of Section 194C of the Income Tax Act, 1961. That being so the value of taxable service should have been determined by application of composition scheme. However the demand has been confirmed against the appellant on the value of receipts towards sale of services without determining the classification of services and without allowing the benefit of composition scheme as the services provided by the appellant are in nature of work contract services.
4.8 Trading and Profit & Loss Account statement in the balance sheet for the year 2015-16, is reproduced below:-
Service Tax Appeal No.70101 of 2026 16 4.9 On perusal of the above, it is evident that the total service turnover of the appellant was Rs.7,48,651/- which is less than the prescribed threshold exemption limit. The above fact is supported by the declaration made in the income tax return of the appellant wherein the same figure appears. Accordingly, I find merits in the submissions of the appellant that the benefit of Notification No.33/2012-ST would be available to them.
4.10 I also find that in view of the facts as above appellant was having a bonafide belief that no service tax liability on them as their turnover during the year 2016-17 was less than the prescribed exemption limit. That being so the demand made by invoking the extended period of limitation cannot be sustained.
Hon'ble Supreme Court in the case of Uniworth Textiles Ltd. [2013 (288) ELT 161 (SC)] has held as follows:-
"21. The Revenue contended that of the three categories, the conduct of the appellant falls under the case of "willful misstatement" and pointed to the use of the word "misutilizing" in the following statement found in the order of the Commissioner of Customs, Raipur in furtherance of its claim :
"The noticee procured 742.51 kl of furnace oil valued at Rs. 54,57,357/- without payment of customs duty by misutilizing the facility available to them under Notification No. 53/97-Cus., dated 3-6-1997"
22. We are not persuaded to agree that this observation by the Commissioner, unfounded on any material fact or evidence, points to a finding of collusion or suppression or misstatement. The use of the word "willful" introduces a mental element and hence, requires looking into the mind of the appellant by gauging its actions, which is an indication of one‟s state of mind. Black‟s Law Dictionary, Sixth Edition (pp 1599) defines "willful" in the following manner :-
Service Tax Appeal No.70101 of 2026 17 "Willful. Proceeding from a conscious motion of the will; voluntary; knowingly; deliberate. Intending the result which actually comes to pass...
An act or omission is "willfully" done, if done voluntarily and intentionally and with the specific intent to do something the law forbids, or with the specific intent to fail to do something the law requires to be done..."
23. In the present case, from the evidence adduced by the appellant, one will draw an inference of bona fide conduct in favour of the appellant. The appellant laboured under the very doubt which forms the basis of the issue before us and hence, decided to address it to the concerned authority, the Development Commissioner, thus, in a sense offering its activities to assessment. The Development Commissioner answered in favour of the appellant and in its reply, even quoted a letter by the Ministry of Commerce in favour of an exemption the appellant was seeking, which anybody would have found satisfactory. Only on receiving this satisfactory reply did the appellant decide to claim exemption. Even if one were to accept the argument that the Development Commissioner was perhaps not the most suitable repository of the answers to the queries that the appellant laboured under, it does not take away from the bona fide conduct of the appellant. It still reflects the fact that the appellant made efforts in pursuit of adherence to the law rather than its breach.
24. Further, we are not convinced with the finding of the Tribunal which placed the onus of providing evidence in support of bona fide conduct, by observing that "the appellants had not brought anything on record" to prove their claim of bona fide conduct, on the appellant. It is a cardinal postulate of law that the burden of proving any form of mala fide lies on the shoulders of the one alleging it. This Court observed in Union of India v. Ashok Kumar & Service Tax Appeal No.70101 of 2026 18 Ors. - (2005) 8 SCC 760 that "it cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility."
25. Moreover, this Court, through a catena of decisions, has held that the proviso to Section 28 of the Act finds application only when specific and explicit averments challenging the fides of the conduct of the assessee are made in the show cause notice, a requirement that the show cause notice in the present case fails to meet. In Aban Loyd Chiles Offshore Limited and Ors. (supra), this Court made the following observations :
"21. This Court while interpreting Section 11-A of the Central Excise Act in Collector of Central Excise v. H.M.M. Ltd. (supra) has observed that in order to attract the proviso to Section 11-A(1) it must be shown that the excise duty escaped by reason of fraud, collusion or willful misstatement of suppression of fact with intent to evade the payment of duty. It has been observed :
„...Therefore, in order to attract the proviso to Section 11- A(1) it must be alleged in the show-cause notice that the duty of excise had not been levied or paid by reason of fraud, collusion or willful misstatement or suppression of fact on the part of the assessee or by reason of contravention of any of the provisions of the Act or of the Rules made thereunder with intent to evade payment of duties by such person or his agent. There is no such averment to be found in the show cause notice. There is no averment that the duty of excise had been intentionally evaded or that fraud or collusion had been practiced or that the assessee was guilty of wilful misstatement or suppression of fact. In the absence of any such averments in the show-cause notice it is difficult to understand how Service Tax Appeal No.70101 of 2026 19 the Revenue could sustain the notice under the proviso to Section 11-A(1) of the Act.‟ It was held that the show cause notice must put the assessee to notice which of the various omissions or commissions stated in the proviso is committed to extend the period from six months to five years. That unless the assessee is put to notice the assessee would have no opportunity to meet the case of the Department. It was held :
...There is considerable force in this contention. If the department proposes to invoke the proviso to Section 11- A(1), the show-cause notice must put the assessee to notice which of the various commissions or omissions stated in the proviso is committed to extend the period from six months to 5 years. Unless the assessee is put to notice, the assessee would have no opportunity to meet the case of the department. The defaults enumerated in the proviso to the said sub-section are more than one and if the Excise Department places reliance on the proviso it must be specifically stated in the show-cause notice which is the allegation against the assessee falling within the four corners of the said proviso...." (Emphasis supplied)
26. Hence, on account of the fact that the burden of proof of proving mala fide conduct under the proviso to Section 28 of the Act lies with the Revenue; that in furtherance of the same, no specific averments find a mention in the show cause notice which is a mandatory requirement for commencement of action under the said proviso; and that nothing on record displays a willful default on the part of the appellant, we hold that the extended period of limitation under the said provision could not be invoked against the appellant."
4.11 In the following decisions also it has been held that extended period of limitation could not have been invoked for making the demand when the person entertained a bonafide Service Tax Appeal No.70101 of 2026 20 belief about non taxable nature or exempted nature of the services provided.
Anand Nishikawa Co. Ltd. Vs CCE, Meerut 2025 (188) ELT 149;
Infinity Infotech Parks Ltd. Vs UOI 2014 (36) STR 37; CCE, Chennai Vs Chennai Petroleum Corporation Ltd. 2007 (211) ELT 193;
4.12 In view of the above, I find that demand is hit by limitation and the findings recorded in the impugned order in this regard cannot stand in the eyes of law. The impugned order is set aside.
5.1 Appeal is allowed.
(Dictated and pronounced in open court) (SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp