Custom, Excise & Service Tax Tribunal
G N Construction vs Jaipur I.. on 1 September, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH-COURT NO. 3
SERVICE TAX APPEAL NO. 52377 OF 2018
[Arising Out Of Order-in-Appeal No. 17(NG)ST/JPR/2018 dated 15.01.2018
passed by the Commissioner (Appeals), Central Goods and Service Tax,
Central Excise, Jaipur]
G N CONSTRUCTION .......APPELLANT
127, G.N. House, Sai Path,
Keshav Vihar, Gopalpura Bypass,
Jaipur
Vs.
COMMISSIONER OF CENTRAL GOODS AND .....RESPONDENT
SERVICE TAX, JAIPUR I.
NCR Building, Statue Circle, C-scheme, Jaipur
Rajasthan-302005
Appearance:
Present for the Appellant : None
Present for the Respondent: Shri S.K. Meena, Authorised Representative
CORAM:
HON'BLE MS. BINU TAMTA, MEMBER ( JUDICIAL )
HON'BLE MR. P. V. SUBBA RAO, MEMBER ( TECHNICAL )
FINAL ORDER NO. 51256 /2025
Date of Hearing : 25/08/2025
Date of Decision : 01/09/2025
P.V. SUBBA RAO
1. M/s. G N Constructions1 filed this appeal to assail the Order in
Appeal dated 15.01.20182 passed by the Commissioner (Appeals)
Central Goods and Services Tax and Central Excise, Jaipur in
pursuance of this Tribunal's Final Order dated 4.4.2016 remanding the
matter.
1
Appellant
2
Impugned order
2
2. The appellant was engaged in providing services of 'construction
of residential complex services' as defined under section 65 (91a) of
the Finance Act, 19943 which was taxable under section 65 (105)
(zzzh) of Act and 'Commercial or Industrial Construction Services' as
defined in section 65 (25b) of the Act and taxable under section 65
(zzb) of Act. Since it rendered services under comprehensive contracts
and had used materials while providing these construction services, it
claimed abatement of 67% of the gross amount received under
exemption notification no. 1/2006-ST dated 1.3.2006. It also claimed
that the construction of the building of Maharaja Vinayak Dental
College was exempted being construction of building of an educational
institution.
3. A Show Cause Notice4 dated 24.10.2011 was issued proposing to
deny the abatement under the exemption and recover differential duty
of Rs. 19,56,105/- from the appellant.
4. After considering the reply, the Additional Commissioner passed
order in original dated 16.1.2013 denying the benefit of abatement
under notification no. 1/2006-ST dated 1.3.20006 and confirming
demand of only Rs. 9,05,505/- with interest under section 73 of the
Act and imposed an equal amount as penalty under section 78 of the
Act.
5. The appellant's appeal against the order of the Additional
Commissioner dated 16.1.2013 was dismissed by the Commissioner
(Appeals) by order dated 23.4.2014 because the appellant had not
made the pre-deposit as directed. On appeal, this Tribunal, by order
3
Act
4
SCN
3
dated 4.4.2016, remanded the matter to the Commissioner (Appeals)
with a direction to decide the appeal on merits. The Commissioner
(Appeals) examined the matter on merits and passed the impugned
order upholding the order of the Additional Commissioner and
rejecting the appellant's appeal.
6. This appeal was listed before this bench twelve (12) times and it
was adjourned either because the learned counsel for the appellant did
not appear or sought an adjournment. Today, learned counsel for the
appellant again sent a letter seeking adjournment. Learned authorized
representative opposed grant of any further adjournments to the
appellant. We find that more than sufficient opportunities were granted
to the appellant, the matter should not be adjourned further.
7. The question which arises is what should this Tribunal do if the
appellant does not appear. The Larger bench of the Hon'ble Supreme
Court has, in the case of Balaji Steel Re-Rolling Mills Versus
Commissioner Of C. Ex. & Customs5 held that if the appellant is not
present on the day the matter is taken up for hearing, this tribunal
should decide the matter on merits. The relevant portion of the
judgment is reproduced below:
"2. The sole question of law which arises for consideration in
the present appeal is as to whether the Customs, Excise and
Service Tax Appellate Tribunal (in short 'the Tribunal') has the
power to dismiss the appeal for want of prosecution or not.
......
13. Applying the principles laid down in the aforesaid case to the facts of the present case, as the two provisions are similar, we are of the considered opinion that the Tribunal could not have dismissed the appeal filed by the appellant for want of prosecution and it ought to have decided the appeal on merits even if the appellant or its counsel was not present when the appeal was 5 2014 (310) E.L.T. 209 (S.C.) 4 taken up for hearing. The High Court also erred in law in upholding the order of the Tribunal.
14. We, therefore, set aside the order, dated 18-1-2014 passed by the High Court of Judicature of Bombay, Bench at Aurangabad and also the order, dated 22-8-2012 passed by the Tribunal and direct the Tribunal to decide the appeal on merits."
(emphasis supplied)
8. Respectfully following the judgment of the Supreme Court in Balaji Steel Re-rolling mills, we proceed to decide this appeal on merits. We have carefully gone through the records of the case, the submissions in the appeal and have heard learned authorized representative for the Revenue.
9. The short question to be answered is if the appellant was liable to pay the differential service tax confirmed in the impugned order by denying the abatement of 67% under exemption notification 1/2006- ST or not.
10. Before we examine this issue, it will be necessary to understand the basic scheme of Service Tax and how it evolved over years. Service tax is levied under Finance Act, 1994. Section 66 of this Act is the charging section which levied tax on 'taxable services' rendered. Taxable services were defined in various clauses of section 65 (105). Initially, service tax was levied only on few services and it was extended to more services from time to time by adding new clauses under section 65(105).
11. On 1.6.2007, some types of works contracts were made taxable under 'works contracts service' by inserting clause (zzzza)in section 65(105). Works contracts are those contracts in which the service is rendered along with transfer or deemed transfer of property in goods; i.e, if goods are used by the service provider while rendering the 5 service. However, even before 'works contracts' were made taxable by introducing clause (zzzza) in section 65(105) in the Act, service tax was being collected when taxable services were rendered under comprehensive contracts including transfer or deemed transfer of goods. Abatement was provided through various notifications so that tax was paid only on the service component of the contracts. The notification no. 1/2006-ST in question in this appeal is one such notification which, inter alia, provided for abatement where 'commercial or industrial construction service' or 'construction of residential complex service' was rendered along with the use of materials under a comprehensive contract. This exemption notification provided for abatement of 67% of the value of the contract subject to some conditions which, according to the Revenue, the appellant had not fulfilled and hence it was not entitled to the benefit of this notification.
12. Meanwhile, in several cases, disputes arose on the question as to if service tax could be charged at all on services rendered under various clauses of section 65(105) if they were provided under comprehensive contracts which included transfer or deemed transfer of materials. The dispute travelled to Supreme Court and Commissioner of C.EX. & Cus. Kerala vs. Larsen & Toubro Ltd.6 decided that Works Contracts can only be taxed under section 65(105) (zzzza) as "works contracts service" after this clause was introduced from 1.6.2007. It has also been held that other clauses of section 65(105) apply only to services simpliciter. Thus, there was no levy of service tax on works contracts before 1.6.2007. Works contracts could only be charged to service tax only under the head 'Works Contract service' 6 2015 (39) STR 913 (SC) 6 under section 65(105) (zzzza) after the levy was introduced from 1.6.2007. When it was brought to the attention of the Supreme Court that exemption notifications were issued giving abatement, the Supreme Court held that since there was no levy at all, the question of any exemption would not arise at all. Relevant portions of the judgment are reproduced below:
"17. We find that the assessees are correct in their submission that a works contract is a separate species of contract distinct from contracts for services simpliciter recognized by the world of commerce and law as such, and has to be taxed separately as such. In Gannon Dunkerley, 1959 SCR 379, this Court recognized works contracts as a separate species of contract as follows :-
"To avoid misconception, it must be stated that the above conclusion has reference to works contracts, which are entire and indivisible, as the contracts of the respondents have been held by the learned Judges of the Court below to be. The several forms which such kinds of contracts can assume are set out in Hudson on Building Contracts, at p. 165. It is possible that the parties might enter into distinct and separate contracts, one for the transfer of materials for money consideration, and the other for payment of remuneration for services and for work done. In such a case, there are really two agreements, though there is a single instrument embodying them, and the power of the State to separate the agreement to sell, from the agreement to do work and render service and to impose a tax thereon cannot be questioned, and will stand untouched by the present judgment." (at page 427)
18. Similarly, in Kone Elevator India (P) Ltd. v. State of T.N. - (2014) 7 SCC 1 = 2014 (34) S.T.R. 641 (S.C.) = 2014 (304) E.L.T. 3 (S.C.), this Court held :-
"Coming to the stand and stance of the State of Haryana, as put forth by Mr. Mishra, the same suffers from two basic fallacies, first, the supply and installation of lift treating it as a contract for sale on the basis of the overwhelming component test, because there is a stipulation in the contract that the customer is obliged to undertake the work of civil construction and the bulk of the material used in construction belongs to the manufacturer, is not correct, as the subsequent discussion would show; and second, the Notification dated 17-5-2010 issued by the Government of Haryana, Excise and Taxation Department, whereby certain rules of the Haryana Value Added Tax Rules, 2003 have been amended and a table has been annexed providing for "Percentages for Works Contract and Job Works" under the heading "Labour, service and other like charges as percentage of total value of the contract" specifying 15% for fabrication and installation of elevators (lifts) and escalators, is self-contradictory, for once it is treated as a composite contract invoking labour and service, as a natural corollary, it would be works contract and not a contract for sale. To elaborate, the submission that the element of labour and service can be deducted from the total contract value without treating the composite contract as a works contract is absolutely fallacious. In fact, it is an innovative subterfuge. We are inclined to think so as it 7 would be frustrating the constitutional provision and, accordingly, we unhesitatingly repel the same." (at para 60)
19. In Larsen & Toubro Ltd. v. State of Karnataka, (2014) 1 SCC 708 = 2014 (34) S.T.R. 481 (S.C.) = 2014 (303) E.L.T. 3 (S.C.), this Court stated :-
"In our opinion, the term "works contract" in Article 366(29-A)(b) is amply wide and cannot be confined to a particular understanding of the term or to a particular form. The term encompasses a wide range and many varieties of contract. Parliament had such wide meaning of "works contract" in its view at the time of the Forty-sixth Amendment. The object of insertion of clause (29-A) in Article 366 was to enlarge the scope of the expression "tax on sale or purchase of goods" and overcome Gannon Dunkerley (1) [State of Madras v. Gannon Dunkerley and Co. (Madras) Ltd., AIR 1958 SC 560 : 1959 SCR 379]. Seen thus, even if in a contract, besides the obligations of supply of goods and materials and performance of labour and services, some additional obligations are imposed, such contract does not cease to be works contract. The additional obligations in the contract would not alter the nature of contract so long as the contract provides for a contract for works and satisfies the primary description of works contract. Once the characteristics or elements of works contract are satisfied in a contract then irrespective of additional obligations, such contract would be covered by the term "works contract". Nothing in Article 366(29-A)(b) limits the term "works contract" to contract for labour and service only. The learned Advocate General for Maharashtra was right in his submission that the term "works contract" cannot be confined to a contract to provide labour and services but is a contract for undertaking or bringing into existence some "works". We are also in agreement with the submission of Mr. K.N. Bhat that the term "works contract" in Article 366(29-A)(b) takes within its fold all genre of works contract and is not restricted to one specie of contract to provide for labour and services alone. Parliament had all genre of works contract in view when clause (29-A) was inserted in Article
366." (at para 72)
42. It remains to consider the argument of Shri Radhakrishnan that post 1994 all indivisible works contracts would be contrary to public policy, being hit by Section 23 of the Indian Contract Act, and hit by Mcdowell's case.
43. We need only state that in view of our finding that the said Finance Act lays down no charge or machinery to levy and assess service tax on indivisible composite works contracts, such argument must fail. This is also for the simple reason that there is no subterfuge in entering into composite works contracts containing elements both of transfer of property in goods as well as labour and services.
44. We have been informed by counsel for the revenue that several exemption notifications have been granted qua service tax "levied" by the 1994 Finance Act. We may only state that whichever judgments which are in appeal before us and have referred to and dealt with such notifications will have to be disregarded. Since the levy itself of service tax has been found to be non-existent, no question of any exemption would arise. With these observations, these appeals are disposed of.
45. We, therefore, allow all the appeals of the assessees before us and dismiss all the appeals of the revenue."
(emphasis supplied) 8
13. The dispute in this appeal is about the entitlement of abatement under exemption notification for construction services provided under composite works contracts. As per the law laid down in Larsen & Toubro, there was no levy at all on such contracts before 1.6.2007 and after this date, the levy could be only under section 65(105) (zzzza) of the Act. Levy under clauses 65 (105) (zzzh) 'construction of residential complex service' and section 65(105) (zzb) 'commercial or industrial construction service' are only for services simpliciter and not for works contracts.
14. Since there was no levy at all under 'commercial and industrial construction service' or 'construction of residential complex service' on the services rendered by the appellant, the denial of abatement under the exemption notification or the demand of differential service tax do not arise. Consequently, the demand of service tax, interest and penalty need to be set aside.
15. In view of the above, the appeal is allowed and the impugned order is set aside with consequential relief to the appellant.
[Order pronounced on 01/09/2025 ] (BINU TAMTA) MEMBER ( JUDICIAL ) (P. V. SUBBA RAO) MEMBER ( TECHNICAL ) Tejo