CESTAT | When road construction is exempt; is every activity exempt relating to the road construction including consulting engineer services? Tribunal answers

Customs, Excise and Services Tax Appellate Tribunal (CESTAT): The Coram of Anil Choudhary (Judicial Member) and P. Anjani Kumar (Technical Member) allowed an appeal which was filed against the Order-in Appeal passed by the Commissioner (Appeals), CGST & Central Excise Appeal Commissionerate, Allahabad.

Appellants were providing ‘Consulting Engineer Service’ taxable under the Finance Act, 1994 (hereinafter referred to as ‘the Act’) on which service tax was payable by the appellant. The appellant had also received ‘rent-a-cab service’ and ‘legal service’ on which service tax was payable by the appellant under reverse charge. The show cause notice alleged that the appellant had suppressed the ‘taxable value’ of consulting engineer services provided to their clients during the period 2011-12 to 2015-16 and also that service tax has not been paid on the services of ‘rent-a-cab service’ and ‘legal services’ under ‘reverse charge’ during this period.

The Revenue had computed the tax liability on the basis of gross turnover as reflected in Form No. 26AS (under the Income Tax provision), which is a document available on the website of Income Tax Department, wherein the data recorded is on cash basis or receipt basis of accounting. Whereas under the provisions of service tax, the tax liability is computed on the basis of accrual on mercantile system of accounting, which is in contrast to the cash basis of accounting.

The Tribunal found that the allegations of Revenue were frivolous, that it was only on enquiry it came to know about the affairs of the appellant, i.e. providing of taxable service in view of the admitted facts that appellant is a registered assessee under the Service Tax provision, and have been filing their returns and paying tax. The Tribunal further found that Form No. 26AS was not a statutory document for determining the taxable turnover under the Service Tax provisions. Whereas under the Service Tax provisions, the service tax was chargeable on mercantile basis (accrual basis) on the service provided whether the value of such service was received or not, thus the Tribunal concluded that the whole basis of show cause notice was incorrect and/or misconceived.

This Tribunal has held in other disputed cases that even the barricade provided on the side of highway, maintaining greenery on the side or middle of highway, construction of any facility, refreshment centre for road users, is also part of the road construction and such activity is also exempt. Even the administrative building constructed by the concessionaire, for construction of the road or highway for administration and collection of toll etc. is part of road.

The Tribunal allowed the appeal holding that appellant was entitled to exemption under the Notification No. 25/2012-ST under Sl. No. 13(a) of the said notification for providing consulting engineer services in the matter of road construction.

[Quest Engineers & Consultant (P) Ltd. v. Commr. CGST &CE, Service Tax Appeal No. 70616 of 2019, decided on 28-09-2021]


Suchita Shukla, Editorial Assistant has reported this brief.

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