Jaipur: In a significant ruling on service tax classification, the Rajasthan High Court has dismissed an appeal filed by the Commissioner of Central Excise and Service Tax, Alwar, upholding the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) order in favour of M/s Incredible Unique Buildcon Pvt. Ltd.
A Division Bench of Justice Arun Monga and Justice Maneesh Sharma refused to interfere with the CESTAT’s decision, which had set aside the Service Tax Department’s demand of over ₹2.54 crore raised against the construction company.
The case arose from an audit conducted by the Central Excise and Service Tax Department, which alleged that the company had incorrectly paid service tax under the category of Commercial or Industrial Construction Services (CICS) instead of Works Contract Services (WCS) between October 2010 and June 2012.
According to the Department, the builder executed composite construction contracts involving both materials and services and should have discharged tax liability under the Works Contract Services category after its introduction in 2007. The Department further claimed that the company had not opted for the Works Contract Composition Scheme and had consequently short-paid service tax.
Based on these findings, a show-cause notice was issued in September 2015 proposing recovery of ₹2,54,64,515, along with interest and penalties under the Finance Act, 1994.
However, the CESTAT had ruled in favour of the assessee, prompting the Revenue to challenge the decision before the Rajasthan High Court.
After hearing the parties, the Division Bench dismissed the Department’s appeal and affirmed the Tribunal’s order, providing major relief to the construction company in the long-pending indirect tax dispute.