DELHI SOUTH vs SHANIVI CONSTRUCTIONS PRIVATE LIMITED

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH-COURT NO. 4


SERVICE TAX APPEAL NO. 51600 OF 2019

[Arising out of Order in Original No. DLI-GST-WEST-COM-28-18-19 dated
08.03.2019 passed by the Principal Commissioner, Central Tax, Delhi West]

COMMISSIONER OF CGST & CENTRAL
…..APPELLANT
EXCISE-DELHI SOUTH
Office of Commissioner of CGST,
Customs and Central Excise Service Tax
nd Rd
2 and 3 Floor, EIL Annexe Building,
Plot No. 2B, Bhikaji Cama Place,

Delhi, New Delhi-110066

Vs.

SHANIVI CONSTRUCTIONS PRIVATE
…..RESPONDENT
LIMITED
SGL Plaza 306, Rohini, Sector-09
New Delhi-110085

Appearance:
Present for the Appellant : Ms. Jaya Kumari, Authorised Representative
Present for the Respondent: Shri Atul Gupta, Chartered Accountant and Shri
Varun Gaba, Advocate

CORAM:
HON'BLE MR. AJAY SHARMA, MEMBER ( JUDICIAL )
HON'BLE MR. P. V. SUBBA RAO, MEMBER ( TECHNICAL )

FINAL ORDER NO. 51676 /2026
DATE OF HEARING : 02/11/2026
DATE OF DECISION : 05/11/2026
P.V.SUBBA RAO

1. Revenue has filed this appeal to assail the order dated
08.03.2019 passed by the Principal Commissioner of Central Tax,
Delhi West in which he decided the proposals made in the Show
Cause Notice dated 20.11.2017 issued to M/s Shanivi Construction
1
Pvt Ltd. covering the period 2012-13 to 2016-17. The show cause
notice has proposed demand of service tax of Rs.7,04,99,548/- under

1 Respondent

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ST/51600/2019
2
Section 73 of the Finance Act, 1994 along with interest and penalties
under section 76 and 78 of the Act.
2. After considering the submissions made by the respondent, the
Commissioner confirmed demand of only Rs.97,15,125/- and dropped
the remaining demand of Rs.6,07,84,423/-. Of the confirmed
demand, Rs.95,54,417/- which was already paid by the appellant
during the investigation was appropriated in addition and an amount
of Rs.1,60,708/- was held liable to be paid by the appellant. The
Commissioner refrained from imposing penalty under section 76 of
the Act but imposed penalty of Rs.1,60,708/- under section 78 of the
Act.
3. This order of the Commissioner was reviewed by the Committee
of Chief Commissioners and, accordingly this appeal has been filed
before this Tribunal with the prayer to determine the following points;
(a) Whether the impugned order is correct in waiving penalty
amount equivalent to the tax deposited before issuance of
the show cause notice under section 78 of the Act in the
facts and circumstances of the case while the invocation of
extended period of limitation has been upheld by the
Commissioner affirming that there was suppression of facts
with an intent to evade payment of service tax;
(b) Whether the impugned order is correct in allowing value of
service component quantified by the noticee in respect of
bifurcable works contracts without ascertaining the
correctness of the same.

2 Act

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ST/51600/2019
(c) Whether an order under section 86(7) of the Act may be
passed by this Tribunal remanding the matter to the
adjudicating authority.
(d) Pass any order as deemed fit by this Tribunal under the
facts and circumstances of the case.
4. We have heard Ms. Jaya Kumari, learned authorized
representative for the Revenue and Shri Atul Gupta, learned
chartered accountant and Shri Varun Gaba, learned advocate for the
respondent and perused the records.
5. The appellant had rendered taxable services and it showed
value of taxable services in the ST-3 returns as well as the amount of
tax payable. The undisputed fact is that the respondent had also
collected service tax from the service recipients for the services but
had not deposited the same with the Revenue. After scrutiny and
examination of the records, the show cause notice was issued
demanding service tax with interest and penalties. Penalties were
proposed under section 76 and 77 and 78 of the Act and demand was
proposed under the proviso to section 73(1) of the Act invoking
extended period of limitation. The Commissioner did not impose any
penalty under section 76 of the Act finding that it was not necessary
since the penalty was already imposed under section 78 of the Act.
6. It must be pointed out if the service tax was not levied or not
paid or was short levied or short paid or was erroneously refunded by
reason of fraud or collusion of willful mis-statement or suppression of
facts or contravention of any of the provisions of the Act or Rules
made thereunder with an intent to evade payment of service tax,

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ST/51600/2019
demand can be raised under the proviso to section 73(1) of the Act
within the extended period of limitation of five years. Penalty of an
amount equal to the service tax so short paid or not paid can be
imposed under section 78 of the Act on the same grounds. In the
impugned order, the Commissioner has categorically recorded that
the respondent had willfully and deliberately suppressed facts from
the department and for that reason invoked extended period of
limitation in confirming the demand. It is also a matter of record that
the appellant had, in fact, collected service tax from its service
recipients but had not paid the service tax to the department.
Therefore, it is not a case where the respondent was under the
bonafide belief that it was not liable to pay service tax. We note that
on identical facts, in the case of INDSUR Global Pvt Ltd. vs.
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Additional Commissioner of Service Tax, Vadodara , the Hon’ble
High Court of Gujarat has held that the extended period of limitation
was correctly invoked because service tax was actually recovered
from the service recipient in the invoices but it was not paid to the
Government.
7. We, therefore, concur with the findings of the Commissioner
that extended period of limitation was correctly invoked in the facts of
the case. Confirmation of demand invoking extended period of
limitation is not in dispute before us. The only point of dispute is with
respect to demand is whether the Commissioner has correctly
calculated the service tax on “works contracts” rendered by the
respondent in which there were separate invoices for the “goods
component” and the “service component”. The submission of the

3 2015 (38) STR 14 (Guj)

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Revenue is that for identical works, in respect of some contracts, the
respondent had issued separate invoices for the value of goods
amounting to about 80% of the total value and the value of service
amounting to 20% of the contract value. For similar work, in other
contracts, the appellant had raised a consolidated invoice showing a
composite value on which it had availed abatement of 60% or 70%
thereby paying service tax and on the 40% or 30% of the value.
Therefore, according to the Revenue, the Commissioner has erred in
accepting the invoices of the respondent where the value of services
and value of the goods were indicated separately.
8. On the other hand, according to the learned counsel for the
respondent, there is no error in the Commissioner accepting the
invoices as they were declared.
9. We find that since the show cause notice has been issued by
the Revenue, it is for the Revenue to prove that the invoices were
incorrect and in the absence of any such evidence, the invoices, as
issued need to be accepted. If some invoices are issued giving a
composite value, the value of the services must be determined as per
rule 2(A)(ii) of the service tax (Determination of Value) Rules, 2006.
On the other hand, if the separate invoices are issued for the value of
goods and for the value of services, service tax has to be charged
only on the value of the services as per Rule 2A(i) of Service Tax
(Determination of Value) Rules, 2006. This Rule reads as follows;
“2A. Determination of value of service portion in the execution
of a works contract.:
Subject to the provision of section 67, the value of service portion in
the execution of a works contract referred to in clause (h) of section
66E of the Act, shall be determined in the following manner, namely:-

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ST/51600/2019
(i) Value of service portion in the execution of a works
contract shall be equivalent to the gross amount charged for
the works contract less the value of property in goods, or in
goods and land or undivided share of land, as the case may
be transferred in the execution of the said works contract.
(ii) Where the value has not been determined under clause
(i), the person liable to pay tax on the service portion
involved in the execution of the works contract shall
determine the service tax payable in the following manner,
namely:-
(A) in case of works contracts entered into for execution of
original works, service tax shall be payable on forty per cent
of the total amount charged for the works contract;
(B) in case of works contract entered into for maintenance or
repair or reconditioning or restoration or servicing of any
goods, service tax shall be payable on seventy percent of the
total amount charged for the works contract;
(C) in case of other works contracts, not covered under sub-
clauses (A) and (B), including maintenance, repair,
completion and finishing services such as glazing, plastering,
floor and wall tiling, installation of electrical fittings of an
immovable property , service tax shall be payable on sixty
per cent. of the total amount charged for the works contract;
Explanation 1. - For the purposes of this rule,- (a) “original
works” means-
(i) all new constructions;
(ii) all types of additions and alterations to abandoned or
damaged structures on land that are required to make them
workable;
(iii) erection, commissioning or installation of plant,
machinery or equipment or structures, whether pre-
fabricated or otherwise;
(d) “total amount” means the sum total of the gross amount
charged for the works contract and the fair market value of
all goods and services supplied in or in relation to the
execution of the works contract, whether or not supplied
under the same contract or any other contract, after
deducting-
(i) the amount charged for such goods or services, if any;
and
(ii) the value added tax or sales tax, if any, levied thereon:
Provided that the fair market value of goods and services so
supplied may be determined in accordance with the generally
accepted accounting principles.
Explanation 2.--For the removal of doubts, it is clarified that
the provider of taxable service shall not take CENVAT credit
of duties or cess paid on any inputs, used in or in relation to

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the said works contract, under the provisions of CENVAT
Credit Rules, 2004.”
10. We, therefore, find that Commissioner committed no error in
accepting the values indicated in the invoices for the goods and the
services presented by the respondent. We also note that the
respondent had paid VAT on the value of goods and filed VAT returns
accordingly.
11. Thus, we find no error in the impugned order with respect to
the determination of the amount of service tax payable.
12. As far as the penalty under section 78 is concerned, this
section reads as follows:
“78. Penalty for Suppressing Value of Taxable Service.
If the Central Excise Officer in the course of any proceedings
under this Chapter is satisfied that any person has, with intent to
evade payment of service tax, suppressed or concealed the value
of taxable service or has furnished inaccurate value of such
taxable service, he may direct that such person shall pay by way
of penalty, in addition to service tax and interest, if any, payable
by him, a sum which shall not be less than, but which shall not
exceed twice, the amount of service tax sought to be evaded by
reason of suppression or concealment of the value of taxable
service or the furnishing of inaccurate value of such taxable
service :Provided that if the value of taxable service (as
determined by the Central Excise Officer on assessment) in
respect of which value has been suppressed or concealed or
inaccurate value has been furnished exceeds a sum of twenty-five
thousand rupees, the Central Excise Officer shall not issue any
direction for payment by way of penalty without the previous
approval of the Commissioner Central Excise.”
13. As is evident, once the service tax was not paid or short paid by
reason of fraud or collusion or willful mis-statement or suppression of
facts or violation of act or rules made thereunder with an intent to
evade, penalty equivalent to the amount of service tax so payable has
to be imposed as per section 78. In this case, the demand was
confirmed as Rs.97,15,123/- whereas the penalty under section 78
was imposed after subtracting the amount of service tax already paid

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by the respondent during investigation. We find no legal basis for
such deduction of amounts paid during investigation to compute
penalty under section 78 of the Act.
14. Learned counsel for the respondent submitted that as per
section 73 (3) of the Act, the department should not have issued a
show cause notice at all, in respect of the amounts which the
Respondent had deposited during the investigation itself. The
respondent had taken this plea before the learned Commissioner who
recorded it in paragraph 3.1 and 3.5 on page 31 of the impugned
order. However, the Commissioner has not given any finding with
respect to this submission.
15. Ms. Jaya Kumari, learned authorized representative for the
Revenue, on the other hand, submits that section 73(3) would not
apply to a case where the service tax has not been levied or short
levied or short paid by reason of fraud or collusion of willful mis-
statement or suppression of facts or contravention of any provisions
of the Act or Rules with an intent to evade payment of duty of service
tax as per section 73(4).
16. We find that section 73(3) and 73(4) read as follows:
“73. Recovery of Service tax not levied or paid or short
levied or short paid or erroneously refunded
(3) Where any service tax has not been levied or paid or has been
short-levied or short-paid or erroneously refunded, the person
chargeable with the service tax, or the person to whom such tax
refund has erroneously been made, may pay the amount of such
service tax, chargeable or erroneously refunded, on the basis of
his own ascertainment thereof, or on the basis of tax ascertained
by a Central Excise Officer before service of notice on him under
sub-section (1) in respect of such service tax, and inform the
Central Excise Officer of such payment in writing, who, on receipt
of such information shall not serve any notice under sub-section
(1) in respect of the amount so paid :

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Provided that the Central Excise Officer may determine the
amount of short payment of service tax or erroneously refunded
service tax, if any, which in his opinion has not been paid by such
person and, then, the Central Excise Officer shall proceed to
recover such amount in the manner specified in this section, and
the period of “thirty months” referred to in sub-section (1) shall
be counted from the date of receipt of such information of
payment.
Explanation . —(1) For the removal of doubts, it is hereby
declared that the interest under section 75 shall be payable on
the amount paid by the person under this sub-section and also on
the amount of short payment of service tax or erroneously
refunded service tax, if any, as may be determined by the Central
Excise Officer, but for this sub-section.
Explanation ( 2)—For the removal of doubts, it is hereby declared
that no penalty under any of the provisions of this Act or the rules
made there under shall be imposed in respect of payment of
service-tax under this sub-section and interest thereon.
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73(4) Nothing contained in sub-section (3) shall apply to a case
where any service tax has not been levied or paid or has been
short-levied or short- paid or erroneously refunded by reason of—
(a) fraud; or
(b) collusion; or
(c) wilful mis-statement; or
(d) suppression of facts; or
(e) contravention of any of the provisions of this Chapter or of the
rules made there under with intent to evade payment of service
tax.”
17. In this case, the Commissioner has held in the impugned order
that there were grounds for invoking the extended period of limitation
and for that reason imposed a penalty under section 78 also.
18. We also found this finding to be correct in view of the fact that
the respondent had collected service tax from its clients but had not
deposited the same. Such being the case, we find that this case
clearly falls under section 73(4) and is not covered by section 73(3).
Therefore, the submission of the learned counsel for the respondent
that no show cause notice should have been issued in view of section
73(3) is not correct.

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19. In view of the above, we find that the impugned order is
incorrect to the extent that it had imposed a penalty under section 78
of the Act equal to the amount of demand confirmed but after
deducting the amount already paid during investigation. Therefore,
the penalty under section 78 of the Act has to be re-determined as
equivalent to the amount of service tax demanded without deducting
any amount paid during investigation.
20. In view of the above, the appeal of the Revenue is partly
allowed to the extent of re-determination of the amount of penalty
under section 78 as equivalent to the total amount of duty confirmed.
The appeal is allowed and the impugned order is modified to the
extent indicated above.
(Order pronounced on 05/11/2026 )


(AJAY SHARMA)
MEMBER ( JUDICIAL )




(P. V. SUBBA RAO)
MEMBER ( TECHNICAL )

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