Gearge Thomas Engg Contractor vs Cochin-cce

ST/21557/2015



CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL
BANGALORE
REGIONAL BENCH - COURT NO. 2

Service Tax Appeal No. 21557 of 2015

(Arising out of Order-in-Appeal No. COC-EXCUS-000-APP-018-15-16
dated 28.04.2015 passed by the Commissioner of Central Excise,
Customs & Service Tax (Appeals-I), Cochin.)

George Thomas Engineering
Contractor,
Pothaparambil House,
Nadakkavu P.O.,
Udaymperoor
Ernakulam Dist. 682 307.
Appellant(s)

VERSUS
Commissioner of Central
Excise and Service Tax,
C R Building,
I.S. Press Road, Ernakulam,
Cochin, Kerala – 682 018.
Respondent(s)
APPEARANCE:


Mr. K. Hariharan, Chartered Accountant for the Appellant
Mr. Rajashekar B.N.N, Superintendent (AR) for the Respondent

CORAM: HON'BLE MR P.A. AUGUSTIAN, MEMBER
(JUDICIAL) HON'BLE MRS R. BHAGYA DEVI,
MEMBER (TECHNICAL)


Final Order No. 20992 /2026


DATE OF HEARING: 04.05.2026
DATE OF DECISION: 03.09.2026

PER : P.A. AUGUSTIAN



The issue in the present appeal is regarding service tax
liability on the Appellant under Commercial or Industrial
Construction Service, Erection, Commissioning or Installation
Service for the period from 2004-2005 to March 2006.
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2. Appellant was engaged in execution of civil contracts such
as construction of BSNL Exchange Buildings, Tower and Tower
Foundation, building for Rubber Board, Meditation Centre for
Marthoma Sabha under the categories of ‘Commercial or
Industrial Construction Service’, ‘Erection, Commissioning or
Installation Service’ and ‘Works Contract Service’. As per the
information received by the Preventive unit of Respondent, it is
alleged that Appellant had not paid service tax for the service
provided by them under various categories. Accordingly,
investigation was commenced and show cause notice was issued
on 18.12.2008 demanding service tax for the period from 2004-
05 to 2007-08. Thereafter as per the Order-in-Original dated
05.03.2010, Adjudication authority confirmed the demand and
also imposed penalties under various provisions of law.
Aggrieved by said order, an appeal was filed before the
Commissioner (Appeals) and Commissioner (Appeals) as per the
impugned order dated 28.04.2015 rejected the appeal filed by
the Appellant. However, the Commissioner (Appeals) set aside
the penalty imposed under Section 76 of Finance Act subject to
payment of penalty under Section 78. Aggrieved by said order,
present appeal is filed.

3. When the appeal came up for hearing, Learned Chartered
Accountant for the Appellant submits that the issue is no more
res integra and it is settled as per the decision of Hon’ble
Supreme Court in the matter of CC vs M/s Larsen & Toubro
[(2015 (39) STR 913 (SC)] where it is held that the
composite contract entered by the Appellant including supply of
material is falling under the category of works contract and no
demand is sustainable before introduction of the service tax on
works contract prior to 01.06.2007. In this regard, Learned
Chartered Accountant drew our attention to the finding in the
impugned order where the Commissioner (Appeals) find that:
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a) The introduction of Works Contract Service from
1.6.2007 does not mean that the said service was not
taxable prior to that date. It was held that there is no
merit in appellant's contention that the services rendered
by them were not liable to Service tax under Construction
Service or Erection, Commissioning or Installation Service
prior to 1.6.2007.
b) The ground that works contracts cannot be vivisected so
as to segregate the service element and subjected to tax
was held as not sustainable relying on various decisions
cited.
c) The appellant has not taken steps to register as service
provider nor paid tax on the services rendered. Extended
period of limitation can rightly be invoked in this case and
the penalty u/s 77 and 78 was upheld.
4. Learned Chartered Accountant further submits that
whether the activity involved amounts to works contract, it is
evident from the finding given by the Adjudication Authority that
the Appellant is eligible for abatement of 67% on the gross
amount, since the Appellant included the value of all the
materials used in the gross amount charged. Learned Chartered
Accountant further submits that under Commercial Industrial
Service as per Section 65(25B), the Erection Commission or
Instruction Service under Section 65(39A), the works should be
intended for Commercial or Industrial and since the Appellant
has not carried out any such activity, it is not falling under the
category of taxable service. In this regard, Learned Chartered
Accountant draw our attention to the Circular No. 80/10/2004-ST
dated 17.09.2004; relevant para of the said circular is extracted
below:-
13.2 The leviability of service tax would depend
primarily upon whether the building or civil structure
is 'used, or to be used' for commerce or industry. The
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information about this has to be gathered from the
approved plan of the building or civil construction.
Such constructions which are for the use of
organizations or institutions being established solely
for educational, religious, charitable, health, sanitation
or philanthropic purposes and not for the purposes of
profit are not taxable, being noncommercial in nature.
Generally, government buildings or civil constructions
are used for residential, office purposes or for
providing civic amenities. Thus, normally government
constructions would not be taxable. However, if such
constructions are for commercial purposes like local
government bodies getting shops constructed for
letting them out, such activity would be commercial
and builders would be subjected to service tax.

5. Learned Chartered Accountant further submits that the
demand confirmed by invoking extended period of limitation and
penalties imposed by the lower authorities are also
unsustainable. In this regard, Learned Chartered Accountant
submits that the Show Cause Notice No. 179/08 dt. 18.12.08
was issued for the period 2004-2005 to 2007-2008 by invoking
proviso to section 73(1) of the Act. The reasoning is that the
appellant had not filed ST-3 returns and the fact of rendering
taxable service without observing Service tax formalities was un-
earthed only because of the action taken by the department. The
present appeal involves the taxability of composite contracts and
exemption for construction projects for government companies/
religious institution. Appellant was under the bona fide belief
that the impugned contracts for government departments/
religious institution are not taxable. Thus, non-payment of tax is
due to interpretational issues and thus the invoking larger period
and imposing of penalty u/s 78 are not justified. Learned
Chartered Accountant further submits that since the contracts
are with government departments or government companies,
suppression of turnover and intention of evasion of tax cannot be
alleged. Thus the demand confirmed invoking extended period
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is unsustainable. Learned Chartered Accountant relies on the
following decisions:

i. Cosmic Dye Chemical v. Collector of Central Excise 1995
(75) E.L.T. 721 (S.C.)
ii. Uniworth Textiles v. Commissioner of Central Excise 2013
(288) E.L.T. 161 (S.C)
iii. Continental Foundation Jt. Venture v. Commissioner 2007
(216) E.L.T. 177 (S.C.)
iv. Shriram Chits Pvt. Ltd. V Ccec & S.T., Hyderabad 2023
(69) G.S.T.L. 397 (Tri. - Hyd.)
v. Hindalco Industries Ltd. V Cce Allahabad-2003 (161) E.L.T.
346 (Tri. -Del.).

6. Learned AR for the Revenue reiterated the finding in the
impugned order.
7. Heard both sides. As per the evidence available on record,
it is an admitted fact that Appellant had carried out activities
which is falling under the category of ‘works contract’ and
service tax was introduced on works contract with effect from
01.06.2007. When information received regarding non-payment
of service tax, before issue of show-cause notice dated
18.12.2008, Appellant had paid service tax with interest as
applicable from 01.06.2007 to March 2008 on 31.03.2008.
Considering the facts and circumstances of the case, composite
contract entered by the Appellant including supply of material is
falling under the category of works contract and no demand is
sustainable before introduction of the service tax on works
contract prior to 01.06.2007 and the demand made as per the
impugned order prior to 01.06.2007 is unsustainable. However,
the appropriation of the amount which was paid by the Appellant
with interest from 01.06.2007 to March 2008 under the category
of works contract is upheld. Accordingly, impugned order is
modified by setting aside the demand prior to 01.06.2007 and
penalties imposed as per impugned orders.

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8. Accordingly, Appeal is partially allowed with consequential
relief if any in accordance with law.
(Order pronounced in Open Court on 03.09.2026)


(P.A. AUGUSTIAN)
MEMBER (JUDICIAL)




(R. BHAGYA DEVI)
MEMBER (TECHNICAL)
Raja…
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