Service tax liability for the period is determined by actual receipts, not accruals.

The appellant provided construction-related services and was assessed to service tax for 2006–07 to 2008–09. Following an audit, the Department calculated tax on the gross value of the work after allowing 67% abatement for materials; the appellant made payments under protest.

The appellant contended that its activities were Works Contract Service and that amounts relating to services completed before the relevant taxable provisions took effect should not be taxed. It also challenged the classification in the show-cause notice and raised limitation. The adjudicating authority confirmed the demand, and the Commissioner (Appeals) dismissed the appellant’s appeal.

1. Whether the demand was unsustainable because the show-cause notice classified the services as Commercial or Industrial Construction Service rather than Works Contract Service.

2. Whether the demand required re-quantification to account for the period when services were rendered and the dates on which consideration was actually received.

3. Whether the demand was time-barred for any part of the relevant period.

The Tribunal applied the principle that, for the period in question, service tax was payable on the basis of consideration actually received, not on accruals.

It further held that amounts attributable to services rendered before the relevant service-tax provisions for Commercial or Industrial Construction Service came into force would not be taxable under those provisions. The judgment identifies no specific statutory section or precedent.

The Tribunal found little merit in the appellant’s classification objection because the show-cause notice’s computation treated the appellant as having supplied both goods and services and allowed 67% abatement for materials.

However, the demand could not be sustained without determining when the contracts were entered into and completed and when the corresponding amounts were received. Since tax liability depended on actual receipts, the adjudicating authority was directed to examine the appellant’s documentary evidence and re-quantify the demand accordingly. The Tribunal remanded the matter for that limited exercise and did not finally determine the limitation contention.

The authority was directed to follow natural justice and decide the matter within four months of receiving the order; the appellant was directed to cooperate and provide the relevant documents.