2025 (1) TMI 426 - AT - Service Tax

Non-payment of service tax - Construction Service - exemption from payment of service tax as per entry no. 13 of N/N. 25/2012 dated 20.06.2012 - HELD THAT - It is observed that the findings of the ld. adjudicating authority reproduced are legally not sustainable. He cannot ignore the verification report submitted by his own officer without any valid reason. He cannot say that the report is not acceptable to him without any reason to counter the findings of the Superintendent in the said report. It is thus observed that the ld. Adjudicating authority has not examined the claim of the appellant that they rendered the services of construction of road, bridge, etc., and the said services are exempted from payment of service tax as per entry no. 13 of Notification No. 25/2012 dated 20.06.2012. The Ld. Commissioner has not given any finding in the impugned order on this claim of the appellant. Hence, the demand confirmed in the impugned order, without verifying the eligibility of the said Notification benefit to the appellant, is liable to be set aside. Conclusion - The adjudicating authority must thoroughly verify exemption claims and cannot disregard internal reports without justification. The adjudicating authority should give an opportunity to the appellant and examine the claim made by the appellant based on the documentary evidence, within a period of four months from the date of receipt of this order - appeal allowed by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the appellant was liable to pay service tax for the services rendered during the period 2016-17 to 2017-18 (up to June 2017).
• Whether the services provided by the appellant were exempt from service tax under entry no. 13 of Notification No. 25/2012 dated 20.06.2012.
• Whether the adjudicating authority erred in confirming the demand without considering the closure report submitted by the Superintendent, CGST CX, Range-IV, Hazaribagh.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability to Pay Service Tax

• Relevant legal framework and precedents: The demand for service tax was based on the consideration received by the appellant as shown in their financial statements. The adjudicating authority confirmed the demand based on these figures.
• Court's interpretation and reasoning: The court noted that the adjudicating authority relied on financial statements rather than the Form 26AS receipts, which were lower. The court found this approach problematic as it did not consider the exemption claims.
• Key evidence and findings: The appellant provided evidence that they were engaged in the construction of roads and bridges, which are exempt under Notification No. 25/2012.
• Application of law to facts: The court applied the exemption criteria from the notification to the services rendered by the appellant and found that the adjudicating authority failed to properly assess the exemption claim.
• Treatment of competing arguments: The court dismissed the adjudicating authority's reasoning for ignoring the closure report, emphasizing the need for a valid counter to the Superintendent's findings.
• Conclusions: The court concluded that the demand for service tax was not sustainable without proper verification of the exemption eligibility.

Issue 2: Exemption under Notification No. 25/2012

• Relevant legal framework and precedents: Entry no. 13 of Notification No. 25/2012 exempts services related to the construction of roads and bridges for public use from service tax.
• Court's interpretation and reasoning: The court found that the appellant's services potentially qualified for this exemption, as indicated by the closure report.
• Key evidence and findings: The closure report by the Superintendent supported the appellant's claim of exemption.
• Application of law to facts: The court noted that the adjudicating authority failed to consider the closure report and did not verify the nature of the services provided.
• Treatment of competing arguments: The court criticized the adjudicating authority for dismissing the closure report without substantial reasoning.
• Conclusions: The court held that the appellant's services were likely exempt, necessitating a remand for proper examination.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "He cannot ignore the verification report submitted by his own officer without any valid reason."
• Core principles established: The adjudicating authority must thoroughly verify exemption claims and cannot disregard internal reports without justification.
• Final determinations on each issue: The court set aside the impugned order and remanded the case for fresh examination, instructing the adjudicating authority to consider the appellant's exemption claim based on documentary evidence.

The judgment underscores the importance of considering all relevant evidence and reports in tax adjudication, particularly when exemptions are claimed. The remand allows for a comprehensive review of the appellant's eligibility for service tax exemption under the specified notification.