2025 (6) TMI 851 - AT - Service Tax

Liability to pay service tax - demand raised on the basis of Form 26AS obtained from the Income Tax Department - HELD THAT - On going through the work orders appellant is engaged in providing the services of work for construction of side drain catch water drain and painting work. These facts are not in dispute. As the activity undertaken by the appellant with regard to construction do not clearly showing that it is in regard to railways which can be evident from the work order assigned to the main contractor therefore the work order assigned to the main contractor is essential to ascertain the fact that the activity undertaken by the appellant is in regard to railways. Therefore the appellant is directed to produce the work orders issued to the main contractor to ascertain the true facts. Matter remanded back to the Ld.Commissioner (Appeal) to ascertain the said fact on production of work orders issued to the main contractor by the appellant - appeal disposed off by way of remand.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Appellate Tribunal (AT) are:

(a) Whether the appellant is liable to pay Service Tax for the period 2015-16 to 2016-17 on the basis of income shown in Form 26AS obtained from the Income Tax Department, despite the appellant's claim of exemption under Notification No. 25/2012 ST dated 20th June 2012.

(b) Whether the services provided by the appellant, as a sub-contractor executing works contract related to construction activities, fall within the exemption clause for original works pertaining to railways under Serial No. 14 of Notification No. 25/2012 ST.

(c) Whether the demand for Service Tax can be confirmed without production and verification of the work orders issued to the main contractor to whom the appellant provided services.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Liability to pay Service Tax based on Form 26AS information

Relevant legal framework and precedents: The appellant was served a Show Cause Notice demanding Service Tax on the basis of income declared in Form 26AS, which is a statement of tax deducted at source and other tax-related information maintained by the Income Tax Department. The appellant contested the demand on the ground that Form 26AS alone cannot be the basis for raising a Service Tax demand without verifying the nature of services rendered and the applicability of exemption notifications.

Court's interpretation and reasoning: The Tribunal acknowledged that the demand was triggered solely based on the information from Form 26AS. However, the Tribunal emphasized that the mere declaration of income in Form 26AS cannot conclusively establish the liability to pay Service Tax without examining the nature of services and the relevant exemption provisions.

Key evidence and findings: The appellant submitted some work orders and contended that the services rendered were exempt. The Revenue relied on the absence of complete documentation and the information from Form 26AS.

Application of law to facts: The Tribunal concluded that the demand cannot be sustained merely on the basis of Form 26AS without further verification of the nature of the services and the applicability of exemptions.

Treatment of competing arguments: The appellant argued that Form 26AS is insufficient for demand, while the Revenue argued that the absence of complete documentation justified confirmation of demand. The Tribunal found merit in the appellant's argument.

Conclusions: The Tribunal held that demand based solely on Form 26AS is not justified without further inquiry.

Issue (b): Applicability of exemption under Notification No. 25/2012 ST for services related to railways

Relevant legal framework and precedents: Notification No. 25/2012 ST dated 20th June 2012 exempts service tax on "services by way of construction, erection, commissioning, or installation of original works pertaining to an airport, port or railways, including monorail or metro" (Serial No. 14). The appellant contended that their services related to construction activities for a new BG rail line, including earth cutting, filling, minor bridges, drains, and ancillary works, which fall under this exemption.

Court's interpretation and reasoning: The Tribunal examined the work orders produced by the appellant, which detailed construction of side drains, catch water drains, and painting work. However, the Tribunal observed that these work orders did not explicitly establish that the works were part of railway construction. The exemption under Serial No. 14 applies only if the works pertain to railways.

Key evidence and findings: The appellant produced some work orders indicating construction activities but did not produce the main contractor's work orders to establish the overall project as railway construction.

Application of law to facts: Since the exemption applies only to original works pertaining to railways, the Tribunal held that it was essential to verify the main contractor's work orders to confirm whether the appellant's work was part of railway construction.

Treatment of competing arguments: The appellant argued that their work was part of railway construction and hence exempt, relying on Notification No. 25/2012 ST and CBC circular No. 147/16/2011 ST which clarifies exemption for subcontractors. The Revenue countered that absence of main contractor's work orders prevented verification of this claim.

Conclusions: The Tribunal found that the exemption claim could not be accepted without verifying the main contractor's work orders and remanded the matter for further inquiry.

Issue (c): Necessity of production of main contractor's work orders

Relevant legal framework and precedents: The appellant's exemption claim hinges on the nature of the main contract under which the appellant provided subcontracting services. The CBC circular No. 147/16/2011 ST clarifies that subcontractors supplying services to exempt main contractors are themselves exempt.

Court's interpretation and reasoning: The Tribunal emphasized that to ascertain the applicability of exemption, it is imperative to examine the main contractor's work orders to verify that the main contract pertains to exempted railway construction works.

Key evidence and findings: The appellant failed to produce the main contractor's work orders despite producing some subcontract work orders.

Application of law to facts: Without the main contractor's work orders, the Tribunal could not conclusively determine the nature of the main contract and thus the exemption applicability.

Treatment of competing arguments: The appellant was directed to produce the main contractor's work orders, failing which the exemption claim would not stand.

Conclusions: The Tribunal remanded the matter to the Commissioner (Appeal) to verify the main contractor's work orders and decide accordingly.

3. SIGNIFICANT HOLDINGS

"The sole issue is that whether the appellant is liable to pay Service Tax against the demand raised on the basis of Form 26AS obtained from the Income Tax Department or not?"

"As the activity undertaken by the appellant with regard to construction do not clearly showing that it is in regard to railways which can be evident from the work order assigned to the main contractor, therefore, the work order assigned to the main contractor is essential to ascertain the fact that the activity undertaken by the appellant is in regard to railways."

"In that circumstances, we remand matter back to the Ld.Commissioner (Appeal) to ascertain the said fact on production of work orders issued to the main contractor by the appellant."

Core principles established include:

- A demand for Service Tax cannot be confirmed solely on the basis of income declared in Form 26AS without examining the nature of services and exemption claims.

- Exemption under Notification No. 25/2012 ST for construction services pertaining to railways applies only if the works are demonstrably part of railway construction.

- Subcontractors are eligible for exemption if the main contractor's work is exempt, but this requires verification by production of main contractor's work orders.

Final determinations:

The Tribunal did not affirm the Service Tax demand but remanded the matter for further inquiry into the nature of the main contract by directing the appellant to produce the main contractor's work orders. The appeal was disposed of by way of remand, leaving the ultimate question of exemption to be decided after such verification.