CESTAT Delhi Sets Aside Rs 33.88 Lakh Service Tax Demand Against Gurbani Constructions

The Principal Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), New Delhi, has set aside a service tax demand of over Rs.33 lakh against Gurbani Constructions over alleged taxable construction activities and purported additional payments from a hotel client.

A bench of Judicial Member Dr. Rachna Gupta and Technical Member P.V. Subba Rao held that the department could not sustain the demand without evidence. “He who asserts has to prove” and if a show cause notice is issued alleging that the appellant had constructed residential complexes, “it is for the department to prove this along with evidence in the SCN.”

The dispute concerned two components of the demand. One related to whether certain house constructions were taxable as residential complex services. The other concerned alleged receipt of additional consideration for commercial construction services provided to Hotel Amber Palace, Dehradun.

The department alleged that the appellant had constructed residential complexes liable to service tax. Gurbani Constructions argued that the projects involved the construction of individual residential houses, which were not taxable during the relevant period.

The Tribunal noted that the department had merely called upon the appellant to produce documents. The Commissioner had nevertheless confirmed the demand on the ground that the appellant failed to prove that the constructions were individual houses.

Rejecting this approach, the Tribunal held that the burden lay on the department to establish its allegation. Since construction of individual houses was admittedly not taxable, and the department failed to prove that the appellant had constructed residential complexes, that part of the demand could not survive.

On the second issue, the department alleged that Gurbani Constructions had received additional payments from Hotel Amber Palace for commercial construction services. The Tribunal found that this allegation rested solely on a legal notice issued by the hotel's advocate.

The Bench held that “a mere legal notice issued by the advocate of the client to the appellant is not sufficient evidence to establish that any additional amount was received as consideration by the appellant from Hotel Amber for taxable services rendered to it. The demand on this count also cannot be sustained.”

Accordingly, the Tribunal set aside the service tax demand, along with interest and penalties imposed on the appellant.

For Appellant: Advocate Rajesh Chhibber, 

For Revenue: Rajeev Kapoor, Authorised Representative