CESTAT Sets Aside Rs 24.96 Lakh Service Tax Demand Against Contractor Based Only On TDS Statement

The Kolkata Bench of CESTAT has set aside a service tax demand of Rs 24.96 lakh against a Chakradharpur contractor, holding that his work for the Railways, exempt subcontracted projects, and construction of single residential units did not attract service tax.

The bench of Judicial Member Ashok Jindal and Technical Member K. Anpazhakan held that a demand cannot stand if it is based solely on Form 26AS data without corroborative evidence or independent inquiry.

Form 26AS is an annual tax statement that shows receipts against which tax has been deducted at source.

The appellant, Manoj Kumar Singh, was engaged in three categories of work during F.Y. 2015-16, namely execution of original works for railways, works contract services rendered as a subcontractor for exempt railway projects, and construction of single residential units for individual clients.

The department began proceedings relying entirely on CBDT Form 26AS data and issued a show cause notice alleging short payment of service tax. The demand was later confirmed by the adjudicating authority and upheld on appeal.

The tribunal found that amounts received from the accounts office of South Eastern Railway related to original works, such as execution of zonal works at station buildings, platforms, and circulating areas, are expressly exempt under a 2012 notifications.

The bench stated that “the nature of work executed by the appellant falls under the category of 'Execution of zonal works/supplies to station building, platforms and circulating area' which is in the nature of original works provided to Railways. We find that the said services are exempted from service tax as provided under Sl. No. 14(a) of N.F. No. 25/2012-ST dated 20.06.2012”

In respect of amounts received from the main contractor, the tribunal held that since the principal works contract for railways itself was exempt, the subcontractor was also entitled to exemption under the same notification.

As regards receipts from individual clients, the tribunal accepted declarations and supporting documents establishing that the services pertained to the construction of single residential units not forming part of a residential complex, which are also exempt from service tax.

The bench further noted that the show cause notice failed to compute tax separately for each category of service and that no verification was conducted either with the railway authorities, the main contractor, or the individual clients.

The Tribunal observed that "decisions cited by the appellant supports their contention that the demand confirmed solely on the basis of data available as per 26 AS, without adducing any corroborative evidence is not sustainable. Thus, we hold that the demand confirmed in the impugned order is liable to be set aside on this ground also"

Consequently, the entire service tax demand, along with interest and penalties, was set aside, and the appeal was allowed.

For Appellant: Advocate Aditya Dutta

For Respondent: Authorized Representative S. K. Dikshit