CONSOLIDATED CONSTRUCTION CONSORTIRUM LTD VS COMMISSIONER OF GST AND CENTRAL EXCISE

GST update /2026-27/0034

Hon’ble Authority: CESTAT, CHENNAI
Case Title: CONSOLIDATED CONSTRUCTION CONSORTIRUM LTD VS COMMISSIONER OF GST AND CENTRAL EXCISE
Appeal No. & Citation: Service Tax Appeal Nos. 41480 & 41481 of 2016

Hon’ble Judge(s)	Shri M. Ajit Kumar, Member (Technical) and Shri Ajayan T.V., Member (Judicial)
Date of Order	25.03.2026
Outcome	Appeal dismissed

Brief Facts of the Case

The appellant,CONSOLIDATED CONSTRUCTION CONSORTIRUM LTD, underwent through the department audit. During the same, it was noticed that the appellant was deducting 0.5% from the bills of sub-contractors under the head “administrative charges”. Later, from July 2012 onwards, the same was renamed as “rebate/discount”. The appellant contended that it incurred expenditure towards common labour welfare facilities such as accommodation, drinking water, medical camps, education facilities for labourers’ children, and other safety measures, etc. Since these facilities were also used by labourers employed through subcontractors, a nominal amount was recovered from subcontractors. However, the department viewed such deductions as consideration for providing “Support Services of Business or Commerce” and accordingly issued a Show Cause Notice demanding tax along with interest and penalties under Sections 76, 77, and 78. The adjudicating authority confirmed the demand and the Commissioner (Appeals) upheld the same except penalty under Section 77. Aggrieved by the same, the appellant approached the Tribunal.

Relevant Section /Notification

·       section 65(105)(zzzq)- Business Support Service
·       Section 76, 77 and 78
·       D.O.F. No. 334/3/2011-TRU dated 28.02.2011

Question before Hon’ble Authority

· Whether deduction of 0.5% from subcontractors’ bills towards labour welfare / administrative facilities constituted taxable consideration for “Support Services of Business or Commerce” or was merely reimbursement of expenses not liable to service tax.

Brief Arguments by Appellant

·       The appellant argued that the amount deducted from subcontractors was merely partial reimbursement of welfare expenses incurred for labourers and not consideration for any service rendered.The appellant relied upon the judgment of Union of India vs Intercontinental Consultants and Technocrats Pvt. Ltd. to contend that reimbursable expenses cannot form part of taxable value.
·       No independent service was provided to subcontractors and therefore service tax was not leviable. Subcontractors had already discharged service tax on the full value of construction services and therefore taxing the same amount again would amount to double taxation.
·       The appellant submitted that it incurred expenditure towards accommodation, drinking water, safety measures, medical camps and educational facilities as part of its Corporate Social Responsibility obligations.
·       The appellant contended that changing the description from “administrative charges” to “rebate/discount” did not alter the real nature of transaction.

Brief Arguments by Respondent

·       The department argued that the appellant failed to produce any documentary evidence like contracts, agreements, expense records, supporting documents, to establish that the recoveries were pure reimbursements. On the other hand, the recovery was fixed at 0.5% of subcontractor bill value, which clearly indicated consideration for services rather than reimbursement of actual expenses.
·       The respondent argued that merely describing an activity as CSR does not automatically exempt it from service tax. Accounting treatment as "administrative charges" supports this conclusion
·       The activity qualifies as "Support Services of Business or Commerce". No double taxation arises, as contractors were taxed for construction services, while the assessee is taxed for support services.

Important Cases Relied Upon

Case Laws	Citation
Union of India vs Intercontinental Consultants and Technocrats Pvt. Ltd.	2018 (10) GSTL 401 (SC) = 2018-TIOL-76-SC-ST
Jet Airways India Ltd. vs Sahara Airlines Ltd.	2011 Vol.113(6) Bom. L.R. 3835
Commissioner of Income Tax Madras vs Best & Co.	1966 SCR (2) 430 / AIR 1966 SC 1325
Sri Krishna Das vs Town Area Committee	(1990) 3 SCC 645

Findings and Judgement

·       Department’s Classification under Business Support Service Was Proper
The Tribunal observed that the appellant was providing several administrative and operational support activities to subcontractors and labourers such as preparation of ERP abstracts, maintaining records and accounts, accommodation facilities, safety drills, miscellaneous administrative support activities which were considered business support services. Reliance was placed on TRU Circular dated 28.02.2011 which clarified that “operational or administrative assistance” has a very wide scope and includes outsourced support functions commonly undertaken by businesses. Accordingly, the Tribunal held that the classification adopted by the department was legally sustainable.

·       CSR Activities Are Not Automatically Exempt from Service Tax
The Tribunal observed that companies undertaking CSR activities under Section 135 of the Companies Act are not automatically exempt from tax liability. It was also noted that CSR does not include activities undertaken in the ordinary course of business. Therefore, merely describing an activity as CSR does not automatically make it exempt from service tax.

·       Reimbursement Requires Actual Proof of Expenses

The Tribunal observed that reimbursement essentially means repayment of actual expenditure already incurred on behalf of another person. In other words, there must first be a clear payment made for and on behalf of another party, which is subsequently recovered from such party. Reliance was placed on the Supreme Court Decision in case of Jet Airways India Ltd. vs Sahara Airlines Ltd. Therefore, for claiming reimbursement, the appellant was required to prove actual expenses incurred on behalf of subcontractors’ labourers and subsequent recovery of the same amount. However, no such evidence was produced. Furthermore, according to the Tribunal, genuine reimbursement should generally correspond to actual expenses incurred. Since in the instant case, the recovery was linked with bill value and not actual cost, it clearly had the character of consideration for services rendered as it indicated existence of quid pro quo.

·       Levy of tax does not amount to double taxation
The appellant argued that subcontractors had already paid service tax on construction services and therefore taxing the same amount again amounted to double taxation. However, this argument was rejected as the subcontractors paid tax for construction services rendered by them; whereas present demand related to separate administrative and operational support services rendered by the appellant. Since both activities were distinct services, there was no double taxation.

·       Extended Limitation Was Properly Invoked
It was observed that had audit not taken place, the non-payment of service tax would have remained undetected. Accordingly, extended limitation and penalty under Section 78 were rightly invoked

Accordingly, the appeal was dismissed and the demand was upheld.

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GST update /2026-27/0034

Brief Facts of the Case

Relevant Section /Notification

Question before Hon’ble Authority

Brief Arguments by Appellant

Brief Arguments by Respondent

Important Cases Relied Upon

Findings and Judgement

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