GST Update/ 2026-27/0062

M/s ESS Infraprojects Pvt Ltd. v/s Commissioner of CGST, Central Excise, Mumbai West.

GST UPDATE

Revenue Neutrality on the ground that service tax not paid which was liable to be paid under Reverse charge basis for the specific services received would be allowed as CENVAT credit to the registered person.

Final Order No.:A/85946/2026

Tribunal: CESTAT, Mumbai

Case Title: M/s ESS Infraprojects Pvt Ltd. v/s Commissioner of CGST, Central Excise, Mumbai West.

Outcome:Appeal was allowed in favour of appellant

Judgement Date: 31.07.2026

BRIEF FACTS OF THE CASE:

M/s ESS Infraprojects Pvt Ltd. (appellant) is engaged in the business of hiring construction machinery. During the audit of period of F.Y. 2014-15 to 2016-17, department observed that the appellant had received legal services from advocates on which the appellant was required to pay service tax under reverse charge mechanism. However, as tax was not paid on such services by the appellant, hence, appellant was served with a show cause notice (SCN). This allegation raised by the SCN was later confirmed by the adjudicating authority along with interest and penalty in its order-in-original. Being aggrieved by the order, appellant preferred appeal before Commissioner (Appeals). Thereafter, an order in appeal was passed by the Commissioner (Appeals) in which demand raised by the order of the adjudicating authority was upheld. Consequently, aggrieved by the rejection of appeal, appellant preferred this appeal before CESTAT (Tribunal).

QUESTION BEFORE HON’BLE TRIBUNAL:

Whether upholding of duty demands confirmed by the original authority under Section 73(2) of the Finance Act 1944 by invoking extended period of limitation is sustainable?
Whether imposition of penalty on appellant under Section 78 is legally sustainable?

ARGUMENTS BY APPELLANT:
Appellant submitted following contentions: -

That the impugned SCN was issued by invoking extended period of limitation only on the basis of audit objection of the records maintained by them without any proper evidence to substantiate the fact that it involved fraud, suppression of facts, omission etc. with an intent to evade payment of tax.

For this reliance was placed upon the decision in the case of
Graphite India Ltd. v. Commissioner of Central Excise and Service Tax- 2019-TIOL-1028-CESTAT-MUM. and
Indus Valley Partners (India) Private Limited v. Commissioner of Central Goods and Service Tax, Noida- 2024 (1) TMI 886- CESTAT-Allahabad.

Further, that, the situation in the instant case is a revenue neutral on the ground that even if service tax is paid on RCM, such tax paid shall be eligible as CENVAT credit to the appellant. Hence, such demand of service tax is not sustainable on account of Revenue Neutrality.

Therefore, impugned order should be set aside.

BRIEF ARGUMENTS BY REVENUE DEPARTMENT:

Revenue Department contended that:

The liability to pay service tax in respect of legal services is on the service recipient as per Section 68(2) of the Finance Act, 1994 read with Notification No. 30/2012-S.T. dated 20.06.2012.
Despite being appellant was clearly required to discharge his service tax liability, he failed to pay tax on services received by him which were squarely covered by the Notification (supra).

FINDINGS & JUDGEMENT:

Following are the findings of the Tribunal in the instant case:

Tribunal observed that amendments brought into effect via Notification No. 30/2012-S.T. dated 20.06.2012 that service tax shall be paid on the services by way of legal services received by the registered taxpayer. This amendment of shifting the payment of service tax was brought into effect to administer the payment of tax in a hassle-free manner and in interest of the administrative expediency.
Further, it was observed that the decision given by the Tribunal in the case of Graphite India limited (supra) which dealt with the identical facts of the present case, in which it was held that only because registered person subject to audit was found availing some credit which was inadmissible, cannot be treated as suppression of fact. Hence, based on the above referred decision extended period of limitation cannot be invoked for the demand arising from the audit objection.
In continuation of above, it was observed that the Tribunal in the case of M/s Indus Valley parters (India) v. (supra) in which issue related to revenue neutrality in respect of payment of service tax on reverse charge mechanism was decided and held that no service tax demand is sustainable on the basis that service tax paid on the services received by the service recipient for which CENVAT credit shall be allowed. Thus, it is purely a case of revenue neutrality and there would be no gain to the government.
On the basis of the observations discussed above, Tribunal held that, the different views cannot be taken in respect of the adjudged demands confirmed on the appellant. Hence, appeal of the appellant stands to be allowed and the impugned order was brushed aside.

Thus, it was held that the writ petition by the appellant is allowed and the matter was remanded back to the adjudicating authority for fresh consideration.

Various Sections and Rules referred in the instant case:

Section 68(2) of the Finance Act 1994
Notification No.30/2012-S.T. dated 20.06.2012
Indus Valley Partners (India) Private Limited v. Commissioner of Central Goods and Service Tax, Noida- 2024 (1) TMI 886- CESTAT-Allahabad.
Graphite India Ltd. v. Commissioner of Central Excise and Service Tax- 2019-TIOL-1028-CESTAT-MUM.

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GST Update/ 2026-27/0062

GST UPDATE

BRIEF FACTS OF THE CASE:

QUESTION BEFORE HON’BLE TRIBUNAL:

BRIEF ARGUMENTS BY REVENUE DEPARTMENT:

FINDINGS & JUDGEMENT:

Various Sections and Rules referred in the instant case:

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