GST update /2026-27/0054

M/s Laxmi Projects vs. Commissioner of CGST & Central Excise, Kolkata North Commissionerate

GST UPDATE

Hon’ble Authority: CESTAT, Kolkata
Case Title: M/s Laxmi Projects vs. Commissioner of CGST & Central Excise, Kolkata North Commissionerate
Appeal No. & Citation: Service Tax Appeal No. 75148 of 2021

Hon’ble Judge(s)	K. Anpazhakan, Member (Technical)
Date of Order	24.03.2026
Outcome	Appeal Allowed

Brief Facts of the Case

The assessee is engaged in construction activities including commercial and residential projects and department raised service tax demand of Rs 15,20,324/- (inclusive of E.Cess and S&HE Cess) for the period 2009-10 to 2012-13 based on audit by comparing ST-3 returns with bank statements alleging non-payment under commercial and industrial construction service and construction of residential complex service. The demand has been raised against the appellant merely on the basis of comparison of the ST-3 Returns and Bank Statements, for the period from 2009-10 to 2012-13. Show Cause Notice was issued to the appellant by invoking the extended period of limitation under Section 73 of the Finance Act, 1994. The appellant had discharged their Service Tax liability in respect of commercial and industrial construction services as certified by a Chartered Accountant and only an amount equal to Rs.4,26,522/- stood short paid which was also discharged before adjudication. The demand of Service tax along with interest and penalty was confirmed in Order in Original and upheld by the Commissioner Appeals. Aggrieved, the appellant filed the appeal with the CESTAT.

Relevant Section

Section 65(91a) of the Finance Act, 1994
Section 65(54) of the Finance Act, 1994
Section 73 of the Finance Act, 1994

Question before Hon’ble Authority

Whether the demand of Service Tax raised solely on the basis of comparison of the ST-3 Returns and Bank Statement of the appellant without any corroborating evidence is legally sustainable?
Whether the invocation of the extended period of limitation is sustainable where the appellant was duly filing its returns and the department was well aware of the of the activities undertaken by the appellant?

Brief Arguments by Appellant

For construction of residential complex service

As per Section 65(91a), service tax is leviable only when construction involves more than 12 units, whereas only 4 flats were constructed as evidenced by the development agreement, hence such activity falls outside taxable scope.

For commercial and industrial construction service

The appellant had already discharged their Service Tax liability as certified by a Chartered Accountant, and further the short payment of Rs 4,26,522 was also made before the adjudication. Since the amount stood paid prior to the adjudication, penalty provisions should not apply.

The appellant also held that notice issued only on the basis of comparison of the ST-3 Returns and Bank Statement of the appellant without any corroborating evidence to substantiate that the value received was not sustainable.

On invocation of Extended Period of Limitation

On limitation, the appellant submitted that they were registered with the Department and were filing their ST-3 Returns regularly, and that the Department was well aware of the activities undertaken. The short payment of Rs.4,26,522/- was voluntarily paid even before passing of the adjudication order. The appellant, vide their letter dated 10.06.2013, had duly informed the Department that they had stopped operations from 2010-11 and also provided various evidence in pursuance of the letter issued by the Audit. Further, no corroborative evidence was produced to substantiate the allegation of wilful mis-statement or suppression of facts which is an essential conditions to invoke the extended period.

Brief Arguments by Respondent

The Department submitted that despite giving numerous opportunities, the appellant did not exercise any such opportunity nor submitted any of the documents before the Department. Accordingly, the extended period of limitation was rightly invoked.

Findings and Judgement

(i) Construction of Residential Complex Service

As per Section 65(91a), service tax is leviable only when construction involves more than 12 units, whereas only 4 flats were constructed as evidenced by the development agreement, hence such activity falls outside taxable scope and demand under this head is not sustainable. In the result, it was ordered that the demand of Service Tax under the category of 'construction of residential complex service', along with interest and penalty, is set aside.

(ii) Commercial and Industrial Construction Service

The Tribunal examined the commercial and industrial construction service issue and found that the assessee had already discharged its service tax liability as certified by a Chartered Accountant, and only a short payment of Rs 4,26,522 was made good before adjudication. No contrary evidence was produced by the Department to controvert the correctness of the Chartered Accountant's certificate produced by the appellant certifying payment of Service Tax on the amount received towards commercial and industrial construction services. Considering that the above short payment was voluntarily paid by the appellant even before the adjudication, reflecting a bona fide approach, the imposition of penalty in respect of the above amount confirmed was set aside.
Further, on the ground of the appellant that demand has been made solely on the basis of comparison of the ST-3 Returns and Bank Statement of the appellant without any corroborating evidence to substantiate that the value received, the Tribunal held that it has been held by various judicial precedents that comparison with ST-3 Returns and Income Tax Returns cannot be the sole basis for confirmation of demands against an assessee; an independent verification is required to be conducted so as to ascertain the nature of service rendered during the concerned period. Thus, the demand raised and confirmed against the appellant in this case merely on the basis of comparison of ST-3 Returns and Bank Statement is not sustainable in the eyes of law, and the demand of Service Tax confirmed against the appellant, over and above the amount already paid and admitted by the appellant, was set aside on this ground.

(iii) Extended Period of Limitation

Further, on the ground of limitation, it was found that considering the facts and circumstances of the case and the grounds placed by the appellant, the allegation of wilful suppression of facts with the intention to evade payment of Service Tax against the appellant is without any basis, and the invocation of extended period of limitation was unsustainable. Consequently, it was held that extended period of limitation was wrongly invoked.

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