Service tax demands cannot be based on mere discrepancies without proper evidence; best judgment assessments must derive from substantiated materials.

JUDGMENT :

Prathiba M. Singh, J.

1. This hearing has been done through hybrid mode.

2. This is an appeal challenging the impugned order dated 30th July, 2024 by which the appeal of the Department has been dismissed by Customs, Excise and Service Tax Appellate Tribunal, Principal Bench, New Delhi (hereinafter, 'CESTAT').

3. On the last date of hearing, notice was issued to the Respondent and they were directed to file the relevant documents which are relied upon in support of the CA certificate, along with the reply to the appeal.

4. Today, Mr. Bhatia has appeared for the Respondent. Mr. Tyagi and Mr. Bhatia have been heard.

5. The short question that arises in this matter is whether the Respondent was liable to pay any service tax on the differential amount which was reflected in the returns filed under the Value Added Tax Act, 2005 (hereinafter, ‘the VAT Act’) and under the Service Tax Act, 1994 (hereinafter, ‘the 1994 Act’). The said issue has been considered by the Adjudicating Authority which has framed the following questions:

“Whether there is short payment of Service Tax under Works Contract Service arising out of Reconciliation?”

6. In respect of this question, the Adjudicating Authority, vide order dated 10th April, 2017 has held as under:

46. The Noticee provided the break-up of their income, vide RUD-26, shown in the balance sheets for the financial year 2007-08 to 2010-11, and scrutiny thereof revealed difference between the amount of WCT Return and the amount of Works Contract Service in ST-3 returns as given in Table-A, supra. Accordingly, SCN-I seeks to demand a differential amount of service tax for the period 2007-08 to 2011-12 collectively amounting to Rs.18,95,70,056/- (details given in Table-B, supra) under Works Contract Service. Subsequently, SCN-II dated 22.05.2014 was also issued seeking demand of differential amount of service tax to the tune of Rs.22,47,16,258/- (refer to Table-G, Supra for the period 2012-13 after arriving at the taxable value by jacking up turnover of WCT of previous year (2011-12) to the extent of 150% taking resort to the best judgment assessment as provided under Section 72 of the FINANCE ACT , 1994 since the Noticee had failed to provide the information sought by the department.

47. Against above, the Noticee submits that they executed all composite contracts with their own labour and materials. WCT/VAT returns contain all type of Works Contract and composite contracts as per definition of Section (au) of The Uttar Pradesh Value Added Tax Act, 2008and Section 2(44) of Rajasthan VAT (RVAT Act, 2003) whereas as per service tax law even prior to existence of the Works Contract Service in year 2007, they have discharged their service tax liability under the category of Erection; Commissioning or Installation Services; Commercial and Industrial Construction Services. Therefore, taxable value of these categories should have been taken into account while raising the demand of Rs.18,95,70,056/- for the period 2007-08 tο 2011-12 under SCN-1.

48. I find from the SCN that the Noticee is mainly engaged in the business of manufacturing, procurement and commissioning of ash handling equipment including EPC projects for thermal power plants. They have their manufacturing units at Sahibabad and Sikanderabad, U.P. The Uttar Pradesh Value Added Tax Act, 2008 defines the term 'works contract’ as under:

"Section 2(au) "works contract" includes any agreement for carrying out for cash, deferred payment or other valuable consideration, the building, construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, modification, repair of commissioning of any movable or immovable property".

49. It is unequivocally clear from the above definition that works contract under VAT law not only includes the contract for building construc