Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(CESTAT) 477

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

ALLAHABAD

REGIONAL BENCH - COURT NO.II

Service Tax Appeal No.70064 of 2026

(Arising out of Order-In-Appeal No.187-ST-APPL-ALLD-2025, dated 13.10.2025 passed by Commissioner (Appeals) CGST & Central Excise, Allahabad)

Manoj Kumar Gupta …..Appellant

(127/1074, W-I, Saket Nagar

Kanpur Nagar, Uttar Pradesh 208014)

VERSUS

Commissioner, CGST, Kanpur ….Respondent

(117/7, Sarvodya Nagar,

Kanpur Nagar, Uttar Pradesh 208005)

APPEARANCE:

Shri Abhinav Mishra, Advocate for the Appellant

Ms. Chitra Srivastava, Authorized Representative for the Respondent

CORAM: HON’BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)

FINAL ORDER NO.-70088/2026

DATE OF HEARING : 27.02.2026

DATE OF DECISION : 25.03.2026

Advocates:
For the Appellants/Petitioners: Abhinav Mishra
For the Respondents: Chitra Srivastava

A sub-contractor is independently liable to pay service tax for taxable services rendered, regardless of whether the main contractor has already discharged tax liability on the same activity. Plea of bona fide belief must be supported by evidence, failing which suppression of facts warrants extended limitation and penalties.

Headnote:(A) Finance Act, 1994 - Section 73(1) (proviso), Section 75, Section 77(1)(c), Section 77(2), Section 78 - CGST Act, 2017 - Section 174 - Service Tax - Liability of sub-contractor - Taxability of sub-contractor services where the main contractor has also paid tax - Whether sub-contractors are entitled to exemption on the ground of revenue neutrality - Held, no.

(B) Service Tax - Assessment, demand and penalty - Limitation and suppression of facts - Bona fide belief - Whether non-registration and non-filing of returns can be justified by a plea of bona fide belief - Held, no - Mere assertion of belief without supporting evidence fails - Suppression of facts with intent to evade tax warrants invocation of extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994. (Paras 4.2, 4.4, 4.8, 4.12)

Facts of the case:
The appellant provided taxable services as a sub-contractor but failed to register with the service tax department or file returns during the financial year. Upon investigation, tax authorities issued a show cause notice for demand of service tax, interest, and penalties based on third-party data retrieved from income tax records. The appellant contended they were exempt under a reverse charge mechanism and acted under a bona fide belief that they were not liable to pay tax. The primary authorities dismissed these claims for lack of evidence.

Findings of Court:
The Appellate Tribunal observed that the appellant provided services as a sub-contractor and that the law requires sub-contractors to discharge tax liability, regardless of whether the main contractor has also paid tax on the same activities. The claim of double taxation is mitigated by the availability of credit mechanisms under the law. The appellant failed to produce any cogent evidence of a bona fide belief, nor could they justify the failure to register and comply with statutory requirements.

Issues: Whether a sub-contractor is liable to pay service tax even if the main contractor has discharged tax liability; whether the failure to register and pay tax is protected by a plea of bona fide belief of non-taxability.

Ratio Decidendi: A sub-contractor qualifies as a taxable service provider under the statutory framework. The taxability of the sub-contractor is independent, and the existence of a tax payment by the main contractor does not exempt the sub-contractor from liability. Furthermore, suppression of material facts and failure to register, lacking any evidentiary support for a bona fide belief, necessitates the imposition of penalties and the invocation of the extended period of limitation.

Result: Appeal dismissed.

SANJIV SRIVASTAVA:

This appeal is directed against the Order-in-Appeal No. 187-ST-APPL-ALLD-2025, dated -13.10.2025 passed by Commissioner (Appeals), CGST & Central Excise, Allahabad. By the impugned order Commissioner (Appeals) has upheld the Order-In-Original No.76/ST/DC/DIV-II/2023-24 dated 29.08.2023 holding as follows:-

ORDER

(i) I confirm the demand of Service Tax amounting to Rs.1,95,356/- (Rupees One Lakh Ninety-Five Thousand Three Hundred Fifty SixOnly) for the financial year 2015-16 under proviso to Section 73(1) of the Finance Act, 1994 read with sec. 174 of CGST Act, 2017.

(ii) I confirm the due interest on the amount of Service Tax mentioned at (i) above should not be demanded and recovered from them under Section 75 of the

(iii) Finance Act, 1994 read with sec. 174 of CGST Act, 2017. (iii) I impose penalty Rs.1,95,356/- (Rupees One Lakh Ninety-Five Thousand Three Hundred Fifty Six Only) upon them under Section 78 of the Finance Act 1994 read with sec. 174 of CGST Act, 2017 for failure to pay service tax & suppressing the facts and value of taxable service with intent to evade payment of service tax.

(iv) I impose penalty of Rs. 10,000/- upon them under Section 77(1)(c) of the Finance Act, 1994 for not furnishing documents/ information called by a Central Excise Officer in accordance with the provisions of the Finance Act, 1994 or rules made thereunder read with sec. 174 of CGST Act, 2017.

(v) I impose penalty 10,000/- upon them under Section 77(2) of the Finance Act, 1994 for not filing of ST-3 return for the financial year 2015-16 read with sec.174 of CGST Act, 2017.

2.1 The Appellant was holding Service Tax Registration No.AHVPG2258ESD001 for providing taxable services (Business Auxiliary Service) as defined by Section 65B(44) read along with Section 66B of the Finance Act, 1994.

2.2 Information was received from the Income Tax Department that for the PAN No. AHVPG2258E a gross amount of Rs.13,47,285/- was received towards sale of service as per Income Tax Return. It was observed that against the receipt of above amount, Appellant as not paid any Service Tax during the period 2015-16 and also had not filed any ST-3 Return. As no ST-3 Return was available, specific service against which this amount was received could not be ascertained.

2.3 Vide Letter dated 23.09.2020 appellant was asked to furnish the explanation/clarification regarding non-payment of Service Tax on the differential amount shown in ITR and the gross amount shown in their ST-3 Return. Appellant was also asked to provide copy of ITR, Form 26AS, Balance-sheet, work contracts, agreements and ST-3 Return for the said period The Appellant failed to respond.

2.4 Taking the entire amount reflected in ITR Return towards provisioning of service, the Service Tax short paid has been determined as in Table below:-

Financial Year	Gross Value of Receipts			Service Tax (incl cess)
Financial Year	ITR	ST-3	Difference	Rate %	Payable
2015-16	1347285	0	1347285	14.5¹During the financial year 2015-16 various rates of Service Tax were applicable. Service Tax rate of 12.36%, 14% & 14.50% was applicable during the period April 2015 to May 2015, June 2015 to Oct.2015 & Nov. 2015 to March 2016 respectively. In absence of segregated data, highest rate of 14.50% has been taken into consideration for calculating the service tax liability for the financial year 2015-16	195356

2.5 Alleging suppression with an intent to evade payment of tax a Show Cause Notice dated 29.12.2020 was issued to the Appellant asking them to show cause as to why:-

(i) The Service Tax amounting to Rs.1,95,356/- (Rupees One Lakh Ninety-Five Thousand Three Hundred Fifty Six Only) including various applicable Cess for the financial year 2015-16 should not be demanded and recovered from them under proviso to Section 73(1) of the Finance Act, 1994 read with sec.174 of CGST Act, 2017.

(ii) The due interest on the amount of Service Tax mentioned at (i) above should not be demanded and recovered from them under Secti

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