Bkr Engineers vs. Commissioner Of Indirect Taxes And Customs

Facts

The petitioner, a civil contractor registered with the Telangana Government, filed a writ petition challenging an Order in Original dated March 29, 2023, passed by the Commissioner of Indirect Taxes and Customs. This order confirmed a demand of Rs. 2,40,37,525.00 towards service tax for the period 2016-17 to 2017-18 (up to June 2017), along with interest and penalty. The demand arose from a show cause notice issued by the Commissioner of Central Tax, Ranga Reddy CGST Commissionerate, on October 21, 2021. The petitioner contended that the services rendered were exempt from service tax as per specific circulars and notifications. The impugned order noted that the petitioner had not produced supporting original documents to substantiate its claim of non-taxability.

Held

The Court held that since the petitioner's claim of non-taxability of services went to the very root of the matter, it was appropriate to grant one more opportunity to substantiate this claim. The Court noted that the petitioner had submitted photocopies of documents because the originals were with the Government. Therefore, the impugned Order in Original dated March 29, 2023, was set aside. The petitioner was directed to submit certified or notarised copies of the relevant documents to Respondent No. 1 (Commissioner of Indirect Taxes and Customs). Respondent No. 1 was then to examine these documents in light of the circulars relied upon by the petitioner, provide an opportunity of hearing, and pass an appropriate order in accordance with the law. The entire exercise was to be completed within eight weeks from the receipt of the order. The ratio decidendi is that when a claim of exemption is central to a tax dispute and the assessee faces difficulties in producing original documents, a reasonable opportunity to substantiate the claim with certified or notarised copies should be provided before confirming the demand.

Key Issues

1. Whether the services rendered by the petitioner, a civil contractor for the Telangana Government, are exempt from service tax in terms of Circular No. 138/107/2011-Service Tax dated 06.05.2011 and Notification No. 25/2012-Service Tax dated 20.06.2012, and Circular No. 147/16/2011-Service Tax dated 21.10.2011, thereby rendering the demand for service tax illegal. (Question of law) Petitioner's contention: The petitioner argued that the services rendered were indeed exempt from service tax as per the aforementioned circulars and notifications. They claimed that the original documents supporting their claim were with the Government, and they could only produce photocopies. They asserted that the impugned order was arbitrary, without the authority of law, violative of natural justice, and without jurisdiction, contrary to the said notifications and violative of Articles 14, 19(1)(g), and 265 of the Constitution of India. Revenue's contention: The judgment does not record any specific arguments presented by the respondents.