CESTAT Rules, Non-Registration Under Service Tax; Real Estate Contractor Faces Rs. 31 Lakh Penalty
Pranav B Prem
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), comprising Ms. Binu Tamta (Judicial Member) and Ms. Hemambika R. Priya (Technical Member), has upheld a service tax demand of ₹31,19,937, along with interest and equivalent penalty, against M/s Panwar Builders for non-registration and non-payment of service tax on construction-related services rendered during 2009–2012. The Tribunal affirmed the finding that the contractor had failed to offer any satisfactory explanation for the substantial amounts received for services rendered and confirmed the penalties imposed under Sections 77 and 78 of the Finance Act, 1994.
Background of the Case
M/s Panwar Builders, based in Jodhpur, was engaged in providing “construction of residential complex” services to various developers, including M/s Manav Developers and M/s Ramdev Developers. Acting on intelligence inputs regarding evasion of service tax, the Central Excise Department initiated an investigation into the activities of the firm. During the inquiry, it emerged that the appellant had rendered taxable services but failed to take registration or discharge service tax liability for a significant part of the relevant period.
Statements were recorded from Shri Jitendra Panwar, who initially claimed proprietorship and admitted to having taken service tax registration only on 05.10.2011. He stated that the work was carried out on a labour contract basis, and that no materials were supplied. However, another statement by Shri Magraj Panwar, father of Jitendra, claimed proprietorship and stated that the business had provided construction services even prior to 2011.
Based on banking records, the department discovered that M/s Panwar Builders had received total consideration of ₹3,02,90,638 for services rendered during 2009–2012, while having deposited only ₹1,91,889 in service tax. A show cause notice was issued on 14.10.2014 proposing a tax demand of ₹31,19,937 under Section 73(1), along with interest and penalties under Sections 75, 77, and 78.
The matter was adjudicated ex parte, and the Order-in-Original dated 30.01.2017 confirmed the demand, interest, and penalties. The Commissioner (Appeals) upheld this decision, following which the appellant approached the Tribunal.
Tribunal Proceedings and Findings
Despite multiple opportunities, the appellant did not appear before the Tribunal or the authorities below. In fact, the Tribunal recorded that the appellant failed to attend any of the personal hearings, despite being specifically cautioned via daily order dated 11.10.2024 that the matter would be decided on merits in the event of continued absence.
Taking note of the record, the Tribunal confirmed that the appellant had acted as a contractor providing labour services for residential construction. The agreement between the appellant and M/s Manav Developers was scrutinized, and it was observed that the appellant had not supplied any construction materials. This conclusion was supported by the Nil VAT returns filed for the years 2009–10 and 2010–11. As no material was involved in the contracts, the appellant was found ineligible for abatement of the value of taxable services.
The Tribunal further noted that no satisfactory explanation had been offered by the appellant regarding the substantial amount of ₹3.02 crores received, and no evidence was submitted before the Tribunal in support of any contrary contention.
The appellant had also raised the plea that the relied-upon documents (RuDs) were not furnished along with the show cause notice. This claim was rejected by the Tribunal, which noted that all relevant documents—including statements and financial records—had either been submitted by the appellant themselves or attached with the appeal. The Tribunal therefore held that there was no procedural infirmity in the adjudication process.
Verdict
The Tribunal concluded that the appellant had failed to discharge service tax liability on taxable services despite receiving significant consideration during the relevant period. It found no reason to interfere with the conclusions drawn by the original authority or the appellate commissioner. Accordingly, the CESTAT dismissed the appeal and upheld the demand of ₹31,19,937 in service tax along with applicable interest. It also confirmed the imposition of penalties under Sections 77(1)(a), 77(2), and 78 of the Finance Act, 1994.
Appearance
None for the Appellant
Shri Anand Narayan, Authorized Representative for the Respondent
Cause Title: M/s Panwar Builders V. Commissioner of Central Goods, Service Tax, Central Excise, Udaipur
Case No: Service Tax Appeal No. 53503 Of 2018
Coram: Hon’ble Ms. Binu Tamta [Member (Judicial)], Hon’ble Ms. Hemambika R. Priya [Member (Technical)]
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