Rajasthan High Court – Jaipur
Commissioner Of Central Excise And … vs M/S. Incredible Unique Buildcon Pvt. … on 18 July, 2026
[2026:RJ-JP:26593-DB]
HIGH COURT OF JUDICATURE FOR RAJASTHAN
BENCH AT JAIPUR
D.B. Central/excise Appeal No. 1/2023
URN: EXCIA / 1U / 2023
Commissioner of Central Excise and Service Tax, A Block, Surya
Nagar, Alwar-301001.
----Appellant
Versus
M/s. Incredible Unique Buildcon Pvt. Ltd., 812/G1 15, Samtel
Zone, Phase III, Bhiwadi, Alwar.
----Respondent
For Appellant(s) : Mr. C.S. Sinha
Mr. Mayank Kanwar
For Respondent(s) : Mr. Sanjay Jhanwar, Sr. Advocate with
Mr. Aditya Sharma
Mr. Wilson Joy
HON'BLE MR. JUSTICE ARUN MONGA
HON'BLE MR. JUSTICE MANEESH SHARMA
Order
1. Date of conclusion of Arguments 09.07.2026
2. Date on which the order was reserved 09.07.2026
3. Whether the full order or only operative part Full
is pronounced
4. Date of pronouncement 18.07.2026
REPORTABLE
Per: Maneesh Sharma,J
1. The present appeal has been preferred by the Commissioner
of Central Excise and Service Tax, Alwar (hereinafter, the
“appellant”) assailing the Final Order No. ST/A/50651/2022-
CU(DB) dated 26.07.2022 (hereinafter, the “impugned order”),
passed by the learned Customs, Excise and Service Tax Appellate
Tribunal, New Delhi (“CESTAT”), in Service Tax Appeal No.
50307/2017.
A) Factual Matrix
2. Shorn of unnecessary detail, the facts giving rise to the
present appeal are as follows.
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2.1. The respondent/assessee is engaged in the business of
construction and is registered with the Department under the
categories of “Commercial or Industrial Construction Services”
(“CICS”) and “Works Contract Services” (“WCS”), as defined under
the Finance Act, 1994.
2.2. In the course of an audit of the respondent’s records, the
Department found that the respondent had discharged its Service
Tax liability under the CICS head, both before and after
01.06.2007. It was further observed that, with effect from
01.06.2007, WCS came to be introduced as a distinct taxable
service, and that the respondent’s activities,which involved the
charging of a composite consideration towards both the rendition
of services and the utilisation of materials therein,were squarely
covered thereunder.
2.3. The Audit Team found that the respondent had not opted for
the Works Contract (Composition Scheme for Payment of Service
Tax) Rules, 2007, and had instead been discharging Value Added
Tax to the State of Rajasthan in terms of the Rajasthan VAT Rules.
On this basis, a shortfall of Rs. 2,54,64,515/- was alleged in the
tax so paid by the respondent.
2.4. Consequently, the Department issued a Show Cause Notice
dated 30.09.2015 under the proviso to Section 73(1) (the “SCN”),
proposing to reclassify the respondent’s services under the WCS
head for the period from October 2010 to June 2012, and to
recover the differential duty, along with with interest under
Section 75 and penalties under Sections 77 and 78 of the Finance
Act, 1994.
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2.5. The respondent filed a reply to the said SCN, refuting the
allegations therein point wise, and contending, inter alia, that: (a)
its services were classifiable as Commercial or Industrial
Construction Services; (b) as a service provider, it had the option
to discharge tax under either the CICS or the WCS head; (c) the
computation of Service Tax proposed by the appellant was
erroneous; (d) the demand so raised was barred by limitation;
and (e) the penalty proposed was not sustainable in law.
2.6 By Order-in-Original dated 22.08.2016, the Commissioner of
Central Excise and Service Tax, Alwar, confirmed the demand of
Service Tax amounting to Rs. 2,54,64,515/- for the period from
October 2010 to June 2012, along with recovery of interest and a
penalty of Rs. 10,000/- upon the respondent.
B) Proceedings Before the CESTAT
3. Aggrieved thereby, the respondent preferred an appeal
before the learned CESTAT. By the impugned order dated
26.07.2022, the learned CESTAT, while upholding the demand on
merits, set aside the Order-in-Original on the ground of limitation,
holding that, in the absence of any proof of intent to evade
payment of tax, no case of fraud, collusion, wilful misstatement or
suppression of facts was made out. Accordingly, the appeal was
allowed and the Order-in-Original dated 22.08.2016 was set aside
in limine.
C) The Substantial Question of Law
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4. By order dated 10.07.2023, this Court admitted the present
appeal on the following substantial question of law:
“Whether the Ld. CESTAT is correct in setting aside the
demand of service tax and penalties on the assessee by merely
stating that the elements of fraud, supression or willful
misstatement with intent to evade taxes is missing in the
present case without providing cogent reasons for holding the
same?”
D) Submissions on Behalf of the Appellant
5. Learned counsel for the appellant contended that the
impugned order is ex facie illegal, arbitrary and mechanical,
having been passed without due application of mind to the facts
on record. He submitted, in particular, that:
(a) the learned CESTAT erred in holding the demand raised
vide the SCN dated 30.09.2015 to be barred by limitation;
(b) the scheme of Service Tax is founded upon self-
assessment, which casts a corresponding duty upon the
respondent to make an accurate and truthful disclosure;
(c) upon the introduction of the WCS category with effect
from 01.06.2007, there existed no ambiguity that services
involving the supply or deemed supply of goods fell to be
classified under the WCS head, and yet the respondent
persisted in classifying them under CICS, thereby
suppressing material facts and evincing an intent to evade
payment of tax; and
(d) although the respondent had voluntarily incorporated WCS
into its existing Service Tax registration by way of an
amendment dated 12.10.2010, it nonetheless failed to
disclose any taxable value under that head, thereby
demonstrating a wilful and deliberate suppression of facts.
5.1. In order to buttress his contentions, learned counsel for the
appellant places reliance upon the judgments passed by the
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Hon’ble Supreme Court in the matters of M/s Bhor Industries
Ltd. v. Commissioner of Central Excise, Mumbai 1 and The
Commissioner, Central Excise and Customs and Anr. v. M/s
Reliance Industries Ltd.2
5.2. Accordingly, order under challenge is prayed to be set aside
and appeal is prayed to be allowed.
E) Submissions on Behalf of the Respondent
6. Per contra, learned counsel for the respondent supported the
impugned order and submitted that:
(a) the learned CESTAT rendered its findings after due
consideration of the submissions by both parties and a
detailed examination of the evidence on record;
(b) there was no intention to evade tax by the respondent,
inasmuch as classification under either taxable head
attracted the same rate of tax and occasioned no
difference in the ultimate liability;
(c) the mere classification of a service under a different
taxable head does not, of itself, constitute wilful
suppression of facts;
(d) the question of classification remained unsettled until the
pronouncement of the Hon’ble Supreme Court in
Commissioner of Central Excise & Customs v. Larsen
& Toubro Ltd.3, and, consequently, the invocation of the
extended period of limitation is unsustainable; and
(e) the burden of establishing wilful suppression of facts lay
upon the appellant, which it has failed to discharge.
6.1. In order to buttress his contentions, learned counsel for the
respondent places reliance upon the judgments passed by the
1 2016 (16) SCC 643
2 2023 AIR (SC) 3219
3 AIR 2015 SC 3600
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Hon’ble Supreme Court in the matters of Larsen & Toubro
(Supra); Commissioner of Central Excise, Bangalore v.
Karnataka Agro Chemicals4; O.K Play (India) Ltd. v.
Commissioner of Central Excise, Delhi-III, Gurgaon 5; Lipi
Boilers v. CCE6; Stemcyte India Therapeutics (P) Ltd. v.
CCE7; Easland Combines, Coimbatore Vs. Collector of
Central Excise, Coimbatore8; Collector of Central Excise v.
H.M.M. Limited9; Pushpam Pharmaceuticals Company Vs.
Collector of Central Excise, Bombay10; Densons Pultretaknik
Vs. Commissioner of Central Excise11; Collector of Central
Excise, Hyderabad Vs. Chemphar Drugs and Liniments,
Hyderabad12; Uniworth Textiles Ltd. v. Commissioner of
Central Excise, Raipur13; CCE v. Bajaj Auto Ltd. 14; Chamundi
Die Cast Ltd. v. Commissioner of Central Excise,
Bangalore15; Principal Commissioner of Service Tax v.
Shree Chanakya Education Society16; Central Excise and
Service Tax v. Amba Poly Chrome P. Ltd. 17; and CCE v.
Himadri Speciality Chemical Ltd.18
6.2. Accordingly, the appeal is prayed to be dismissed.
4 (2008) 7 SCC 343
5 (2005) 2 SCC 460
6 (2025) 152 GSTR 760
7 (2025) 144 GSTR 662
8 (2003) 3 SCC 410
9 1995 Supp (3) SCC 322
10 1995 Supp (3) SCC 462
11 (2003) 11 SCC 390
12 (1989) 2 SCC 127
13 (2013) 9 SCC 753
14 (2010) 13 SCC 117
15 2007 (215) ELT 169 SC
16 2018 SCC OnLine Bom 14918
17 2016 SCC OnLine P&H 19036
18 2022 SCC OnLine Cal 3348
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F) Analysis and Findings
7. We have heard learned counsel for the rival parties at length
and have carefully perused the material on record, including the
authorities cited at the Bar.
8. The controversy in the present appeal lies within a narrow
compass, and is confined to the substantial question of law framed
hereinabove, namely, whether the learned CESTAT was justified in
setting aside the Order-in-Original on the finding that the
elements of fraud, suppression or wilful misstatement, coupled
with an intent to evade tax, were absent.
9. A perusal of the impugned order dated 26.07.2022 discloses
that the learned CESTAT, while allowing the appeal, held as
follows:
“17. We are unable to find any proof of intent to evade either
from the show cause notice or from the impugned order. Mere
omission or merely classifying its services under an incorrect
head does not amount to fraud or collusion or willful
misstatement or suppression of facts. The intention has to be
proved to invoke extended period of limitation. Supreme Court
has delivered the judgment in the case of Larsen & Toubro
dated 20 August 2015, prior to which there was no clear ruling
that services which involved supply or deemed supply of goods
could only be classified under WCS. The appellant had been
classifying its services (which also involved supply/use of
goods) under the CICS and Revenue never objected to it and,
therefore, the appellant could have reasonably believed it to be
the correct head and continued to file returns accordingly and
paying duty. Once the returns are filed, if Revenue was of the
opinion that the self-assessment of service tax and the
classification was not correct, it could have scrutinized the
returns and issued notices within time. The show cause notice
was issued on 30 September 2015 for the period covered
October 2010 to June 2012, which is clearly beyond the normal
period of limitation. Therefore, although Revenue is correct on
merits, the demand is time barred and, therefore, cannot
sustain. For the same reason, the penalties imposed upon the
appellant under Sections 77 and 78 also cannot be upheld.”
10. On a careful scrutiny of the record, it also emerges that the
respondent had, throughout, been filing its returns by classifying
its services under the CICS head, and that no Show Cause Notice
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was issued by the appellant within the ordinary period of limitation
calling upon the respondent to file returns under the WCS head.
11. It is further evident that, as early as in the year 2013, the
appellant had itself conducted an audit of the respondent’s
accounts, in the course of which an objection with respect to the
classification of the respondent’s services was raised.
Notwithstanding this, no Show Cause Notice was issued to the
respondent at that stage. It may therefore reasonably be inferred
that the appellant was, well within the period of limitation, aware
of the alleged misclassification and was in a position to issue
notice accordingly; yet, for reasons best known to it, no such
notice came to be issued until 30.09.2015, in respect of the period
from 2010 to 2012.
12. In this backdrop, and in the light of the explanation
furnished by the respondent, we are satisfied that the respondent
entertained a bona fide belief that it was correctly discharging its
tax liabilities and filing accurate returns. It cannot, in these
circumstances, be said that the respondent harboured any intent
to evade payment of tax, for mere inaction, omission, or the
classification of services under an incorrect head does not, of
itself, amount to fraud, collusion, wilful misstatement or
suppression of facts, so as to warrant invocation of the extended
period of limitation by the appellant.
13. On a further perusal of the material available on record, we
find that in the absence of any positive act/action taken by the
respondent, mere inaction/omission or mere classification of its
services under an incorrect head does not, by itself, amount to
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fraud or collusion or willful misstatement or suppression of facts,
and is thus insufficient to invoke the extended period of limitation.
14. The foregoing conclusion accords with the settled position of
law. In Chemphar Drugs and Liniments (supra), the Hon’ble
Supreme Court held:
“9……..Something positive other than mere inaction or failure
on the part of the manufacturer or producer or conscious or
deliberate withholding of information when the manufacturer
knew otherwise, is required before it is saddled with any
liability, before the period of six months. Whether in a
particular set of facts and circumstances there was any fraud
or collusion or wilful misstatement or suppression or
contravention of any provision of any Act, is a question of fact
depending upon the facts and circumstances of a particular
case.”
(Emphasis Supplied)
14.1. In Easland Combines (Supra), it was held as under:
“31. It is settled law that for invoking the extended period or
limitation duty should not have been paid, short levied or short
paid or erroneously refunded because of either fraud, collusion,
wilful misstatement, suppression of fact or contravention of
any provision or rules. This Court has held that these
ingredients postulate a positive act and, therefore, mere failure
to pay duty and/or take out a licence which is not due to any
fraud, collusion or wilful misstatement or suppression of fact or
contravention of any provision is not sufficient to attract the
extended period of limitation.”
(Emphasis Supplied)
14.2. In Lipi Boilers Ltd. (Supra), it has been held as under:
77. In the context of invoking the extended period of
limitation Under Section 11A of the Act, 1944, this Court in
Pahwa Chemicals Private Limited v. Commissioner of Central
Excise, Delhi reported in (2009) 4 SCC 658, observed that
mere failure does not amount to wilful misdeclaration or wilful
suppression and that there must be some positive act on the
part of an Assessee to bring the case within the mischief of
wilful misdeclaration or wilful suppression, as the case may be.
This Court in Pahwa Chemicals (supra) observed as follows:
“6. It is settled law that mere failure to declare does
not amount to wilful misdeclaration or wilful
suppression. There must be some positive act on the
part of the party to establish either wilful
misdeclaration or wilful suppression. When all facts
are before the Department and a party in the belief
that affixing of a label makes no difference does not
make a declaration, then there would be no wilful
misdeclaration or wilful suppression. If the
Department felt that the party was not entitled to
the benefit of the notification, it was for the(Uploaded on 03/08/2026 at 04:53:46 PM)
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[2026:RJ-JP:26593-DB] (10 of 12) [EXCIA-1/2023]Department to immediately take up the contention
that the benefit of the notification was lost.”
(Emphasis supplied)
78. The allegation levelled against the Assessee in the present
matter before us is of wilful suppression with an intention to
evade central excise duty. Therefore, the following observation
of this Court in Continental Foundation Joint Venture Holding v.
CCE reported in 2007:INSC:877 is required to be referred to:
“12. The expression ‘suppression’ has been used in
the proviso to Section 11-A of the Act accompanied
by very strong words as ‘fraud’ or ‘collusion’ and,
therefore, has to be construed strictly. Mere
omission to give correct information is not
suppression of facts unless it was deliberate to stop
(sic evade) the payment of duty. Suppression means
failure to disclose full information with the intent to
evade payment of duty. When the facts are known to
both the parties, omission by one party to do what
he might have done would not render it suppression.
When the Revenue invokes the extended period of
limitation Under Section 11-A the burden is cast
upon it to prove suppression of fact. An incorrect
statement cannot be equated with a wilful
misstatement. The latter implies making of an
incorrect statement with the knowledge that the
statement was not correct.”
(Emphasis supplied)
15. To the same effect, in Pushpam Pharmaceuticals Co.
(supra), the Hon’ble Supreme Court, holding that “suppression of
facts”, having been deployed in the company of strong words such
as fraud, collusion and wilful default; therefore the act must be
deliberate and animated by an intent to evade payment of tax,
observed:
“4. ………..But the proviso carves out an exception and
permits the authority to exercise this power within five years
from the relevant date in the circumstances mentioned in the
proviso, one of it being suppression of facts. The meaning of
the word both in law and even otherwise is well known. In
normal understanding it is not different that what is explained
in various dictionaries unless of court the context in which it
has been used indicates otherwise. A perusal of the proviso
indicates that it has been used in company of such strong
words as fraud, collusion or wilful default. In fact it is the
mildest expression used in the proviso. Yet the surroundings in
which it has been used it has to be construed strictly. It does
not mean any omission. The act must be deliberate. In
taxation, it can have only one meaning that the correct
information was not disclosed deliberately to escape from
payment of duty. Where facts are known to both the parties
the omission by one to do what he might have done and not
that he must have done, does not render it suppression.”
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(Emphasis Supplied)
15.1. A similar view was taken in Collector of Central Excise v.
H.M.M. Limited (supra):
“2………The mere non-declaration of the waste/by-product in
their classification list cannot establish any wilful withholding of
vital information for the purpose of evasion of excise duty due
on the said product……………… If the Department proposes to
invoke the proviso to Section 11A(1), the show cause notice
must put the assessee to notice which of the various
commissions or omissions stated in the proviso is committed to
extend the period from six months to 5 years. Unless the
assessee is put to notice, the assessee would have no
opportunity to meet the case of the department. The defaults
enumerated in the proviso to the said sub-section are more
than one and if the excise department places reliance on the
proviso it must be specifically stated in the show cause notice
which is the allegation against the assessee falling within the
four corners of the said proviso.”
16. Applying the aforesaid principles to the facts at hand, we
are of the considered view that the appellant has failed to adduce
any cogent evidence of a positive act on the part of the
respondent evincing an intent to evade payment of tax. The mere
omission, or the classification of services under an incorrect head,
does not, of itself, constitute fraud, collusion, wilful misstatement
or suppression of facts. It follows that the appellant was not
entitled to invoke the extended period of limitation.
17. In view of the aforesaid, the submission of the appellant
lacks merit, and as far as the authorities relied upon by learned
counsel for the appellant are concerned the same are clearly
distinguishable from the facts and circumstances of the present
case.
G) Conclusion
18. For the reasons aforesaid, we find that the findings of the
learned CESTAT are consistent with the record and in conformity
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with the settled legal position expounded by the Hon’ble Supreme
Court.
19. The learned CESTAT has, in our view, correctly held that the
appellant failed to establish any element of fraud, collusion, wilful
misstatement or suppression of facts with intent to evade
payment of tax. We find no legal infirmity or perversity in the
impugned order warranting interference by this Court.
20. In the premises, the merits of the controversy no longer
survive for consideration. The substantial question of law framed
is answered in favour of the respondent and against the appellant,
and the impugned order dated 26.07.2022 is upheld.
21. Accordingly, the present appeal, being devoid of merit, is
dismissed, with no order as to costs.
22. All other pending applications, if any, shall stand disposed of.
(MANEESH SHARMA),J (ARUN MONGA),J
Deepa
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