M/s. v R Nirman Private Ltd. Vs the Assistant Commissioner Central Taxes

M/S. V R NIRMAN PRIVATE LTD, REPRESENTED BY ITS MANAGING DIRECTOR, SHRI CHERUVU RAMAKOTAIAH, 1ST FLOOR, 50-22-11, VARAPURNA NILAYAM, T P T COLONY, NEAR GANESH BABU CHILDRENS HOSPITAL, SEETHAMMADHARA, VISAKHAPATNAM, ANDHRA PRADESH, 530013.

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...PETITIONER

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AND

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THE ASSISTANT COMMISSIONER CENTRAL TAXES, VISAKHAPATNAM NORTH CGST DIVISION, D. NO. 10-50-22, SIRIPURAM LANE,, 0PP. WNS MAIN GATE, VISAKHAPATNAM - 530 003.

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THE SUPERINTENDENT OF CENTRAL TAX, ASSELMETTA RANGE, VISAKHAPATNAM NORTH CGST DIVISION, D. NO. 10-50-22, SIRIPURAM LANE, 0PP. WNS MAIN GATE, VISAKHAPATNAM - 530 003.

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THE SUPERINTENDENT OF CENTRAL TAX, ARC SECTION, VISAKHAPATNAM NORTH CGST DIVISION D. NO. 10-50-22, SIRIPURAM LANE, 0PP. WNS MAIN GATE, VISAKHAPATNAM - 530 003.

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UNION OF INDIA, DEPARTMENT OF REVENUE, REPRESENTED BY ITS SECRETARY (REVENUE), NORTH BLOCK, NEW DELHI.

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...RESPONDENT(S):

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Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased toPleased to issue a writ of mandamus or any other writ, direction or order declaring the proceedings of the 1st Respondent in rder-in-Original No. 139/2023- 24/ST/AC/NORTH/DSRB (DIN No. 20240355YJ000005330C) dated 27.03.2024 for the period from 01st April 2015 to 30th June 2017 confirming the service tax demand of Rs. 49,25,653/- and consequential recovery notice issued vide C. No. V/4/006/2024-25-ARC/617 dated 14.10.2025 for recovery of the demand confirmed in the Order-ln- Original No. 139/2023-24/ST/AC/ NORTH/DSRB (DIN No. 20240355YJ000005330C) dated 27.03.2024 as being arbitrary, unconstitutional, time barred and contrary to the provisions of the Finance Act, 1994, and the rules made thereunder and is violative of Article 19(1)(g), 265 and 300A of the Constitution of India and set aside the same. b. And to pass

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IA NO: 1 OF 2025

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Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pleased to stay the operation of the proceedings of the 1st Respondent in Order-in-Original No. 139/2023- 24/ST/AC/NORTH/DSRB (DIN No. 20240355YJ000005330C) dated 27.03.2024 for the period from 01st April 2015 to 30th June 2017 and consequential recovery notice issued vide C. No. V/4/006/2024-25 -ARC/617 dated 14.10.2025 in the interest of justice and pass

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Counsel for the Petitioner:

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1.ANIL KUMAR BEZAWADA

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Counsel for the Respondent(S):

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1.JOSYULA BHASKARA RAO (SR. SC FOR CBIC)

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The Court made the following Order:

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The petitioner, who is in the business of executing work contracts, had been awarded certain work contracts by M/s. CPWD. The turnover relating to the said contracts for the period April-2014 to March-2015 was taken up for the assessment for service tax under the provisions of the Finance Act, 1994. The said proceedings, which had been initiated by the Assistant Commissioner of Central Taxes, Visakhapatnam North CGST Division, was dropped by way of an Order, dated 30.03.2019. In this Order, the Assistant Commissioner took the view that the construction works carried out by the petitioner as a sub contractor of the Ms. CPWD related to the construction of structures etc, in the Acharya Nagarjuna University, Central University of Tamil Nadu and Indian Maritime University, Chennai. The Assistant Commissioner had thereupon taken note of exemption notification No.25/2012-ST, dated 20.06.2012 and had held that the main contract work executed by M/s. CPWD would be exempted from sales tax by virtue of entry No.12 in this notification. Thereafter, the Assistant Commissioner had given a finding that even services by a sub contractor, provided to another contractor whose services are exempt, would also have to be exempted by virtue of entry No.29(h) in the notification, dated 20.06.2012. On this basis, the Assistant Commissioner dropped all further proceedings, by way of an Order dated 30.03.2019. Aggrieved by this order, the department had moved an appeal bearing No.01/2019(VSP)ST(D), before the Commissioner (Appeals), Guntur, central tax & customs. The Commissioner (Appeals) dismissed the appeal,

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filed by the department, by an Order dated 23.01.2020. In this order, the Commissioner took the view that entry No.29(h) read with entry No.12(a) of the notification, dated 20.06.2012, would exempt the petitioner from being taxed for the service tax on the contracts executed by the petitioner. Apart from this, the Commissioner (Appeals) also took the view that since the CPWD was a main contractor which was eligible for exemption under the entry No.12(a) & 12(c) and the petitioner would also be exempt, by virtue of entry No.29(h) of the notification, dated 20.06.2012.

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The Assistant Commissioner of Central Taxes again initiated the assessment proceedings, for sales tax, for the period 2015-16 and 2016-17. These proceedings were initiated in relation to the contracts executed by the petitioner as sub contractor of M/s.CPWD, which was treated as the main contractor. The petitioner, after receipt of the show-cause notice issued by the Assistant Commissioner, had contended that the transactions in question relate to the transactions which had already been considered in the earlier year and that the proceedings cannot be taken further in view of the observations and findings of the Assistant Commissioner as well as the Commissioner (Appeals) in the earlier round of assessment.

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The Assistant Commissioner, however passed an order of assessment, bringing to tax, the turnovers of the petitioner, relating to the execution of work contracts in that period. The Assistant Commissioner held that no material had been placed before the Assistant Commissioner to demonstrate that the contracts executed by the petitioner are related only to

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contracts for the Government or Government authorities or local bodies and that these contracts were executed through M/s.CPWD. The Assistant Commissioner had thereafter, held that the turnovers of the petitioner would be liable to be taxed, as no material has been placed before the Assistant Commissioner, regarding the nature of the works executed by the petitioner.

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Aggrieved by this Order, dated 27.03.2024, the petitioner has

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approached this Court by way of the present Writ Petition.

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Sri P. Veera Reddy, learned Senior Counsel appearing on behalf

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of Sri Anil Kumar Bezawada, learned counsel appearing for the petitioner, would assail the said order on two grounds:-

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I. Learned Senior Counsel would contend that the Assistant Commissioner did not have the discretion to take up these issues again after the decision of the Commissioner (Appeals), dated 23.01.2020 and relied upon the Judgment of the Hon’ble Supreme Court of India, in the case of Union of India & Ors Vs. Kamlakshi Finance Corporation Limited¹ .

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II. Learned Senior Counsel would also contend that the Assistant Commissioner, in the impugned order, had given a specific finding that the works executed by the petitioner were works executed as sub contractor to M/s.CPWD. In such circumstances, the Assistant Commissioner could not have arrived at any finding, that the non-filing of the documents by the petitioner was

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1 1992 Supp (1) SCC 443

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sufficient to hold that the petitioner had not demonstrated that these transactions are exempted transactions.

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Sri Josyula Bhaskar Rao, learned Standing Counsel for CBIC, appearing for the respondents, would on the other hand contend that the findings for the earlier assessment period are not binding and would not amount to res judicata, for subsequent years, under the taxation law. He would further submit that the Assistant Commissioner had distinguished the turnovers, under the impugned assessment proceedings, from the turnovers relating to the earlier period. He would submit that this differentiation is based on the fact that the petitioner had not placed any material before the Assistant Commissioner to show that the transactions in the present period are identical or similar to the transactions of the previous year.

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The question of exemption arises on account of the notification

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dated 20.06.2012. The entry No.12 of this notification reads as follows:-

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12. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, Installation, completion, fitting out, repair, maintenance, renovation, or alteration of-

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a) 4[***];

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b) a historical monument, archaeological site or remains of national importance, archaeological excavation, or antiquity specified under the Ancient Monuments and Archaeological Sites and Remains Act, 1958 (24 of 1958);

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c) 1[***];

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d) canal, dam or other Irrigation works;

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e) pipeline, conduit or plant for (i) water supply (ii) water treatment, or (iii) sewerage treatment or disposal; or

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f) 2[***];

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3[12A. Services provided to the Government, a local authority or a governmental authority by way of construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of-

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a) a civil structure or any other original works meant predominantly for use other than for commerce, Industry, or any other business or profession,

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b) a structure meant predominantly for use as (i) an educational, (ii) a clinical, or (iii) an art or cultural establishment; or

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c) a residential complex predominantly meant for self-use or the use of their employees or other persons specified in the Explanation 1 to clause (44) of section 65B of the said Act;

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under a contract which had been entered into prior to the 1^st March, 2015 and on which appropriate stamp duty, where applicable, had been paid prior to such date:

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Provided that nothing contained in this entry shall apply on or after the 1^st April, 2020;]

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Other relevant entry is entry No.29(h) which reads as follows:-

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“Service by the following persons in respective capacities-

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a) sub-broker or an authorised person to a stock broker;

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b) authorised person to a member of a commodity exchange;

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c) 1[***];

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d) 2[***];

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e) 3[***];

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f) selling agent or a distributor of SIM cards or recharge coupon vouchers,

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g) business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch;)

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(ga) any person as an intermediary to a business facilitator or a business correspondent with respect to services mentioned in clause(g). (gb) business facilitator or a business correspondent to an insurance company in a rural area; or]

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h) sub-contractor providing services by way of works contract to another contractor providing works contract services which are exempt;”

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The findings of the Assistant Commissioner, in the impugned Order

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is that the turnover, considered in the impugned order arise out of the services provided by the petitioner to M/s. CPWD.

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The works carried out by M/s. CPWD, as set out in the order itself in paragraph Nos.8.1 & 8.2, would show that these works related to Kendriya Vidyalaya, Nagakudi, Tamil Nadu, as well as certain works executed for the

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Andhra Pradesh Endowment Department in relation to certain temples. Entry No.12, in the notification, dated 20.06.2012, states that all services provided to the Government or a local authority or a Government authority in relation to structures meant predominantly for use by an educational establishment would be exempt. M/s.CPWD had executed works for Kendriya Vidyalaya, which would be a Governmental authority for the construction of a school building which can only be used for an education purpose. Similarly, the construction carried out for the Andhra Pradesh Endowments department would squarely fall within the exemption granted under the entry No.12 of the notification, dated 20.06.2012.

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Apart from this, the question of whether the Assistant Commissioner could have raised these issues in a subsequent year remains. The Judgment of the Hon’ble Supreme Court of India in the case of Union of India & Ors Vs. Kamlakshi Finance Corporation Limited had considered a similar issue where the assessing authority sought to reopen the issues which

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had already been determined by the Collector (Appeals) in an earlier period. The Hon’ble Supreme Court of India, while dealing with this issue, had held as follows:-

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“6. Sri Reddy is perhaps right in saying that the officers were not actuated by any mala fides in passing the impugned orders. They perhaps genuinely felt that the claim of the assessee was not tenable and that, if it was accepted, the Revenue would suffer. But what Sri Reddy overlooks is that we are not concerned here with the correctness or otherwise of their conclusion or of any factual mala fides but with the fact that the officers, in reaching their conclusion, by-passed two appellate orders in regard to the same issue which were placed before them, one of the Collector (Appeals) and the other of the Tribunal. The High Court has, in our view, rightly criticised this conduct of the Assistant Collectors and the harassment to the

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assessee caused by the failure of these officers to give effect to the orders of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department- in itself an objectionable phrase and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws.

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7. The impression or anxiety of the Assistant Collector that, if he accepted the assessee's contention, the department would lose revenue and would also have no remedy to have the matter rectified is also incorrect. Section 35-E confers adequate powers on the department in this regard. Under sub-section (1), where the Central Board of Direct Taxes come across any order passed by the Collector of Central Excise with the legality or propriety of which it is not satisfied, it can direct the Collector to apply to the Appellate Tribunal for the determination of such points arising out of the decision or order as may be specified by the Board in its order. Under subsection (2) the Collector of Central Excise, when he comes across any order passed by an authority subordinate to him, if not satisfied with its legality or propriety, may direct such authority to apply to the Collector (Appeals) for the determination of such points arising out of the decision or order as may be specified by the Collector of Central Excise in his order and there is a further right of appeal to the department. The position now, therefore, is that, if any order passed by an Assistant Collector or Collector is adverse to the interests of the Revenue, the immediately higher administrative authority has the power to have the matter satisfactorily resolved by taking up the issue to the Appellate Collector or the Appellate Tribunal as the case may be. In the light of these amended provisions, there can be no justification for any Assistant Collector or Collector refusing to follow the order of the Appellate Collector or the Appellate Tribunal, as the case may be, even where he may have some reservations on its correctness. He has to follow the order of the higher appellate authority. This may instantly cause some prejudice to the Revenue but the remedy is also in the hands of the same officer. He has only to bring the matter to the notice of the Board or the Collector so as to enable appropriate proceedings being taken under Section 35-E(1) or (2) to keep the interests of the department alive. If the officer's view is the correct one, it will no doubt be finally upheld and the Revenue will get the duty, though after some delay which such procedure would entail.”

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In the light of these observations and in view of the fact that the Assistant Commissioner itself had given findings relating to the nature of the works executed by the petitioner, it would have to be held that the impugned order, dated 27.03.2024, passed by the Assistant Commissioner would have to be set aside. Accordingly, this Writ Petition is disposed of, setting aside the impugned Order, dated 27.03.2024, passed by the Assistant Commissioner of Central Taxes.

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As a sequel, pending miscellaneous applications, if any, shall stand closed.

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________________________

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R. RAGHUNANDAN RAO, J

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________________ T.C.D. SEKHAR, J

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Date: 04.02.2026 BSM

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