Works contract exemption and extended limitation fail absent suppression, with subcontracted government project services treated as exempt.

A subcontractor providing works contract services for a Ministry of Defence project was held entitled to exemption under Notification No. 25/2012-S.T. because the main contractor's exempt government contract extended the same benefit to subcontracted services. The demand also failed on limitation because it was raised years later on Form 26AS data without independent enquiry, and no corroborative evidence showed suppression of facts or wilful misstatement with intent to evade tax. Service tax, interest and penalty were therefore set aside, with consequential relief granted.

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Issues: (i) Whether a sub-contractor providing works contract services to a contractor executing an exempt government contract is entitled to exemption under Notification No. 25/2012-S.T. dated 20.06.2012. (ii) Whether the demand was barred by limitation and the extended period could be invoked in the absence of independent corroborative evidence of suppression or wilful misstatement.

Issue (i): Whether a sub-contractor providing works contract services to a contractor executing an exempt government contract is entitled to exemption under Notification No. 25/2012-S.T. dated 20.06.2012.

Analysis: The services rendered by the appellant were found to be part of the construction work awarded by the Ministry of Defence to the main contractor. The notification grants exemption to specified construction services provided to the Government or governmental authority, and its sub-contractor clause extends the same benefit where the main contractor's service is exempt. Since the main contractor's services for the Ministry of Defence project were exempt, the appellant's subcontracted works contract services also fell within the exemption.

Conclusion: The exemption applied, and the service tax demand on merits was unsustainable in favour of the assessee.

Issue (ii): Whether the demand was barred by limitation and the extended period could be invoked in the absence of independent corroborative evidence of suppression or wilful misstatement.

Analysis: The demand was raised several years after the relevant period on the basis of Form 26AS data without independent enquiry into the nature of the service. No material was produced to establish suppression of facts or wilful misstatement with intent to evade tax. In the absence of corroborative evidence, invocation of the extended limitation period was not justified.

Conclusion: The demand was barred by limitation, and the extended period was not validly invoked, in favour of the assessee.

Final Conclusion: The service tax demand, interest, and penalty were set aside, and the appeal was allowed with consequential relief as permissible in law.

Ratio Decidendi: A subcontractor is entitled to exemption where the main contractor's works contract service is exempt under the notification, and the extended limitation period cannot be invoked absent independent evidence of suppression or wilful misstatement.

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