HOSPITECH MANAGEMENT CONSULTANTS PVT LTD vs. PRINCIPAL COMMISSIONER OFCENTRAL GOODS AND SERVICES TAX

SERTA-15/2023HC Delhi01 September 202615 pages
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What were the facts?

The appellant, Hospitech Management Consultants Pvt Ltd, provides services related to the planning, designing, construction, management, and supervision of projects for government hospitals, medical colleges, and educational institutions. The appellant contended that these services were non-commercial and not liable to service tax. A CERA Audit Memo in 2006 raised concerns about the taxability of these services. Initially, the Service Tax Department, citing CBEC Circular No. 80/10/2004-ST, agreed with the appellant that construction for educational and health institutions not for profit was non-taxable. However, later, the Commissioner of Service Tax initiated proceedings, leading to a demand of service tax, CENVAT credit, and penalties. The appellant's challenge to the CESTAT order concerning the service tax demand for the normal period of limitation and CENVAT credit/penalty was not pressed. The present appeal focuses on the penalty of Rs. 4,50,000/- imposed under Section 78 of the Finance Act, 1994, for the period July 1, 2009, to March 30, 2010.

What did the High Court hold?

The High Court held that the penalty of Rs. 4,50,000/- imposed under Section 78 of the Finance Act, 1994, was unwarranted. The Court noted that the Tribunal, while setting aside the demand for the extended period, had found no willful suppression of facts with intent to evade service tax, a finding not challenged by the revenue. This finding was considered to have a material bearing on the penalty imposition. The Court relied on Section 80 of the Act, which provides for waiver of penalty if the assessee proves a reasonable cause for the failure. Citing precedents like Bharat Hotels Ltd. and M/s Bajaj Travels Ltd., the Court held that a bona fide belief regarding the non-taxability of services, coupled with the Department's own contemporaneous view supporting this belief, constitutes a reasonable cause. The Court found that the non-payment of service tax was not a deliberate or contumacious default but arose from a bona fide understanding of the legal position. Therefore, the appeal was allowed, and the levy of penalty was set aside. The issue concerning the service tax levy for the normal period was dismissed as not pressed.

What were the issues?

1. Whether the levy of service tax for the normal period of limitation, as upheld by CESTAT's Impugned Order 1, is sustainable? (This issue was not pressed by the appellant and thus stands dismissed as not pressed). 2. Whether the penalty of Rs. 4,50,000/- imposed under Section 78 of the Finance Act, 1994, by CESTAT's Impugned Order 2, is sustainable? Assessee's Contentions: - The appellant argued that it had a reasonable and bonafide cause for not depositing service tax, as the Department itself had previously opined that the services rendered to government institutions were not exigible to service tax, citing CBEC Circular No. 80/10/2004-ST. - The appellant relied on Section 80 of the Finance Act, 1994, for waiver of penalty, asserting that there was no willful suppression or intention to evade tax. - The appellant cited the High Court's decisions in Bharat Hotels Ltd. v. Commissioner of C. Ex. (Adjudication) and M/s Bajaj Travels Ltd. v. Commissioner of Service Tax, which held that a bona fide belief regarding non-taxability constitutes a reasonable cause under Section 80. Revenue's Contentions: - The judgment does not record specific contentions from the revenue regarding the penalty under Section 78.

Which sections of the Income-tax Act were involved?

Section 83,Section 35G,Section 73(1),Section 78,Section 77,Section 80

AI-generated summary — verify with the full judgment below

SERTA 15/2023 $~ * IN THE HIGH COURT OF DELHI AT NEW DELHI

%

Judgment reserved on: 11.08.2026 Judgment delivered on: 01.09.2026 Judgment uploaded on: 01.09.2026

# CNR No: DLHC010366612023

+ SERTA 15/2023 & CM APPL. 47934/2023

HOSPITECH MANAGEMENT CONSULTANTS PVT LTD

....Appellant

versus

PRINCIPAL COMMISSIONER OF CENTRAL GOODS AND SERVICES TAX

.....Respondent

Advocates who appeared in this case

For the Appellant

: Dr. Prabhat Kumar, Mr. Pralabh

Mathur, Mr. Karan Kanwal, Advs

For the Respondent

: Mr. Atul Tripathi, SSC with Mr.

Shubham Mishra, Mr. Gaurav Mani

Tripathi, Mr. Akshay Sagar and Mr.

Madhav Anand, Advs. for CBIC CORAM: HON'BLE MR. JUSTICE ANIL KSHETARPAL HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA

JUDGMENT

MANMEET PRITAM SINGH ARORA, J. Signing Date:01.09.2026

The order continues below.

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