Tax demand based on unverifiable freight figures fails where the Revenue cannot justify computation or deny abatement.

A service tax demand based on freight charges extracted from balance-sheet and ledger figures was found unsustainable because the Revenue could not explain the computation in the show-cause notice, and the relied-upon documents were not supplied despite request. The Tribunal also noted that the audited balance-sheets reflected composite expenses under loading, transportation and other selling heads, and the records did not establish that the full amounts treated as freight were taxable freight charges. On that basis, denial of the abatement benefit under Notification No. 32/2004-ST was not upheld, the impugned order was set aside, and the appeal was allowed.

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Issues: Whether the service tax demand on freight charges based on balance-sheet figures was sustainable, and whether the benefit under Notification No. 32/2004-ST could be denied.

Analysis: The demand was founded on figures taken from the assessee's balance-sheet and ledgers, but the audited balance-sheets produced before the Tribunal showed different composite figures under loading, transportation and other selling expenses. The Tribunal found that the Revenue was unable to explain how the figures in the show-cause notice were worked out, and the relied-upon documents were not made available to the assessee despite request. The records produced also did not establish that the entire amounts treated as freight were only freight charges, or that the demand was supported by proper evidence.

Conclusion: The demand was held unsustainable, and the denial of the abatement benefit was not upheld.

Final Conclusion: The impugned order was set aside and the appeal was allowed.

Ratio Decidendi: A tax demand must be supported by clear and verifiable material, and where the Revenue cannot justify the computation or establish the taxable value from the relied-upon records, the demand cannot survive.

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