2019 (2) TMI 1563 - AT - Service Tax

Tribunal overturns order, finds revenue failed to prove service tax underpayment. Show cause notice deemed unsustainable.

M/s Lord Krishna Real Infra Private Ltd. Versus Commissioner of Customs, C.E. & S.T., Noida

The Tribunal set aside the impugned order and allowed the appeal, holding that the revenue did not discharge its burden to prove the short payment of ... Short payment of service tax - Demand of service tax - Demand Confirmed on the basis of Form 26 AS of the appellant - Held that:- There were no other record of the appellant which were taken into consideration for entertaining a prima-facie view that appellant was required to pay short paid service tax of around ₹ 8 crores for the said period than the information that was available in returns in the form 26AS - Tribunal had an occasion to examine sustainability of demand raised only on the basis of form 26AS. It was held by this Tribunal in the case of Sharma Fabricators Pvt. Ltd. Vs Commissioner of Central Excise, Allahabad [2017 (7) TMI 168 - CESTAT ALLAHABAD] that The charges in the Show Cause Notice have to be on the basis of books of account and records maintained by the assessee and other admissible evidence. The books of account maintained by M/s Sharma were not looked into for issue of above stated two Show Cause Notices. Therefore, the transactions recorded in the books of account cannot be held to be contrary to the facts. From the record it is very clear that none of the records of appellant were taken into consideration for framing of charges that appellant had short paid service tax to the tune of around ₹ 8 crores and the said charges were framed only on the basis of information in the form 26AS - Revenue could have investigated into the nature of such transactions & should have established that the said transactions were in respect of provision of said service. Then alone the charges of short payment of Service Tax would have sustained. Appeal allowed - decided in favor of appellant. Issues Involved:1. Confirmation of demand of service tax based on Form 26AS.2. Admissibility of Cenvat credit to the appellant.Issue-wise Detailed Analysis:1. Confirmation of Demand of Service Tax Based on Form 26AS:The appellant contested the confirmation of the service tax demand amounting to Rs. 8,07,86,168/- based on Form 26AS. The appellant argued that during the audit, they provided all required details, and the audit team initially confirmed a service tax demand of Rs. 1,65,31,159/-. However, the Commissioner confirmed the higher demand based on Form 26AS figures without seeking explanations from the appellant regarding the nature of the payments recorded in the form. The appellant highlighted that payments recorded in Form 26AS might have already been subjected to service tax in previous years due to the accrual basis of service tax, leading to potential double taxation. Additionally, some payments reflected in Form 26AS might not be liable to service tax under the Finance Act, 1994.The appellant cited several judicial precedents to support their contention, including:- Synergy Audio Visual Workshop Pvt. Ltd. v CST, Bangalore: The Tribunal held that service tax payment cannot be confirmed based on income-tax returns and balance sheets.- Alpha Management Consultants Pvt. Ltd. v. CST Bangalore: It was held that service tax cannot be recovered based on amounts shown in income tax returns, as service tax is payable on recoveries made, not on amounts due.The Tribunal noted that the burden of proof lies on the Department to establish the appellant's liability to pay service tax. The revenue failed to provide evidence proving the appellant's liability for the demanded amount, relying solely on Form 26AS information.2. Admissibility of Cenvat Credit:The appellant claimed Cenvat credit amounting to Rs. 2,21,35,916/- during the investigation period, which was verified by the audit team. The audit officers disallowed only Rs. 6,38,024/- of the claimed credit. However, the Commissioner disallowed the entire credit on the grounds that original documentary evidence was not provided, despite copies being submitted. The appellant argued that the audit officers had already adjudged the credit as eligible, and the Commissioner did not challenge the legal eligibility of the credit in the show cause notice or the impugned order.The Tribunal found that the Commissioner should have directed the appellant to produce original documents if there were doubts about their availability. The presumption that the appellant did not have original documents was deemed unsustainable. Additionally, there was no proposal in the show cause notice to deny the Cenvat credit.Judgment:The Tribunal concluded that the show cause notice was issued solely based on Form 26AS information without examining the appellant's records. The Tribunal referenced its decision in Sharma Fabricators Pvt. Ltd. v. Commissioner of Central Excise, Allahabad, where it held that demands based solely on Form 26AS without examining the assessee's books of account are not sustainable. The Tribunal emphasized that the charges of short payment of service tax could only be sustained if the revenue had investigated the nature of transactions and established that they pertained to the provision of taxable services.The Tribunal set aside the impugned order and allowed the appeal, holding that the revenue did not discharge its burden to prove the short payment of service tax. The show cause notice dated 05.10.2016 was deemed unsustainable.