Service tax demands on refunded advances, loose entries, and disputed credit were largely unsustainable, with remand for fresh determination.

Amounts received as booking advances that were later refunded, and sums shown as loans or other creditors, were treated as outside service tax where no service was actually provided; the taxable component required re-determination after excluding amounts returned and any tax already paid. Demands based only on scribblings, loose computer entries or alleged cash income were held unsustainable in the absence of independent corroborative evidence. On Cenvat credit and works contract valuation, the proper course was to determine the correct differential tax liability rather than deny credit mechanically; the conceded small credit alone was confirmed, while the remaining valuation and credit issues were remanded for reconsideration.

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Issues: (i) Whether service tax could be demanded on advances received for bookings that were subsequently cancelled and amounts returned, including amounts shown as loans or other creditors; (ii) whether demand could be sustained on the basis of scribblings, loose computer entries and alleged cash income without independent corroborative evidence; (iii) whether denial of Cenvat credit and the valuation adopted for works contract services were sustainable.

Issue (i): Whether service tax could be demanded on advances received for bookings that were subsequently cancelled and amounts returned, including amounts shown as loans or other creditors.

Analysis: Amounts initially received but later returned to customers, where no service was actually provided, do not constitute taxable consideration. Genuine loans and advances are outside the levy. The burden lies on the revenue to establish that the receipt was a taxable advance and not a loan or refundable deposit. The matter also required re-examination of the actual taxable component after giving credit for amounts already returned and tax already paid, if any.

Conclusion: The demand could not be sustained in respect of amounts returned or amounts shown as loans, and the issue was remanded for re-determination of the taxable component.

Issue (ii): Whether demand could be sustained on the basis of scribblings, loose computer entries and alleged cash income without independent corroborative evidence.

Analysis: A serious tax demand cannot rest solely on private notings or loose entries. In the absence of independent corroboration, such as statements of buyers or other supporting evidence, and in view of the retraction and contrary affidavits on record, the alleged unaccounted receipts were not proved.

Conclusion: The demands based on scribblings, loose entries and alleged cash income were not sustainable.

Issue (iii): Whether denial of Cenvat credit and the valuation adopted for works contract services were sustainable.

Analysis: If the revenue's case was that the correct course was to apply a different valuation or abatement scheme, the proper consequence was to determine the differential service tax and not to recover Cenvat credit in isolation. For the post-01.07.2012 period, Rule 2A was held to be retrospectively clarified by Section 129 of the Finance Act, 2017, and the valuation controversy concerning land deduction did not justify the credit denial in the manner adopted. The small credit conceded by the appellant alone was confirmed; the director's penalty was also set aside.

Conclusion: The credit denial and allied demand were not fully sustainable, save for the conceded small amount, and the matter was remanded for reconsideration of the remaining issues.

Final Conclusion: The adjudication was set aside in substantial part, the matter was sent back for fresh determination on the surviving taxable issues, and only the admitted small credit stood confirmed.

Ratio Decidendi: Tax demand on advances is not sustainable where the amounts are returned and no service is provided; allegations of unaccounted receipts must be proved by independent corroborative evidence; and where valuation or rate disputes arise, the proper course is to determine the correct tax liability rather than mechanically deny credit.

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