Service tax demand based solely on Form 26AS data without verification of taxable services held unsustainable

CESTAT Kolkata held that service tax demand based solely on Form 26AS data without verification of taxable services is unsustainable. The department failed to establish whether amounts in Form 26AS related to taxable services or demonstrate malafide intention for extended limitation period invocation. Following precedents from CESTAT Allahabad and Kolkata, the tribunal ruled that Form 26AS figures alone cannot determine service tax liability without evidence of taxable services. The demand for 2016-17 period issued in 2021 was time-barred as extended period was improperly invoked. Appeal allowed, impugned order set aside.

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Issues:
The issues involved in the judgment are the demand of Service Tax based on Form 26AS data and the invocation of extended period of limitation.

Issue 1: Demand of Service Tax based on Form 26AS data

The Appellant contended that the demand in the case was barred by limitation as the proceedings were solely based on information from Form 26AS of the Income Tax department. They argued that since these figures were included in the Profit/Loss Account in the Balance Sheet, there was no suppression. The Appellant also emphasized that the Department did not provide any positive evidence to demonstrate malafide intention or mens rea for Service Tax evasion. Citing the decision in Aban Lyod Chiles Offshore Ltd. vs. CCE, the Appellant asserted that invoking extended period of limitation without justification when all facts were known to the Department was not valid. The Appellant further argued that the demand of Service Tax cannot be solely based on Form 26AS data without verifying if the amount received was for taxable services, as supported by previous tribunal decisions.

Issue 2: Invocation of extended period of limitation

The Appellant challenged the invocation of the extended period of limitation for demanding Service Tax. They highlighted that the Department relied solely on data from Form 26AS without verifying if the amount received was for taxable services. The Appellant referenced tribunal decisions, such as Luit Developers Pvt. Ltd. vs. Commissioner, CGST, to support their argument that Form 26AS figures alone cannot determine Service Tax liability without evidence of it being due to a taxable service. The Appellant maintained that the Department failed to show malafide intention or mens rea for Service Tax evasion, rendering the demand unsustainable. The Tribunal held that the demand beyond the normal limitation period was not justified, setting aside the demand and concluding that interest and penalty were not applicable due to the unsustainable demand.

Separate Judgement Delivered:
The judgment was delivered by Hon'ble Mr. K. Anpazhakan, Member (Technical) at the Appellate Tribunal CESTAT Kolkata on 22.11.2023.

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