Service tax demand based solely on Form 26AS cannot be sustained without proper investigation

CESTAT Kolkata allowed the appeal against service tax demand based on Form 26AS from Income Tax Department. The Tribunal held that demand cannot be sustained solely on Form 26AS basis, citing precedent in M/S. Piyush Sharma case. Additionally, the extended limitation period was improperly invoked as the Department failed to issue show-cause notice timely despite starting investigation in April 2015, and conducted faulty investigation without determining payment purposes. The demand was dismissed on both substantive and limitation grounds.

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Issues Involved:
1. Validity of Demand Raised Based on Form 26AS
2. Applicability of Service Tax Exemptions
3. Invocation of Extended Period of Limitation

Summary:

1. Validity of Demand Raised Based on Form 26AS:
The core issue was whether the demand for service tax could be raised solely based on Form 26AS issued by the Income Tax Department. The Tribunal found that the demand was raised without a proper investigation or examination of the appellant's books of accounts. It cited previous rulings, including Pijush Sharma vs. Commissioner of CGST & Excise and M/s Lord Krishna Real Infra Private Limited vs. Commissioner of Customs, Central Excise & Service Tax, which held that demands based solely on Form 26AS are not sustainable. The Tribunal reiterated that the demand cannot be based merely on Form 26AS without corroborative evidence from the appellant's records.

2. Applicability of Service Tax Exemptions:
The appellant argued that the services provided to the Indian Army, such as supply/renting of vehicles and supply of fresh food items, were either exempt or non-taxable. Specifically, the appellant claimed exemption under Notification No.30/2012-ST for transport services, as no consignment notes were issued. For the period April 2017 to June 2017, the appellant contended that the income was below the threshold limit for service tax. The Tribunal did not directly address these exemptions in its final ruling as it found the demand itself unsustainable.

3. Invocation of Extended Period of Limitation:
The appellant contended that the show-cause notice issued on 30th December 2020 was barred by limitation, arguing there was no suppression of facts. The Tribunal agreed, noting that the investigation initiated in April 2015 did not lead to timely action by the Department. The Tribunal held that the extended period of limitation was not invocable due to the Department's inaction and the faulty investigation process.

Conclusion:
The Tribunal set aside the impugned order, holding that the demand for service tax based solely on Form 26AS was unsustainable and that the extended period of limitation was not applicable. The appeal was allowed with consequential relief.

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