2024 (2) TMI 1524 - AT - Service Tax

Revenue cannot demand service tax on 26AS-ST3 discrepancies without examining reasons and proving taxable services

Maheshwari Builders Versus Commissioner of CE & CGST, Lucknow

CESTAT Allahabad allowed the appeal and set aside the demand raised by Revenue based on discrepancies between Form 26AS and ST-3 returns. The Tribunal ... Invocation of extended period of limitation - confirmation of demand that was raised on the basis of information received from Income Tax Department in Form 26AS - HELD THAT:- It was held by this Tribunal in the case of [2017 (7) TMI 168 - CESTAT ALLAHABAD] that it was the responsibility of the executive to examine the records and examine the audit objection raised with reference to the records and facts of the case and take a view whether there is a sustainable case for issue of show cause notice and that charges in the show cause notice have to be on the basis of books of account and records maintained by the assessee and the other admissible evidence and the transactions recorded in the books of account cannot be held to be contrary to the facts. It was further held by this Tribunal in the case of Kush Construction [2019 (5) TMI 1248 - CESTAT ALLAHABAD] that without examining the reasons for difference in the figures reflected in Form 26AS and ST-3 returns, Revenue cannot raise demand on the basis of such difference without establishing that the entire amount received by the appellant as reflected in the said returns and Form 26AS being consideration for services provided and without examining whether the difference was because of any exemption or abatement. Clause (44) of Section 65B of Finance Act, 1994 has provided for definition of service and it has elaborately dealt with a list of activities which shall not be included in such definition. Further, Section 66D of Finance Act, 1994 has provided for negative list of services where the activities provided covered by such negative list do not qualify to be a taxable service. Therefore, it is clear that while determining the value of taxable service under Section 67 ibid, such aspect as to the activities which are covered by negative list and activities which are mentioned in the definition of service as those which are not covered by such definition become important. Conclusion - For arriving at amount of service tax not paid or not levied arriving at correct value of taxable service which has not suffered service tax needs to be determined as the first step. Further, there are services where entire or part of service tax is to be paid by service recipient. In addition, mega exemption N/N. 25/2012-ST dated 20.06.2012 has provided exemption to various activities from the levy of service tax. Therefore, unless the data is examined with reference to all the above stated aspects, no one can come to a conclusion about the exact value which has not suffered service tax. Such exercise has not been undertaken in the present case. The impugned order is set aside - appeal allowed. Issues Presented and Considered:The core legal questions considered in this case include:Whether the demand for service tax on the appellant is sustainable under the extended period of limitationRs.Whether the services provided by the appellant to the P.W. Department of the State Government of Uttar Pradesh are exempted under relevant notificationsRs.Whether the original authority erred in confirming the demand without considering all submissions and admissibilityRs.Whether the value of taxable service not paid or not levied needs to be determined correctlyRs.Issue-Wise Detailed Analysis:1. Extended Period of Limitation and Exemption:The appellant argued that the demand for service tax under the extended period of limitation was not sustainable, citing relevant case law and exemptions under Notification No. 25/2012-ST. The appellant contended that services provided to the P.W. Department of the State Government of Uttar Pradesh were exempted under Entry No. 12(a) of the said notification. Additionally, the appellant highlighted the insertion of Entry 12A through Notification No. 9/2016-ST and Section 102 of the Finance Act, 2016, which provided exemptions for services provided to government entities. The appellant also referenced tribunal decisions to support their arguments.2. Original Authority's Error in Confirming Demand:The appellant raised concerns regarding the original authority's failure to consider all submissions and admissibility before confirming the demand. The Tribunal noted that the original authority did not properly examine the records, audit objections, and differences in figures reflected in Form 26AS and ST-3 returns. The Tribunal emphasized the importance of determining the correct value of taxable service and considering exemptions under the Finance Act. It was observed that the original authority did not undertake a comprehensive examination of the data and relevant aspects before confirming the demand.3. Determination of Correct Value of Taxable Service:The Tribunal highlighted the significance of determining the correct value of taxable service that had not suffered service tax. It emphasized the need to consider activities covered by the negative list, definitions of service, and exemptions under the mega exemption Notification No. 25/2012-ST. The Tribunal concluded that without a thorough examination of these aspects, it was not possible to ascertain the exact value that had not been subject to service tax. The Tribunal found that such an exercise was lacking in the present case.Significant Holdings:The Tribunal held that the impugned order was not sustainable due to the original authority's failure to consider all submissions, admissibility, and relevant aspects before confirming the demand. Consequently, the Tribunal set aside the impugned order and allowed the appeal.(Order pronounced in the open court on 25.02.2025)