Service tax demand under Section 73 requires proper valuation under Section 67 with evidence examination

CESTAT MUMBAI held that determination of service tax under Section 73 of Finance Act, 1994 requires proper valuation of taxable services under Section 67. The tribunal found that charges were framed without examining appellant's books of account or admissible evidence to establish taxable value of Rs.4,54,64,051/-. Following precedent in M/S KUSH CONSTRUCTIONS case, revenue cannot raise demand without establishing that entire amount received constitutes consideration for services. The show cause notice lacked legal basis for determining taxable value, rendering it unsustainable. Commissioner (Appeals) order was set aside and appeal was allowed.

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Issues Involved:
1. Determination of service tax not levied or not paid under Section 73 of the Finance Act, 1994.
2. Proper determination of the value of taxable services for charging service tax.
3. Sustainability of the impugned order.

Detailed Analysis:

Issue A: Determination of Service Tax Not Levied or Not Paid
For the determination of service tax under Section 73 of the Finance Act, 1994, it is essential to determine the value of taxable services as provided under Section 67 of the said Act. Section 66B of the Finance Act, 1994, provides for the levy of service tax at 14% on the value of service. Section 67 specifies that the value shall be the consideration in money charged by the service provider. The definition of service under Clause (44) of Section 65B and the negative list under Section 66D must be considered. Thus, the first step is to determine the correct value of taxable service.

Issue B: Proper Determination of Value of Taxable Services
The Tribunal noted that the Revenue, without examining any records of the appellant, concluded that a taxable value of Rs.7,19,93,389/- for the period from October 2013 to March 2014 had not been subjected to service tax. The show cause notice did not provide evidence that this amount was received for providing services. The Tribunal cited several precedent decisions:

1. Umesh Tilak Yadav (2024) 159 taxmann.com 336 (Mumbai-CESTAT):
- The Tribunal emphasized that the demand must be based on the value derived from consideration received for services, which was not established in the show cause notice.

2. Commissioner vs. Modern Road Makers Pvt. Ltd. (Appeal No. ST/86984/2021):
- The Tribunal held that the show cause notice was presumptive and lacked examination of the respondent's activities or reasons for the turnover difference.

3. Principal Commissioner vs. SBI Life Insurance Co. Ltd. [2024] 159 taxmann.com 168:
- The Tribunal reiterated that the demand based on the difference between ST-3 returns and income tax returns without further examination is not sustainable.

4. Lord Krishna Real Infra Pvt. Ltd. 2019 (2) TMI 1563 - CESTAT All.:
- It was held that Revenue must investigate transactions and establish that they were for providing services.

5. Sharma Fabricators & Erectors P Ltd. 2017 (7) TMI 168 - CESTAT All.:
- The Tribunal noted that charges must be based on the assessee's books of account and other admissible evidence.

6. Kush Construction 2019 (5) TMI 1248 - CESTAT All.:
- The Tribunal held that without examining reasons for differences in figures between income tax returns and ST-3 returns, Revenue cannot raise a demand.

The Tribunal concluded that the show cause notice lacked a basis for arriving at the taxable value and was thus not sustainable in law.

Issue C: Sustainability of the Impugned Order
Since the show cause notice was held to be non-sustainable, the impugned order passed by the Commissioner (Appeals) was set aside. The appeal filed by the appellant was allowed, and the cross-application filed by Revenue was dismissed.

Conclusion:
The Tribunal allowed the appeal by setting aside the order passed by the Commissioner (Appeals) and dismissed the cross-application filed by Revenue. The primary reason was the lack of examination of the appellant's records and the presumptive nature of the show cause notice, which failed to establish that the amount in question was received for providing taxable services.

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