2024 (8) TMI 601 - AT - Service Tax

Service tax demand upheld for willful suppression despite five-year limitation; penalty under Sections 77-78 confirmed

M/s. Gupta Electric Company Versus Principal Commissioner of Central Goods & Service Tax, Dehradun

CESTAT NEW DELHI dismissed the appeal in a service tax case. The Department assessed service tax based on Income Tax Return disclosures and TDS ... Levy of service tax - income of service provider shown in the Income Tax Return - suppression of facts and contravention of the Act/Rules with intent to evade payment of tax or not - extended period of limitation - interest and penalty. Levy of service tax - HELD THAT:- The Department has proceeded in the present case on the basis of the information received from the Income Tax Department relating to the income from the provision of services shown in the ITR as well as income on which TDS has been deducted and the gross amount of value of service shown in the ST-3 Returns was provided. The Tribunal in the case of VATSAL RESOURCES PVT LTD VERSUS C.C.E. & S.T. -SURAT-I [2022 (7) TMI 718 - CESTAT AHMEDABAD], following the earlier decisions in line, observed that by relying on the TDS/26-AS statements, the demand of service tax under the Service Tax Act cannot be made. There is no quarrel to the settled principle that amounts shown in the ITRs or Balance Sheets are not liable for service tax, however, here the conduct of the appellant cannot be ignored as he failed to produce the documents when asked for by the Department. Extended period of limitation - HELD THAT:- Perusal of the impugned order shows that the Appellate Authority accepted that the demand, which was beyond the period of 5 years was unsustainable and consequently, set aside the demand for the period April, 2015 to September, 2015. The demand for the remaining period was upheld as per the proviso to Section 73(1) of the Act as the appellant has filed the ST-3 Returns without fully disclosing the taxable value to the Department and thereby willfully suppressed the taxable value with intent to evade the payment of requisite tax. The Department learnt about the differential value only on the information provided by the Income Tax Department and therefore, the extended period of limitation has been rightly invoked. Interest and penalty - HELD THAT:- On the principles of invoking the extended period of limitation, the penalty under Section 78 and 77 as imposed under the impugned order is upheld. The appellant is also liable to pay the interest as the tax liability has been affirmed. There are no merits to interfere with the impugned order and hence the same is affirmed - appeal dismissed. Issues:Challenge to order confirming demand raised in show cause notice; Service tax liability on differential income; Burden of proof on Department; Invocation of extended period of limitation; Failure to cooperate with Department; Difference in value between ITR and ST-3 Returns; Applicability of legal precedents; Upholding of penalty and interest.Analysis:The Appellate Tribunal CESTAT NEW DELHI addressed the challenge by M/s. Gupta Electric Company against the order confirming the demand raised in the show cause notice. The case involved the service tax liability on the differential income declared by the appellant. The Tribunal observed that the appellant had provided services of a higher value than declared in their ST-3 Returns, leading to the need to pay service tax on the differential amount. The appellant argued that the burden of proof lay with the Department, emphasizing the lack of investigation and failure to produce necessary documents. However, the Tribunal found that the Department had rightly invoked the extended period of limitation based on information from the Income Tax Department.Regarding cooperation with the Department, the Tribunal noted the appellant's failure to provide essential documents and reconcile the income vis-`a-vis service tax paid. The appellant's admission of providing services without clarifying the difference in value raised suspicions. The Tribunal highlighted the importance of cooperation in investigations and the appellant's deliberate avoidance of submitting crucial documents.The issue of the difference in value between the Income Tax Return (ITR) and ST-3 Returns was crucial. The Tribunal differentiated between mis-statement and suppression of facts, citing legal precedents. It emphasized that the appellant, directly involved in filing both returns, was aware of the differing values and stood to benefit from evading higher service tax payments. The Tribunal found the Department's reliance on information from the Income Tax Department justified, despite the settled principle that amounts in ITRs or Balance Sheets are not subject to service tax.Regarding the invocation of the extended period of limitation, the Tribunal upheld the penalty and interest imposed, citing the Apex Court's definition of suppression and willful mis-statement. The Tribunal affirmed the impugned order, dismissing the appeal and upholding the penalty and interest. The decision was pronounced on 8th August, 2024.