2024 (11) TMI 290 - AT - Service Tax

Service tax demand dismissed due to lack of evidence proving taxable services despite Trial Balance discrepancies

M/s. South Eastern Coalfields Limited Versus Commissioner of CGST Respondent Customs and Central Excise, Manik Bagh Palace, Indore (M.P.)

CESTAT NEW DELHI dismissed service tax demand, interest and penalty against a public sector undertaking based on differences between Trial Balance and ... Service tax demand along with interest and penalty u/s 75 and 78 of the Finance Act,1994 - difference in figures between Trial Balance and ST-3 Returns - difference in the two set of figures indicated the value of taxable services on which due service tax was not paid by the appellant - These values pertained to the Works Contract Services, Legal Consultancy Services and Security Services received by the appellant, where they were liable to pay service tax under the Reverse Charge Mechanism and also the renting of immovable property service rendered by them - HELD THAT:- The issue whether service tax can be demanded on the basis of the difference in the figures as reflected in the Trial Balance and ST-3 Returns is no longer res-integra referring to the decisions in Go Bindas Entertainment Private Limited [2019 (5) TMI 1487 - CESTAT ALLAHABAD] and M/s Kush Constructions [2019 (5) TMI 1248 - CESTAT ALLAHABAD] where it has been held that no demand can be confirmed by comparing the ST-3 Returns with balance sheet figures in the absence of any evidence to prove the same that income in the balance sheet reflects the providing of taxable services. Since it is the Revenue, who is making the allegations as such the onus to prove the said allegation lies heavily upon the Revenue. We may also refer to the decision of SBI Life Insurance Company Ltd [2024 (1) TMI 1161 - CESTAT MUMBAI] where also the Tribunal reiterated the principle that demand or penalty on the basis of difference between ST-3 Returns and Income Tax Returns of any period without further examination to establish the differences on account of consideration received towards the charge of services cannot be sustained. Following the said principles, Tribunal in the case of the appellant titled as South Eastern Coalfields Ltd [2024 (3) TMI 14 - CESTAT NEW DELHI] decided the issue observing that mere difference in figures appearing in the Trial Balance as compared to the ST-3 Returns without any corroborative evidence that taxable services had indeed been provided by the appellant cannot be upheld. We accordingly conclude, that no service tax demand can be raised on the appellant on this account. Invoking extended period of limitation - As the entire demand proposed in the show cause notice falls within the extended period of limitation and, therefore, is liable to be set aside. The show cause notice has been issued for the period April 2015 to June 2017, and hence, the entire demand is beyond the normal period of limitation, however, the extended period of limitation has been invoked on the ground that the non-payment would not have come to knowledge had the audit not been conducted. Reference has been made to the decision in M/s Vandana Global versus Commissioner (Appeals) CGST, Central Excise and Customs, Raipur, where it has been held that it is not correct to say that had the audit not been conducted, the alleged errors in assessment would not have come to light because they would have come to light if the officers had scrutinised the returns and called for any data or records which they needed. The fact that audit has pointed out the alleged mistakes only shows that the officers have not scrutinised the Returns properly. Thus, the extended period of limitation cannot be invoked in the present case, and therefore the demand being barred by limitation is unsustainable. Appellant has challenged the imposition of penalty u/s 78 of the Act on the principle that there is a presumption that Public Sector Undertakings do not have any intention to evade the payment of tax as held in Burn Standard Company Ltd [2007 (5) TMI 435 - CESTAT, CHENNAI] and Chennai Petroleum Corporation Ltd [2007 (4) TMI 4 - SUPREME COURT] The same principle is applicable in the case of the appellant which is Public Sector Undertaking and hence, no penalty can be imposed under Section 78 of the Act. Issues:1. Demand of service tax based on difference in figures between Trial Balance and ST-3 Returns.2. Applicability of revenue neutrality principle in the case.3. Invocation of extended period of limitation for demand of service tax.4. Imposition of penalty under Section 78 of the Finance Act, 1994 on Public Sector Undertakings.Detailed Analysis:1. The primary issue in this case was the demand of service tax amounting to Rs.10,76,44,875/- confirmed against the appellant based on the difference in figures between Trial Balance and ST-3 Returns for the period April 2015 to June 2017. The appellant contended that the demand was solely based on this difference without considering the nature of entries or whether they were for taxable services. The Tribunal referred to previous decisions, including Go Bindas Entertainment Pvt Ltd. and M/s Kush Constructions, emphasizing that the onus to prove such allegations lies on the Revenue. The Tribunal concluded that no service tax demand could be raised solely on this basis.2. The second issue involved the application of the revenue neutrality principle. The appellant argued that the demand was under the reverse charge mechanism, and if they had paid the service tax, they would have been entitled to Cenvat credit, ensuring revenue neutrality. Citing the decision in Asmitha Microfin Ltd., the Tribunal held that the demand was hit by limitation and set it aside, as the extended period of limitation could not be invoked in revenue neutral cases.3. The third issue was the invocation of the extended period of limitation for the demand of service tax. The appellant challenged this invocation, arguing that the alleged errors would have come to light even without the audit. Referring to the decision in M/s Vandana Global Ltd., the Tribunal held that the extended period of limitation could not be invoked in this case, rendering the demand unsustainable due to being barred by limitation.4. The final issue pertained to the imposition of penalty under Section 78 of the Finance Act, 1994 on Public Sector Undertakings. The appellant relied on the presumption that PSUs do not intend to evade tax, as established in previous cases. The Tribunal agreed with this argument, holding that no penalty could be imposed under Section 78 on the appellant, a Public Sector Undertaking.In conclusion, the Tribunal set aside the impugned order and allowed the appeal on the grounds of lack of evidence for the service tax demand, application of revenue neutrality principle, unsustainable invocation of extended period of limitation, and ineligibility for penalty on a Public Sector Undertaking.