Service tax demand cannot rest on book discrepancies alone without proof that receipts represent taxable services.

Service tax demand could not be sustained merely from discrepancies between ST-3 returns, the balance sheet, and bank ledgers without proving that the receipts related to taxable services. The adjudicating authority had relied on income figures and book entries, but the reconciliation was found incomplete because it did not properly account for service tax in debtors and creditors, bad debts, or credit notes. The assessee offered explanations for the differences, and the department failed to rebut them with evidence. On that basis, the demand based on assumptions and presumptions could not be upheld.

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Issues: Whether service tax demand could be sustained solely on the basis of discrepancies between the ST-3 returns, balance sheet, and bank ledger without proving that the receipts represented taxable services.

Analysis: Service tax was payable on the value of taxable services received. The adjudicating authority had proceeded on the basis of income figures and book entries without establishing that the receipts were in fact against taxable services. The reconciliation was found to be incomplete and faulty, as it did not properly account for service tax element in debtors and creditors, bad debts, or credit notes. The demand was based on assumptions that all accounted receipts were taxable, while the assessee had furnished explanations to reconcile the differences and the department failed to disprove them with evidence.

Conclusion: The demand could not be upheld on presumptions alone, and the Revenue's appeals were liable to fail.

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