2025 (8) TMI 496 - AT - Service Tax

Service Tax Demand Set Aside Due to Improper Turnover Calculation and Limitation Issues Under Relevant Rules

The CESTAT Kolkata allowed the appeal, holding that the confirmed Service Tax demand was unsustainable both on merits and due to limitation. The Revenue ... Invocation of extended period of limitation - Appellants have not paid requisite Service Tax - appellant is providing Construction Service under CICS category and also providing Maintenance and Repair Services to Durgapur Steel Plant - HELD THAT:- It is found that prior to 01.07.2012, the Revenue was required to specify the classification under which the demand is being made. In this case, it is seen that the demand has been made purely based on the turnover for the year as has been declared by the Appellant in their Books of Accounts for each of their financial years. This turnover has been taken to arrive at the Service Tax payable. While the allegation is towards CICS Services and Maintenance and Repair Services, it is found that in both these cases, abatement has to be considered for the materials used. The Revenue is in error in not quantifying the demand properly under these two headings. This has deprived the Appellant from taking proper defence towards the material used in respect of these services. Revenue is also in error in generalizing the turnover to quantify the demand. There are force in the Appellant’s arguments that there was no need for the Revenue to add the turnover of 2008-09 for quantifying the present demand. It is also seen that no quantification has been done for the year 2007-08. Therefore, effectively the demand is for the period 2004-05 to 2006-07 only - in terms of instructions given to the officials under CBEC Manual, even in respect of self-assessed Returns, scrutiny of the Returns is required to be taken up by them. The objections raised in 2009 by way of the present Show Cause Notice could have been raised in 2005-06, 2006-07 itself, if proper scrutiny was taken up for the ST Returns filed by the Appellant. The Tribunal in the case of Accurate Chemicals Industries v. Commr. of C.Ex., NOIDA [2013 (8) TMI 153 - CESTAT NEW DELHI] affirmed by the Hon’ble High Court of Allahabad has clearly held that once the assessee files the Returns, the Revenue officials are required to undertake the scrutiny and raise the query if any. In this case if there was a short payment or non-payment of Service Tax under these two headings, the queries should have been posed to the Appellant when the ST-3 Return were filed, which has not been done in this case. The confirmed demand is legally not sustainable both on merits and on account of time bar - Appeal allowed. ISSUES: Whether the demand for Service Tax on Construction and Maintenance and Repair Services is barred by limitation.Whether the Revenue properly quantified the Service Tax demand by bifurcating turnover under Construction Service under CICS and Maintenance and Repair Services.Whether the invocation of extended period for issuing Show Cause Notice was justified.Whether the Revenue complied with the requirement to scrutinize self-assessed Service Tax Returns and raise queries within the limitation period. RULINGS / HOLDINGS: The demand is effectively limited to the period up to 2006-07, and inclusion of 2008-09 turnover to justify delayed issuance of Show Cause Notice is improper; therefore, the demand is barred by limitation.The Revenue erred by not providing a proper bifurcation of the demand under Construction Service and Maintenance and Repair Services, which deprived the appellant of the opportunity to claim abatement on materials used; quantifying demand based solely on generalized turnover is incorrect.The invocation of the extended period was unjustified as the Revenue failed to scrutinize the self-assessed returns and raise objections within the prescribed time, despite the appellant having filed ST-3 Returns.The confirmed demand is legally unsustainable both on merits and on account of time bar and is set aside accordingly. RATIONALE: The legal framework requires that prior to 01.07.2012, the Revenue must specify the classification under which Service Tax demand is made, and properly quantify the demand considering applicable abatements.Revenue officials are mandated to scrutinize self-assessed Service Tax Returns (ST-3) and raise queries within the limitation period as per CBEC Manual instructions; failure to do so precludes invocation of extended period provisions.Precedent affirms that once returns are filed, Revenue must undertake scrutiny and raise queries timely; delayed action without proper quantification and classification violates principles of natural justice and statutory requirements.