2026 (2) TMI 563 - AT - Service Tax

Service tax demand based on Form 26AS discrepancies overturned for failure to establish differential receipts as taxable consideration; demand and penalties set aside

A Revenue demand premised solely on discrepancies between Form 26AS and filed ST-3 returns without examining causes was invalid; the Department must ... Service Tax demand - Demand founded solely on third party data/Form 26AS vis a vis returns (ST 3) without examination of reasons - exemption under Sr. no. 18 of Mega Exemption Notification No. 25/2012 (as substituted by Notification No. 6/2014 ST) for declared tariff below Rs.1000 per day - obligation on Revenue to establish that differential receipts represent consideration for taxable services - penalty under Sections 78 and 77(1)(c) of the Finance Act, 1994 - HELD THAT:- It appeared to the Service Tax Department that there is short payment of Service Tax by the Assessee and accordingly, SCN was issued proposing to demand the Service Tax which was alleged to be short paid. Appellant is registered with the Service Tax Department and ST-3 returns were being regularly filed. Revenue has compared the figures reflected in the ST-3 returns and those reflected in Form 26AS statement. I note that without further examining the reasons for the difference in the two statements, Revenue has raised the demand. I note that Revenue cannot raise the demand on the basis of such difference without examining the reasons for the said difference and without establishing that the entire amount received by the Appellant as reflected in the Form 26AS statement, being consideration for services provided and without examining whether the difference was because of any exemption or abatement, since, it is not legal to presume that the entire differential amount was on account of consideration for providing services. Thus, the demand of Service Tax is set aside. The penalties imposed under Sections 78 & 77 (1)(c) are set aside. The appeal filed by the Appellant is allowed with consequential relief, if any, as per law. Issues: Whether the Service Tax demand (and consequential penalties) raised on the basis of a difference between receipts shown in third party/Form 26AS data and ST 3 returns for the period 01.10.2014 to 31.03.2015 is sustainable, having regard to claimed exemption under Entry No.18 of Notification No.25/2012 (S.T.) as amended and evidence produced by the assessee.Analysis: The Tribunal examined whether Revenue could sustain a demand solely by relying on differential figures in third party/Form 26AS data without establishing that the entire differential constituted consideration for taxable services and without enquiring into applicable exemptions or abatements. The Tribunal considered the exemption scheme under Entry No.18 of Notification No.25/2012 (S.T.) dated 20.06.2012 as substituted/amended by Notification No.6/2014 ST dated 11.07.2014, and the effect of the limitation/extension provisions under Section 73 of the Finance Act, 1994 as extended by government notification. The Tribunal reviewed the material produced on remand: detailed chart of receipts, customer entry register, and invoices showing that substantial receipts related to room tariff below Rs.1,000 per day and that Service Tax was paid where room charges exceeded Rs.1,000 per day due to extra/amenity charges. The Tribunal found Revenue had not examined reasons for the difference in statements nor established that the differential amount was wholly consideration for taxable services, and therefore reliance on Form 26AS alone was insufficient to sustain the demand.Conclusion: The Service Tax demand of Rs.1,29,174/ and the penalties imposed under Section 78 and Section 77(1)(c) of the Finance Act, 1994 are set aside; the appeal is allowed in favour of the assessee and relief granted consequentially as per law.