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Issues: (i) Whether the demand of service tax could be sustained by invoking the extended period of limitation on the allegation of suppression, when the assessee had been filing ST-3 returns and the department had not recorded a specific finding on limitation; (ii) Whether a demand built substantially on the basis of difference between ST-3 returns and Form 26AS / income-tax data, without independent corroboration of taxable service and consideration, could be sustained, along with the consequential interest and penalties.
Issue (i): Whether the demand of service tax could be sustained by invoking the extended period of limitation on the allegation of suppression, when the assessee had been filing ST-3 returns and the department had not recorded a specific finding on limitation.
Analysis: The record showed that the assessee was registered and regularly filing ST-3 returns, and that this fact was accepted in the adjudication chain. The impugned order did not return any independent finding on limitation, while the show-cause notice and earlier order proceeded on alleged non-filing or suppression. In the absence of material showing a positive act of concealment or deliberate suppression with intent to evade tax, the foundation for the extended period was not made out.
Conclusion: The invocation of the extended period of limitation was held to be bad in law and unsustainable against the assessee.
Issue (ii): Whether a demand built substantially on the basis of difference between ST-3 returns and Form 26AS / income-tax data, without independent corroboration of taxable service and consideration, could be sustained, along with the consequential interest and penalties.
Analysis: The demand was founded on third-party financial data, while the assessee's ST-3 filings and self-assessed tax payments were on record. The department did not establish by independent investigation that the entire differential amount represented consideration for taxable service, nor did it dislodge the assessee's explanation by admissible evidence. Since the demand itself failed on this primary footing, the consequential liabilities of interest and penalties could not survive.
Conclusion: The demand of service tax, interest, and penalties was set aside.
Final Conclusion: The appeal succeeded and the impugned demand and all consequential recoveries were annulled, granting relief to the assessee.
Ratio Decidendi: A service tax demand cannot be sustained merely on the basis of mismatch between ST-3 returns and income-tax data without independent proof that the differential amount represents taxable consideration, and the extended period cannot be invoked absent cogent material of deliberate suppression with intent to evade tax.
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