Service tax demand fails where receipts were explained by job work, works contract, and sale of goods records, without Section 73 conditions being met.

Service tax demand based on differences between ST-3 and income-tax returns was held unsustainable where the receipts were explained by records. Job work receipts were supported by financial statements and the tax already stood discharged; amounts treated as works contract services were rendered to government entities without tax being collected; and later-period receipts were backed by invoices for sale of goods carrying VAT and sales tax, taking them outside the service tax net. As the department did not verify the books of account or establish that the receipts were consideration for taxable services, the conditions for invoking Section 73 of the Finance Act, 1994 were not met, and the show cause notice and demand were set aside.

---

---

Issues: Whether the service tax demand could be sustained on receipts shown in the returns, including amounts attributable to job work, works contract services to government entities, and invoices relating to sale of goods.

Analysis: The receipts shown as job work were supported by financial statements and the service tax payable thereon had already been discharged. The amounts described as works contract service were found to have been rendered to government entities, and no service tax had been collected on those transactions. The balance amount for the later period was supported by invoices showing sale of goods with VAT and sales tax charges, bringing those receipts outside the service tax regime. The demand was also founded merely on a difference between ST-3 returns and income-tax returns, without examination of the books of account or a proper verification that the receipts were consideration for taxable services. In that situation, the statutory preconditions for invoking Section 73 of the Finance Act, 1994 were not satisfied.

Conclusion: The show cause notice and the resulting demand were unsustainable, and the service tax demand was set aside in favour of the assessee.

---