Service tax valuation must follow actual records, not trial balance differences alone, when determining taxable turnover.

Service tax demand cannot be sustained merely by comparing the trial balance with ST-3 returns when the sub-ledger records and the applicable valuation method show a different taxable base. The demand here was built on progressive credits and opening debtors in the trial balance, without accounting for closing balances or extracting actual revenue from the underlying records. That approach was inconsistent with Section 67(1) of the Finance Act, 1994, the Service Tax (Determination of Value) Rules, 2006, and the Point of Taxation Rules, 2011. In the absence of corroborative evidence that the entire trial balance difference represented taxable turnover, the demand was set aside.

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Issues: Whether service tax demand could be sustained solely on the basis of the difference between the trial balance and the ST-3 returns, ignoring the sub-ledger records and the correct method of valuation under the service tax law.

Analysis: The demand was based on figures drawn from the trial balance, including progressive credits and opening debtors, without accounting for the closing balance and without deriving the actual revenue or taxable value from the underlying records. The sub-ledger accounts maintained by the assessee contained the service-wise and transaction-wise particulars, and the trial balance only reflected closing balances for accounting purposes. The valuation adopted by the department was held to be inconsistent with Section 67(1) of the Finance Act, 1994, the Service Tax (Determination of Value) Rules, 2006, and the applicable Point of Taxation Rules, 2011, and no corroborative basis was shown for treating the entire trial balance difference as taxable turnover.

Conclusion: The service tax demand based solely on the trial balance was held unsustainable and was set aside, resulting in relief to the assessee.

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