Third party data verification 26AS Vs. ST-3 return for the period 2012-13 no scn department writes letter to deposit differential amount of taxable value on the basis of 26AS

[Ahesanali Khan]

Now Service Tax Department is pressing hard for payment of service tax value shown in 26AS under 194C for the period of 2012-13. it is a mis-match of ST-3 return differential amount. 5 years time limit for demand has already been expired. should assessee pay that 2012-13 amount after 5 years though the amount is liability to pay to Govt. exchequer. under third party data verification under section 15A & B asking documents for verification. how they will confirm taxable amount. case seems heat by limitation of time. please guide.

[DR.MARIAPPAN GOVINDARAJAN]

Definitely limitation will hit. If the amount involved is high you may file writ petition before the High Court.

[KASTURI SETHI]

Dear Querist,

Examine your case on merits as well as time limitation factors .

(i) It is not necessary that value of taxable service should match with with the value shown in Form 26 AS of Income Tax. Such like investigation is going on through out India. All such investigations cannot yield to short levy or non levy of Service Tax. It is a routine exercise by the department. Both Acts are entirely different. As you know, Income Tax is a direct tax and Service Tax is indirect tax. Value in Form 26 A  and Profit and Loss Account should be examined viz-a-viz value in ST-3 returns. Every amount mentioned in Form 26 A may not be subject to Service Tax.

(ii) Be careful regarding computing the period of five years from the relevant date. Definition of "relevant date" has been given under Section 73 (6) of the Finance Act, 1994.

(iii) Time barred demand cannot be recovered. However, if you have collected ST from the Service Receivers, the department can recover from you even without issuing demand SCN. Section 87 of the Finance Act empowers to recover such amount. None can retain Govt. exchequer with oneself.

(iv) I have seen some cases where the assessees become the victims of the terms and conditions mentioned in the agreement with Service Receiver. The wording like "Prices are inclusive of all taxes/Service Tax" indicate ST has been collected though not specifically mentioned in the invoices.

So one has to be careful while handling such cases.

[Ganeshan Kalyani]

I fully agree with Sri Kasturi Sir's view. It is common questions raised by the department. But the actual tax payable has be check by reveiwing the accounts. One need to comply with the notice however.

AI Summary

Limitation on tax demands may bar service tax recovery, but recovery possible if tax was collected from recipients. Reconciliation shows a mismatch between Form 26AS entries and ST 3 returns for 2012-13 and the department seeks the differential. The operative legal point is whether the demand is time barred: limitation likely applies subject to the statutory definition of the relevant date. Practical steps include reconciling accounts because not all 26AS amounts are taxable, responding to verification notices, reviewing contractual terms about tax inclusivity, and noting that tax actually collected from recipients may still be recoverable.