Tax demand for wrong mention of Notification No. in ST3 RETURN

[MAHESH M]

A Service provider filed ST–3 Returns by wrongly including Negative list item-sale of goods turnover of ₹ 9.5 crores to the taxable service and claimed exemption by giving Notification No.7 of 2015 .

On ₹ 1.5 crores man power supply also, the assessee has claimed 100% abatement in ST-3 Returns by giving notification No.30/2012 item No.10 instead of Sl No.8. The mistakes were pointed out by the AG AUDIT PARTY. AC has issued show cause Notice with demand of around ₹ 1.8 crores saying that he is not entitled to the exemptions as mentioned in ST-3 RETURNS in respect of the services provided U/s Section 65(39a) and Section 65(64) – Erection, commissioning and Maintenance or Repair Service to Mobile companies

It is only disclosure mistake - the Sales Turnover suffered VAT Tax and the claim of 100% abatement on man power supply is also correct except giving wrong S.No.10 instead S.No.8 in ST3 Return.

Are there any case laws supporting the above facts where the department cannot levy service tax just for claiming exemptions/ abatements under wrong notification number in returns when the assessee can prove his claims with documentary evidence?

Please give your valuable advice with case laws, if any, in satisfying the A.C that the sales already suffered VAT and claim of abatement is also correct except giving wrong exemption notification No in ST-3 Returns and there cannot be service tax demand just for disclosure mistakes.

[KASTURI SETHI]

Undoubtedly, demand cannot be raised on the ground of procedural lapse, especially, when no evasion has taken place and hence no revenue loss has been caused to the Govt.SCN cannot be issued on mere mention of wrong exemption notification.It appears that such SCN will not be sustainable in the eyes of service Tax law. You have mentioned about VAT and Notification No.7/15-ST. I want more information.

1. Whether Service Provider is non- body corporate ?

2. Whether service receiver is body corporate ? If so, entire liability is cast upon service receiver.

2. What are services involved ? (other than manpower supply)

3. How VAT is implicated, if it is service only ?

Case laws are available but can be posted only after submission of complete and correct information. Pl. post here.

[Venkataprasad Pasupuleti]

Certainly, the demand cannot be raised for mere wrong mention of the notification number. Submit the Vat returns, invoice copies etc., to prove your facts and case laws holding the mere procedure lapse would not disentitles the exemption benefit can be cited.

[KASTURI SETHI]

From the contents of query, It appears to be a bona fide mistake and hence I term it as lame SCN.

[akhilesh tumram]

The service code for Maintenance and repair services of commercial and industrial machinery is 9987171 and the prescribed rate of GST is 18% (CGST @ 9% of the taxable value, SGST @ 9% of the taxable value) or IGST @ 18% of the taxable value.

Degreaser

[DR.MARIAPPAN GOVINDARAJAN]

I endorse the views of Shri Sethi.

[Ganeshan Kalyani]

Procedure lapse should not be penalized. However, it is the most difficult job to prove that there was no intention to evade tax. Most of the notices from department has the sentence stating that the taxpayer has intention to evade payment of tax and had this notice is not being issued there would be revenue loss to the govt.

Taxpayer need to prove that there was no intention behind inadvertently mentionin incorrect notification number.

AI Summary

Procedural lapse in exemption notification entry cannot alone justify a service tax demand if documentary proof shows entitlement. A clerical misstatement of an exemption or abatement notification number in a service tax return, standing alone, does not create taxable liability where documentary evidence shows the transactions were non-taxable or legitimately entitled to abatement; the department must prove tax evasion or revenue loss, and absent such proof a show cause notice based solely on incorrect citation of a notification number is unsustainable.