Service Tax Demand Invalid Without Independent Verification of Transactions: CESTAT Quashes ₹56.72 Lakh Demand Based Solely on Income Tax Data [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) Kolkata Bench has quashed a Service Tax Demand of ₹56.72 lakh, on the ground that a Demand raised merely on the basis of Income Tax data without any independent verification of transactions is not sustainable in law.

The appellant Jeetu Madnani is a service provider in the field of promotion and marketing services against whom two Show Cause Notices were issued covering a period from October 2014 to June 2017.

Further, the Department computed the Demand by comparing the figures declared in ST-3 returns and Form 26AS and Income Tax Returns. Suppression of taxable value is alleged by the Department and extended limitation period is invoked under Section 73 of the Finance Act, 1994.

The demand along with interest and penalties was confirmed by the adjudicating authority, which was further upheld by the Commissioner (Appeals).

However, it was contended by the appellant that the returns for ST-3 were regularly filed and the books of accounts were properly maintained which were available with the Department. Further, the departmental audit for the relevant period was not objected to on the issue of the discrepancies.

Further,It was contended that no separate inquiry was made to ascertain the nature of the transactions, but the demand was made on the basis of the comparison of the data and the issuance of the second Show Cause Notice on the basis of the extended limitation on the same facts was legally not permissible.

The Tribunal was of the view that no such independent verification was done to determine the taxability of the differential income. It once again clarified that no such reliance on Income Tax data or Form 26AS, in the absence of corroborative evidence, can justify raising a Service Tax demand.

The Bench comprising K. Anpazhakan (Technical Member) pointed out that all facts were already within the knowledge of the Department, and they had already been considered at the time of audit thereby ruling out the question of suppression of information. Therefore, invocation of extended limitation was also found to be not valid.

Therefore, the impugned orders were set aside and the appeals were allowed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates