The Delhi Bench of Customs Excise & Service Tax Appellate Tribunal (CESTAT) has held that an extended period of limitation is invokable on failure to file st-3 returns with malafide intention to evade tax.
M/s Haiko Logistics India Pvt. Ltd, the appellant is a multi-modal transport operator under MultiModal Goods Transport Act, 1993 and is having a license/registration dated 08.03.2007 issued by the Directorate General of Shipping. The appellant is inter-alia engaged in providing (i) customs clearance services (ii) freight forwarding services and (iii) transportation services.
The clients (importers/exporters) approached the appellant for transportation of their goods from overseas or to overseas and the appellant in turn approaches various shipping lines/airlines and booked cargo space on such ships/planes as per the requirements of the clients on agreed price and transports the goods thereafter.
During the audit, an objection was raised concerning the non-payment of service tax on legal expenses and the difference in figures in ST-3 returns. The said payments were made by the appellant with interest before the issuance of the show cause notice. Thus, the appellant was entitled to the benefit of section 73(3) of the Finance Act. The demand could not, therefore, have been confirmed.
As per the breakup provided by the appellant, the nontaxable income included components like custom duty, overseas ocean & air freight and other charges. Ocean freight and air freight are per se not taxable, though markup is taxable. Further, the markup on air freight is not taxable as the same does not form part of demand in the show cause notice dated 10.10.2014;
A certificate from an independent Chartered Accountant has been submitted by the assessee wherein it has been certified that the entire income and TDS, as reflected in Form 26AS, have been duly considered as part of the audited financial year 2014-15 and that the income reflected in form 26AS forms part of the revenue figure of Profit & Loss account and has duly been recorded in the books of account.
Since demand has been raised based on the differences in the balance sheet and ST-3 (gross income vis-à-vis the income on which service tax is paid in ST-3 returns), the second demand based on the reconciliation of the same with ST-3 Returns filed by the appellant shall not be proper and correct as it would be superfluous and would lead to duplication of demand. Thus, demand is not sustainable.
The department has challenged the dropping of demand contending that they failed to appreciate the importance of Form 26AS in assessing the service tax liability. It has been repeatedly held that no demand can sustain merely based on the difference in figures in ST-3 and Form 26AS as there is a difference in the methodology in preparing both the records and Form No. 26AS is not a statutory document for determining the taxable turnover under the service tax provision.
The Commissioner observed that the infractions came to the knowledge of the department only during scrutiny and under the self-assessment regime the appellant needed to make full disclosure in the ST-3 returns.
“Failing to file the ST-3 returns properly infers malafide intent to evade tax and so the extended period of limitation would be invokable and interest would be recoverable, and penalty imposable under section 78 of the Finance Act. It would not be necessary to examine whether the extended period of limitation could be invoked regarding the first show cause notice dated 10.10.2014.”, the two-member bench comprising Justice Dilip Gupta, President and Ms Hemambika R Priya, Member (Technical) held. The CESTAT dismissed the appeal filed by the department
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
