Non-Filing of Nil Service Tax Returns: CESTAT quashes Penalty [Read Order]

The Allahabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has ruled that no penalty can be imposed for failing to file a NIL return.

Presided over by Judicial Member P.K. Choudhary, the bench clarified that filing a return is not mandatory when the service tax liability is NIL. Consequently, imposing a penalty on the appellant, who was not providing taxable services, was deemed unjustified.

The appellant, a service provider engaged in "Works Contract Service" (Erection, Commissioning, and Installation of boilers, ESPs, etc.), was registered as a service tax assessee during the pre-GST regime. While the appellant had paid service tax on services rendered in the past, an investigation based on third-party information from the Income Tax Department revealed that the appellant had received ₹57,68,440 in 2014-15 but had not paid service tax for that period.

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Based on this information, the Department issued a Show Cause Notice (SCN), demanding service tax on the declared amount, treating it as the value of taxable services rendered during 2014-15. The demand was accompanied by interest and penalties.

The Assistant Commissioner, CGST, adjudicated the SCN and confirmed the service tax demand with interest and penalties. Dissatisfied with the ruling, the appellant appealed before the Commissioner (Appeals), CGST, Meerut, arguing that the entire amount declared in the Income Tax return for 2014-15 had been treated as taxable value without proper investigation. The appellant further asserted that a portion of the declared amount represented the sale of goods, which is not subject to service tax.

Although the Commissioner (Appeals) partially modified the demand, reducing the late fees, the appellant sought further relief from the tribunal.

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Upon review, the tribunal bench of Judicial Member P K Choudhary concluded that the penalty imposed for failing to file a NIL return was unwarranted, as the appellant was not liable for service tax during the period in question.

To Read the full text of the Order CLICK HERE

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