The Kolkata Bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) has held that service tax demand based on Form 26 AS from the Income Tax Department without Investigation is Invalid.
M/s. Piyush Sharma, the appellant has undertaken and/or rendered services to telecommunication companies viz. Tata Teleservices Ltd., ATC Telecom Pvt.Ltd., ATC Infrastructure Services Pvt. Ltd. and Idea Cellular Infrastructure Ltd. about erection, commissioning and installation, completion fitting-out, repair, maintenance services to telecommunication towers of those companies, which also includes execution of Civil Construction Work.
Based on the information received from the Income Tax Department in the form of Form-26AS, it was found that the appellant has received an amount of Rs.1,19,67,288/- during the period from 2012-13 to 201617 on which TDS was deducted by the service recipient, therefore, show cause notice was issued to the appellant for demanding service tax from the appellant.
Another demand was raised on 11.02.2020 for the period April 2017 to June 2017 based on the Best Judgement Method. The appellant contested the show cause notice, but the demand proposed in the show cause notice was confirmed against the appellant.
The appellant submitted that based on the Form-26AS figure, the demand cannot be raised against the appellant. Further submitted that the appellant received contractual payments on the execution of ‘Works Contract Services’ and the appellant has submitted the copies of work orders, payment particulars, copies of the invoices and Form-26AS. The work order shows that they executed composite work.
The payments were made to the appellant from the service recipient after deducting Works Contract Tax instead of Local Sales Tax/VAT. It is also submitted that valuation should have been made in terms of Rule 2A(ii) of the Valuation Rules, 2006 after allowing abatement. It is also submitted that the appellant is eligible for the benefit of Notification No.30/2012-ST dated 20.06.2012 being the appellant is a Proprietorship Firm and tax liability has not been calculated based on Rules and Notifications.
Further argued that the demand is barred by limitation as for the period 2012-13 to 2016-17, the show cause notice has been issued on 23.04.2018, which is beyond the normal period of limitation. The appellant was submitting the returns and paying service tax. Therefore, the differential demand is hypothetically demanded and is contrary to the statutory provisions.
On the other hand, the Department reiterated the findings of the impugned order and submitted that the appellant did not co-operate during the investigation, therefore, the demand has been rightly calculated based on Form-26AS.
A two-member bench of Shri Ashok Jindal, Member(Judicial) and Shri K Anpazhakan, Member(Technical) observed that the show cause notice has been issued to the appellant by invoking an extended period of limitation and some of the demand pertains to beyond five years and in this case, the demand has to be calculated in terms of Valuation Rules, 2006.
The CESTAT held that an extended period of limitation is not invocable and demand based on Form-26AS is not sustainable.
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