Service Tax Demand cannot be based on Statement recorded u/s 132 of Income Tax Act: CESTAT [Read Order]

While quashing a service tax demand, the CESTAT, Ahmedabad bench has held that the demand cannot be solely on the basis of the statement recorded under section 132 of the Income Tax Act, 1961.

The appellants are builders. The Income tax Authorities provided the documents to DGGI containing Excel Work Sheet which was seized during the Income Tax search from the computer. The DGGI initiated proceedings against the appellants for recovery of Service tax of Rs. 13,79,41,328/- in respect of taxable services “Construction of Residential Complex Services / Construction of Commercial Complex Services and Service tax of Rs. 2,98,55,000/- in respect of Work Contract Service supplied during the period 01.04.2014 to 30.06.2017. accordingly demand notice along with penalties were imposed on the appellants and the Directors.

The appellants argued that the department merely relies upon the investigation conducted by the Income Tax authorities and notice issued by the Income tax authorities.

Judicial Member Mr. Ramesh Nair and Technical Member Mr. Raju observed that without conducting the independent enquiry, the demand of Service tax only on the basis of document/ information/ data provided by the Income tax authorities by the revenue legally not sustainable. The documents relied upon loses its evidentiary value in absence of any independent enquiry.

Allowing the contentions of the appellants, the Tribunal held that “We agree with the argument of Ld. Counsel that the above provision explicitly indicates that the evidentiary value of the statement recorded under the Section 132 of the Income tax Act is restricted and limited to the provisions of the Income tax and the same cannot be used or relied upon for any other purpose.”

“We also find that in the present case the Revenue has raised the Service tax demand merely on the ground of investigation conducted by the Income Tax Authorities. We find that demand cannot be raised merely on the basis of assessment made by the Income Tax Authorities.,” the Tribunal said.

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