Suppression cannot be Alleged by Department for Income Reconciliation of Books and ST 3 Returns: CESTAT quashes Service Tax Demand [Read Order]

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed the service tax demand and observed that the suppression cannot be alleged by the department for income reconciliation of books and ST 3 returns.

The appellant in the present matter is M/s. Bimal Auto Agency. Based on the investigation undertaken by the Directorate General of Goods and Services Tax Intelligence (DGGI) wing of the department into the business operations of the appellant, it was issued with a Demand cum Show cause notice alleging non/short payment of service tax on incentives/discounts received from Maruti Suzuki India Ltd (MSIL) on various promotional schemes implemented for promoting the sales of Maruti vehicles.

It was also alleged by the department that there was a short declaration of taxable value in the ST-3 return in comparison to the books of accounts for the impugned period.

MSIL provides compensation to the Appellant on account of rate difference when a vehicle is sold by the Appellant to a customer at a lower price due to a reduction in the recommended sale price of MSIL after the purchase of the said vehicle by the Appellant from MSIL. These activities cannot be stated to be any service provided by the Appellant to MSIL.

It was also submitted by the appellant that this service tax audit was conducted for the period from April 2014 to September 2016 by the Assistant Commissioner (Audit), in January 2017 and such income reconciliation was satisfactorily explained to the department and thus again issuing a show cause notice for such difference by invoking extended period of limitation cannot be maintained.

A Two-Member Bench of the Tribunal comprising P.K Choudhary, Judicial Member and K Anpazhakan, Technical Member observed that “Since there had been service tax audit conducted prior to the DGGI investigation covering the period under dispute, we are of the considered view that suppression cannot be alleged by the department for income reconciliation of books and ST 3 returns as no such allegation was raised during department audit. we are of the view that the entire demand of service tax has to go.”

To Read the full text of the Order CLICK HERE

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