CESTAT Sets Aside Service Tax Demand Based on Form 26AS as Recipient Pays Tax Under RCM [Read Order]

The Kolkata Bench of Customs,Excise and Service Tax Appellate Tribunal ( CESTAT ) set aside the Service Tax demand raised solely on the basis of Form 26AS, noting that the service recipient, had already discharged the tax liability under the reverse charge mechanism.

Maninder Singh, appellant-assessee,provided transportation services from April 2016 to June 2017. Based on information from Tata Motors Limited and the Income Tax Department, it was alleged that he received payments for these services but did not pay Service Tax.

A Show Cause Notice was issued, and since the appellant did not submit the required documents, the Department conducted a best judgment assessment. The demand for Service Tax, along with interest and penalties, was confirmed through the impugned order.

Challenging this demand, the appellant filed the present appeal.

The assessee counsel submitted that the Show Cause Notice was based only on Tax Deducted at Source (TDS) details from the Income Tax Department, which could not be the sole basis for demanding Service Tax. He referred to a tribunal decision that supported this view.

He explained that the assessee had provided transportation services to Tata Motors Limited, which had already paid Service Tax under the reverse charge mechanism, as per the applicable notification. Hence, the assessee was not liable to pay the tax.

He also argued that the notice, issued in October 2021 for the period April 2016 to June 2017, was time-barred. Since the assessee was a goods transport agency and there was no suppression of facts, he claimed that extended limitation could not be applied.

The departmental representative supported the findings in the impugned order.

The two member bench comprising Ashok Jindal (Judicial Member) and K.Anpazhakan ( Technical Member) found that the Service Tax demand was raised based only on Form 26AS from the Income Tax Department, showing receipt of payments by the assessee for services during April 2016 to June 2017.

However, the Show Cause Notice was issued in October 2021 without any valid reason to allege suppression of facts. Since the information was already available with the Department in 2016-17, the tribunal held that the extended time limit could not be applied.

It also noted that no proper investigation was done before issuing the demand. The assessee had provided transportation services as a goods transport agency, and Tata Motors Ltd., the service recipient, had already paid the Service Tax under the reverse charge mechanism. A certificate confirming this was submitted.

In view of this, the appellate tribunal held that the demand and penalties were not justified, set aside the impugned order, and allowed the appeal.

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