CESTAT Sets aside Service Tax demand on Insurance Surveyor, Cites 'No Suppression' [Read Order]
It stated that the Revenue must examine the reasons for the difference and establish that the amount is indeed consideration for services, ruling out presumptions.
The New Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed an appeal, holding that a service tax demand based solely on a discrepancy with Income Tax Form 26AS is not sustainable and that the extended period of limitation was wrongly invoked.
M/s Rajendra Dongle, an insurance surveyor, filed an appeal against an order confirming a service tax demand of ₹2,24,217/- for the financial year 2015-16. The demand was initiated after the department observed a discrepancy between the appellant's 'Nil' service tax return and an income of ₹15,46,331/- reflected in Form 26AS.
The core issue was whether the Revenue could confirm a demand based solely on third-party information (Form 26AS) without establishing that the entire amount was consideration for taxable services, and whether the extended period of limitation was applicable.
The appellant's counsel contended that the demand wrongly included expenses reimbursed as a 'pure agent' and that the SSI threshold exemption was wrongly denied. The primary argument was that the entire demand was premised on Form 26AS, which is an insufficient basis for a demand.
The Department's Representative argued that the appellant failed to prove they were acting as a 'pure agent', pointing to invoices and TDS entries under the head for professional fees (194J) as evidence.
The bench, comprising Dr. Rachna Gupta (Judicial Member) held that service tax is chargeable only on the 'gross amount charged' for the taxable service (surveyor fees) and not on reimbursed expenses incurred as a 'pure agent'. It noted that the lower authorities had passed the order in "sheer ignorance of the documents on record."
Crucially, the tribunal reiterated that a demand cannot be raised merely on the basis of a difference between the ST-3 return and Form 26AS. It stated that the Revenue must examine the reasons for the difference and establish that the amount is indeed consideration for services, ruling out presumptions.
On the limitation aspect, the tribunal found no 'suppression of facts'. The appellant was a registered assessee filing 'Nil' returns and maintaining proper financial records. Relying on the Supreme Court's decision in Pushpam Pharmaceuticals, the tribunal held that suppression must be a deliberate act, and where facts are known to both parties, an omission does not constitute suppression.
Consequently, the extended period of limitation was wrongly invoked, rendering the entire demand time-barred. Accordingly, the CESTAT set aside the demand and allowed the appeal.
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