Extended Limitation Cannot Be Invoked Based on Discrepancies b/w ST-3 returns and Form 26AS Data Mismatch Alone: CESTAT [Read Order]
The Tribunal held that service tax demand based solely on Form 26AS discrepancies cannot be sustained when returns were regularly filed, thereby setting aside both the tax and penalties.
The Customs, Excise and Service Tax Appellate Tribunal, Allahabad (CESTAT) held that a service tax demand raised solely on the basis of discrepancies between ST-3 returns and Form 26AS data cannot justify invoking the extended period of limitation when the assessee has regularly filed returns and no evidence of suppression or intent to evade tax is established.
M/s Uttarakhand Tent and Light House, the Appellant, is registered with the Service Tax Department and provides event-related services. The case arose when third-party data from the Income Tax Department indicated that for the Financial Year 2016-17, the Appellant’s gross receipts were ₹13,35,550 as reflected in Form 26AS, while the Appellant had declared ₹9,79,616 in its ST-3 returns.
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This difference of ₹3,55,934 led to the issuance of a Show Cause Notice proposing a demand of ₹53,390 under Section 73 of the Finance Act, 1994 read with Section 174 of the Central Goods and Services Tax Act, 2017, along with interest and penalties under Section 77 and Section 78 of the Finance Act, 1994.
The Adjudicating Authority confirmed the demand and imposed penalties through the Order-in-Original. The Commissioner (Appeals), Noida, upheld the order. Aggrieved, the Appellant approached the Tribunal.
The Appellant, represented by CA Kapil Vaish, argued that the service tax liability had already been correctly discharged. It was submitted that a demand cannot be raised merely on the basis of Form 26AS or TDS statements, which may contain reimbursements or non-taxable components. The disputed amount of ₹3,55,934 was stated to be reimbursement of labour charges, duly reflected on both the credit and debit sides of the Appellant’s Profit & Loss Account. Further argued that the extended period of limitation was wrongly invoked since the Appellant had been regularly filing ST-3 returns and had disclosed all relevant information.
The matter was decided by P.K. Choudhary, Member Judicial, who noted that the Appellant had been regularly filing ST-3 returns and that the Profit & Loss Account for the relevant year clearly showed the allegedly differential amount of ₹3,55,934 on both the credit and debit sides as labour charges. The Tribunal held that such entries did not justify an adverse inference.
The Tribunal further observed that the entire demand was based solely on third-party Form 26AS data without any independent verification of alleged suppression. The Bench relied extensively on the decision of the Division Bench of the Tribunal in G.D. Goenka Pvt. Ltd. (Final Order No. 51088/2023), which clarified the principles governing invocation of the extended period of limitation under Section 73 of the Finance Act, 1994.
Referring to the Supreme Court’s decision in Pushpam Pharmaceuticals Co. v. CCE (1995), the Tribunal reiterated that for extended limitation to apply, there must be evidence of fraud, collusion or violation of the Act with intent. Mere mismatch in data or incorrect self-assessment does not constitute suppression.
As no evidence of intent to evade tax was found, the Tribunal concluded that the extended period of limitation was wrongly invoked. Consequently, the demand of ₹53,390 and the penalties imposed under Section 77 and Section 78 were set aside in entirety.
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