Reliance on Form 26AS Insufficient & Notice Time-Barred: CESTAT sets aside Service Tax Demand [Read Order]

The New Delhi bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) allowed an appeal, setting aside a service tax demand by holding that reliance on Form 26AS was insufficient to prove the levy and that the notice was barred by limitation.

Manoj Kumar Anand filed an appeal against an order that upheld a service tax demand of Rs. 5,37,392/- for the period from April 2015 to June 2017. The department had initiated proceedings based on income tax details, alleging the appellant had received commission on which service tax was payable.

The core issues were whether a service tax demand can be confirmed solely based on information from Form 26AS without corroborative evidence, and whether the extended period of limitation was validly invoked.

The appellant's counsel argued that the department had produced no evidence to show the income was commission. He pointed out that Form 26AS itself did not show any TDS deduction under the relevant section. He contended that the income was for providing pandal and catering services, which were exempt under the abatement threshold, and therefore, he had a bona fide belief that no tax was due, making the notice time-barred.

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The Department's Representative argued that the appellant was non-cooperative and had not filed any returns or registered for service tax, which justified the invocation of the extended period to prevent tax evasion.

The two member bench of Dr. Rachna Gupta (Judicial Member), held that the burden of proof lies on the Revenue to establish tax liability, especially in cases of ambiguity. Relying on Supreme Court decisions in Jai Prakash Industries Ltd.and Dilip Kumar & Company the tribunal found that the department had failed to discharge this burden. It noted that Form 26AS did not support the department's allegation of commission income, as no TDS was reflected. The tribunal also accepted the appellant's claim of providing catering services, which would be eligible for abatement.

On the issue of limitation, the tribunal found no evidence of suppression or misstatement. Citing the Supreme Court's decisions in Chemphar Drugs & Liniments and Gopal Zarda Udyog it held that the extended period could not be invoked based on mere inaction, especially when the appellant had a reasonable belief of no liability due to the exemption limit.

The tribunal found the demand to be unsustainable and time-barred. The impugned order was set aside, and the appeal was allowed.

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