Service Tax Cannot Be Demanded Without Verifying RCM Payment by Recipient: CESTAT Remands [Read Order]

The Mumbai Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that service tax cannot be demanded without verifying whether the liability has already been discharged by the service recipient under the Reverse Charge Mechanism (RCM).

Varun Transport, the appellant, is engaged in providing services such as Clearing and Forwarding Agent services, Business Auxiliary Services, and Goods Transport Agency (GTA) services. During scrutiny of TDS/ITR data for the year 2014–15, the department found a difference of Rs. 60,21,482 between income shown in ITR and value declared in Service Tax returns.

Based on this difference, a show cause notice was issued demanding service tax. The adjudicating authority confirmed a demand of Rs. 7,44,255 along with interest and penalties. On appeal, the Commissioner (Appeals) upheld the demand and rejected the appeal. Aggrieved by this order, the appellant approached the CESTAT.

The appellant’s counsel argued that the difference amount relates to GTA services provided to Ambuja Cements Ltd and under the Reverse Charge Mechanism, the service recipient is liable to pay service tax. It was also argued that a certificate from the service recipient confirming payment of tax was submitted but it was not properly considered.

The revenue counsel argued that the appellant failed to produce proper documentary evidence to show that the service recipient had discharged the tax liability. It was also argued that the earlier certificate did not contain sufficient details or breakup to verify the claim.

The single-member bench comprising S.K. Mohanty (Judicial Member) considered the submissions and observed that a fresh certificate was produced before the Tribunal stating that M/s Ambuja Cements Ltd. had discharged service tax liability of Rs. 60,21,402 under reverse charge.

The tribunal observed that such certificate was not examined by the lower authorities and requires proper verification. The tribunal pointed out that the matter involves factual verification which should be done by the original authority.

In view of these findings, the tribunal set aside the impugned order and remanded the matter back to the original authority for fresh adjudication after verification and after giving opportunity of hearing to the appellant. The appeal was allowed by way of remand.

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