Service Tax Demand Based on Photocopy of Bill Unsustainable when Marriage Palace’s Receipts Below Exemption Limit: CESTAT [Read Order]

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) ruled that a service tax demand cannot be sustained when based only on a photocopy of a bill, particularly when the assessee’s receipts were below the exemption limit.

Payal Marriage Palace, located in Alwar, Rajasthan, provided “Mandap Keeper” services. Based on departmental information, officers recovered a photocopy of Bill No. 37 dated October 20, 2011, showing Rs. 9,00,000 allegedly billed to one Mr. Iqbal Singh.

The department claimed that the appellant had not obtained registration or paid service tax between 2011–12 and 2014–15. A show cause notice demanded Rs. 7,46,482 with interest and penalties. The adjudicating authority confirmed the demand, which was later upheld by the Commissioner (Appeals).

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The appellant’s counsel argued that the demand was based on mere assumptions without proof of actual payment. He submitted that the photocopied bill was forged, the original was never recovered, and an FIR had been filed against Mr. Iqbal Singh.

They further argued that the appellant’s annual receipts were always below Rs. 10 lakh, making them exempt under Notification No. 33/2012-ST, and that the show cause notice was time-barred.

The revenue counsel argued that the appellant provided taxable services without registration and that the Rs. 9,00,000 bill was sufficient evidence to sustain the demand.

The tribunal, presided by Dr. Rachna Gupta (Judicial Member), observed that the entire case rested on an unverified photocopy with no evidence of payment. It observed that the appellant’s turnover during the relevant years was below Rs. 10 lakh, qualifying for exemption.

The tribunal explained that even if the full Rs. 9,00,000 were assumed to be received, the taxable value would remain below the limit after applying 70% abatement under Notification No. 26/2012-ST.

The tribunal pointed out that tax cannot be demanded on presumptions or unsupported documents. It explained that denying the appellant the right to cross-examine Mr. Iqbal Singh violated natural justice and Section 9D of the Central Excise Act. It also observed that the extended limitation period was wrongly invoked since no suppression or intent to evade tax was proved.

The tribunal set aside the impugned order and allowed the appeal, holding that the service tax demand, interest, and penalties were unsustainable as the receipts remained below the exemption limit.

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