Service Tax Notice u/s 73 Unsustainable When Liability already Declared in ST-3 Returns: CESTAT [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal Allahabad Bench while allowing the appeal,quashed the service tax demand under Section 73(1) of the Finance Act, 1994. The Tribunal held that the issuance of show cause notice under Section 73(1) of the Act is unsustainable if the liability is already declared under the ST-3 return.

The Tribunal held that if the liability is self-assessed it should be recovered under Section 73(1B) of the Act without the issuance of SCN. Therefore, the entire proceeding under Section 73(1) of the Act was held to be invalid.

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The appellant K D Merchants Pvt. Ltd who was a registered service tax assessee was selected for investigation based on information provided by third parties and received from the Income TaxDepartment for the 2015-16 financial year.The department had alleged that service tax was not paid to the extent of ₹12.39 lakh as a result a SCN was issued under Section 73(1).

During the process of adjudication it was found that the appellant had already declared the value of services provided and the tax liability in its ST-3 returns.The difference was in the computation due to different rates applicable during that period. Therefore, The Commissioner partly confirmed the SCN to the extent of ₹8.69 lakh along with interest and penalties.

The appellant had contended that since the liability was properly declared in the returns filed in ST-3 forms invocation of Section 73(1) was precluded by Section 73(1B). Further, it was contended that no penalty under Section 77(1)(d) was applicable for delay in filing returns.

The department supported the findings in this case.

The single-member bench consisting P.K.Choudhary (Judicial Member) held that “it is noticed that returns were filed prior to institution of proceedings and value as well as tax liability was properly declared. It is pertinent to note that Section 73(1B), which overrides Section 73(1), specifically requires recovery without serving SCN.”

Further,the Tribunal also held that penalty under Section 77(1)(d) cannot be imposed for delay in filing returns as specific provisions are made for payment of fees under Section 70.

Accordingly,the impugned order was set aside, and the appeal was allowed.

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