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2017 (12) TMI 966 - AT - Service TaxNon-payment of service tax - best judgment assessment - details accounts not maintained by appellant - invocation of Section 72 of FA, 1994 - Held that - the appellants categorically asserted that they did not provide any other service other than those, the details of which have been submitted to the lower authorities. The Revenue also could not point out excess receipt on these contracts or the taxable service which gave them the consideration escaping the tax. In the absence of specific allegation with reference to the nature of service or the service recipient it is not tenable to hold an income of the appellant even if it is admitted to be an actual income, as consideration for a taxable service. The appellants did file returns under Section 70 and also made available all the contracts on which service tax liability will arise for them. As such, application of Section 72 cannot be extended based solely on the income tax return without identifying the specific taxable service or service recipient. Demand not sustainable - appeal allowed - decided in favor of appellant.
Issues Involved:
Service tax liability based on income tax returns under Section 44AD of Income Tax Act, 1961. Detailed Analysis: Issue 1: Service Tax Demand Calculation The case involved a dispute regarding the service tax liability of the appellant based on the consideration received by them for construction activities and management services. The Revenue contended that the appellants were not paying service tax on the full taxable consideration received. The Original Authority dropped the demand for the period beyond 5 years and allowed deductions, resulting in a confirmed demand of ?16,14,334. On appeal, the Commissioner further reduced the demand amount to ?11,37,155 by allowing certain claims related to repair services and gardening activities. Issue 2: Contesting Tax Amounts The appellant contested a portion of the confirmed tax amount, specifically ?71,271 and ?39,084, while disputing the service tax demand of ?10,26,800 attributable to a taxable income of ?90,09,321. The appellant argued that the service tax liability should be based on identifiable taxable services provided, not on the inflated income shown in the income tax returns under Section 44AD of the Income Tax Act, 1961. Issue 3: Application of Section 72 of Finance Act, 1994 The lower authorities invoked Section 72 of the Finance Act, 1994, based on the appellant's use of Section 44AD for filing income tax returns. The appellant argued that the income tax return cannot solely form the basis for confirming service tax liability and that they provided services only to the Government Department, supported by contracts and documents. Issue 4: Identification of Taxable Services The Tribunal noted that the appellant did not maintain detailed accounts for all transactions and relied on Section 44AD for filing returns. The Revenue failed to identify excess receipts or specific taxable services escaping tax. The Tribunal emphasized that to impose service tax liability, the nature of taxable services and recipients must be identified, which was done for the contracts examined by the lower authorities. Conclusion The Tribunal found the service tax demand unsustainable as it was based solely on the income tax return without identifying specific taxable services or recipients. The application of Section 72 was deemed inappropriate in this case, and the appeal was allowed, setting aside the impugned order.
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