2019 (3) TMI 1097 - AT - Service Tax

Demand of service tax miscellaneous income - Scrutiny of Balance Sheet - It appeared to Revenue that miscellaneous income shown in the books of account by the appellant for the period 2008-09 to 2009-10 was required to be added to the taxable value - Held that - Revenue could not establish that the said amount collected was for providing any specific service - Just because some income is reflected in the books of account, it cannot be concluded that the said amount was received for providing services. Revenue is required to examine the reasons for which such income was received by the appellant, identify the services for which the said amount was received and examined other aspects such as abatement and exemption and then arrive at a decision as to whether the service tax worked out on the said receipts is liable to be demanded or not. No such exercise was carried out and the show cause notice was issued under presumption that the miscellaneous income was for providing taxable services - SCN not sustainable - appeal allowed.

Summary

Issues involved:
Allegations based on scrutiny of balance sheet, addition of miscellaneous income to taxable value, failure to establish specific service, presumption of taxable services based on income, sustainability of show cause notice.

The judgment by the Appellate Tribunal CESTAT ALLAHABAD involved a case where the Revenue alleged that miscellaneous income shown in the appellant's books of account needed to be added to the taxable value for services related to Air Travel and Air Tour Operator Service. The Revenue's claim was based on scrutiny of the balance sheet, where approximately ?18 lakhs was identified as miscellaneous income for the period 2008-09 to 2009-10. However, upon review, the Tribunal observed that the Revenue failed to establish that the amount collected was specifically for providing any service. Merely because income was reflected in the books did not automatically imply it was received for services. The Tribunal emphasized that Revenue should have examined the purpose of such income, identified the services it related to, considered aspects like abatement and exemption, before determining the liability for service tax on the receipts.

The Tribunal noted that the Revenue did not conduct the necessary examination and issued the show cause notice presuming the miscellaneous income was for taxable services. Consequently, the Tribunal found the show cause notice to be unsustainable and set aside the impugned order, ultimately allowing the appeal. The judgment highlights the importance of establishing a direct link between income and services provided before asserting tax liabilities, emphasizing the need for a thorough examination before making such determinations.