2022 (3) TMI 50 - AT - Service Tax

Demand of differential tax - CA certified Reconciliation of Form 26AS and ST-3 Returns clearly shows that some service recipients deducted TDS on the entire rent/commission plus the Service Tax component causing inflation in Form 26AS as compared to ST3 Returns - extended period of limitation - revenue neutrality - HELD THAT - There are force in the contention of the Ld Counsel of the appellant that CA Certified Reconciliation of ST-3 Returns and Form 26AS clearly shows that inflated figure in Form 26AS is because some Service Recipients deducted TDS not only on the rent/commission but also on the Service Tax component. The Service Recipients also confirmed the same. There are force in the contention of the appellant that part of the service tax being demanded by the Department on RCM basis cannot be sustained since Service tax was already collected by Service Providers as seen from invoices and Reconciliation Certificate. Extended period of limitation - Service tax demand for the period April 2014-September 2014 is beyond the extended period of 5 years - revenue neutrality - HELD THAT - The Department has done audit of the appellant for February, 2014-15 as per Detailed Manual Scrutiny Report dated 15.12.2017, which includes checking of Form 26AS as clearly mentioned in Para 5.2 of CBEC Circular No 185/4/2015-ST dated 30.6.2015 vide F.No 137/314/2012 and therefore no suppression can be alleged for this period - proviso to Section 73(1) has not been invoked in the operative part of the SCN and therefore extended period cannot be invoked as held in M/S SATISH KUMAR CO. VERSUS COMMISSIONER OF CENTRAL EXCISE, NAGPUR 2018 (5) TMI 611 - CESTAT MUMBAI - thus invoking extended period cannot be sustained for part of tax demand raised on RCM basis by virtue of it being a revenue neutral situation since the appellant is eligible for credit if it had done tax payment. The entire demand fails on merits as well as on limitation - there can be no imposition of Service tax, interest and penalty on the appellant - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against Service Tax demand upheld by Adjudicating Authority and Commissioner (Appeals) - Appellant providing taxable service of renting immovable property - Mismatch in income reflected in Form 26AS and ST-3 Returns - Show Cause Notice issued for demand of Service Tax, interest, and penalty - Appellant's arguments on TDS deduction by service recipients, RCM basis tax demand, and limitation period invoked - Department's justifications and findings - Tribunal's analysis on merits and limitation period - Decision to set aside the impugned order and allow the appeal.

Analysis:

1. Service Tax Demand Upheld:
The appeal was filed against the Order-in-Appeal upholding the Service Tax demand by the Adjudicating Authority. The appellant, engaged in renting immovable property, faced a mismatch in income as per Form 26AS and ST-3 Returns. The Department issued a Show Cause Notice for the demand of Service Tax, interest, and penalty, covering a specific period.

2. Appellant's Arguments:
The appellant contended that the inflated figures in Form 26AS were due to TDS deduction by service recipients on rent, commission, and Service Tax component. Additionally, the appellant argued against the tax demand on the Reverse Charge Mechanism (RCM) basis, highlighting that tax had already been collected and paid by the service providers.

3. Limitation Period and Legal Precedents:
The appellant raised the issue of the limitation period, arguing that the extended period invoked was beyond the scope of the Show Cause Notice. Citing legal precedents, the appellant emphasized that the Department's reliance on Form 26AS figures for determining Service Tax liability was not valid without evidence of taxable services.

4. Tribunal's Analysis and Decision:
After considering the arguments and evidence presented, the Tribunal found merit in the appellant's contentions regarding TDS deductions and RCM tax demands. The Tribunal also noted that the Service Tax demand for certain periods exceeded the extended limitation period of 5 years.

5. Conclusion and Decision:
Based on the analysis, the Tribunal concluded that the entire demand failed on both merits and the limitation period. Consequently, the impugned order upholding the Service Tax demand, interest, and penalty was set aside, and the appeal was allowed with consequential benefits to the appellant.

This detailed analysis highlights the legal intricacies involved in the judgment, covering the issues of Service Tax demand, TDS deductions, RCM tax basis, limitation period, and the Tribunal's decision to set aside the impugned order and allow the appeal.