2022 (4) TMI 735 - AT - Service Tax

Levy of Service Tax - Construction service - cash amount deposited in Bank and income disclosed under Income Disclosure Scheme (IDS), 2016 - Circular No. 1053/02/2017-CX dated 10.03.2017 - HELD THAT - The revenue has not come forward with the evidence that the Appellant have generated the disputed income on account of providing taxable service. Therefore in absence of concrete evidence on record, the service tax cannot be demanded on the basis of assumption and presumption.The department has not been able to support their allegation with evidence that the said disclosed income under IDS scheme were collected for providing services of construction Service. There is merit in the contention of the appellant that it is settled principal of law that the burden of proving a fact is on the person who alleges the same but the department did not produce any evidence on record to prove that the disclosed Income under Income Tax Disclosure Scheme, 2016 pertained to construction activity and that the charges of income was generated out of taxable activity without any evidence was not sustainable in the absence of cogent, convincing and tangible evidences. Income tax and service tax are two different/ separate and independent special Act and their provisions operating in two different fields. Therefore by relying the income disclosed in income tax provision, without undertaking any independent investigation under the Service Tax Act, demand of service tax cannot be made. In the case of M/S. RAVI FOODS PVT. LTD. OTHERS VERSUS CCE, HYDERABAD 2010 (12) TMI 290 - CESTAT, BANGALORE , it was held that admission by assessee to Income Tax department as regards undisclosed/suppressed sales turnover cannot be held to be on account of clandestine removal of their final products, in the absence of any other corroborative evidence. The meaning of income has been defined under Section 2(24) of the Income tax Act, 1961 is very wide and it cover all types of Income. Income can also be earned from taxable, non-taxable, exempted activity. The provisions of Income-tax Act and IDS scheme are having specific scope, purpose and intent, as decided by the legislature. Further, under the Income tax, income declared by the assessee cannot be assumed that the said income earned from taxable service only, whereas under the income tax income have wide meaning. In the present matter department‟s allegation that the income disclosed under the IDS scheme is attributable to construction services provided to their clients/ customers is based on the assumption that Appellant have no other activity except construction service. In the present matter Appellant also produced the details of payment received after obtaining Business use (BU) i.e. sales of flats, shop etc. after receipt of the completion certificate. Therefore it cannot be said that the income declared by the Appellant under IDS Scheme is attributable to the taxable service provided by them to their clients. In this case, evidence gathered by the Department is not sufficient to establish even the preponderance of probability. Therefore, the demand on the ground that the income declared under IDS scheme is earned from the taxable service is not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Liability to pay Service Tax on cash deposits and income disclosed under the Income Disclosure Scheme (IDS), 2016.
2. Validity of evidence supporting the Service Tax demand.
3. Burden of proof on the Revenue.
4. Applicability of pre-consultation before issuing the Show Cause Notice.
5. Computation of taxable value and consideration of cum-tax value.

Issue-wise Detailed Analysis:

1. Liability to pay Service Tax on cash deposits and income disclosed under the Income Disclosure Scheme (IDS), 2016:
The primary issue was whether the appellant was liable to pay Service Tax on the cash amount deposited in the bank and income disclosed under the IDS, 2016. The Revenue's case was based on the assumption that the disclosed income was earned from providing taxable construction services. However, the Tribunal found no concrete evidence to support this claim. The Tribunal emphasized that income declared under IDS does not automatically imply it was generated from taxable services, especially when the appellant was involved in multiple business activities, including land sales and sales post-BU permission, which are not taxable under Service Tax law.

2. Validity of evidence supporting the Service Tax demand:
The Tribunal observed that the Revenue's case relied heavily on the statement of Shri Girish Patel, which was retracted, and no corroborative evidence was provided to substantiate that the disclosed income was from taxable services. The Tribunal cited various case laws, including decisions from the Hon'ble Madras High Court and other Tribunal rulings, which consistently held that income declared before Income Tax authorities cannot be considered as evidence for Service Tax demands without independent and concrete evidence.

3. Burden of proof on the Revenue:
The Tribunal reiterated the legal principle that the burden of proving a fact lies on the person who alleges it. In this case, the Revenue failed to provide convincing evidence that the disclosed income under IDS was attributable to taxable services. The Tribunal noted that assumptions and presumptions could not replace concrete evidence, and the Revenue did not meet the burden of proof required to support their allegations.

4. Applicability of pre-consultation before issuing the Show Cause Notice:
The appellant argued that the Show Cause Notice was issued without the mandatory pre-consultation as per Circular No. 1053/02/2017-CX dated 10.03.2017. However, the Tribunal did not delve deeply into this issue, as the primary demand itself was found unsustainable on merits. The Tribunal noted that the demand's invalidity on substantive grounds rendered the procedural argument moot.

5. Computation of taxable value and consideration of cum-tax value:
The appellant contended that the computation of the Service Tax demand based on the gross profit ratio of past financial years was erroneous. The Tribunal agreed that the Revenue's method of estimating gross receipts was flawed and not supported by evidence. The Tribunal also acknowledged the appellant's argument for considering cum-tax value, citing relevant case laws, but ultimately did not need to address this in detail due to the primary finding that the demand itself was unsustainable.

Conclusion:
The Tribunal set aside the impugned order, stating that the Service Tax demand could not be sustained merely on the basis of income declared under IDS without concrete evidence linking it to taxable services. The appeals filed by the appellants were allowed with consequential relief as per law. The judgment emphasized the necessity of independent investigation and concrete evidence in supporting Service Tax demands, distinguishing between the scopes of Income Tax and Service Tax laws.