2024 (3) TMI 11 - AT - Service Tax

Demand of service tax with interest and penalty - demand sought on the basis of the income from sale of service shown in the Balance Sheet and the ITR Returns - HELD THAT - Revenue takes the stand that in the Negative List regime, Department is not obliged to prove the provision of a particular service to demand service tax and further, the Appellants could not explain that the difference satisfactorily. I find that this is not the correct approach; exigibility to service tax depends on the service provider, service rendered, service recipient and the consideration thereof. Unless these four elements have been connected logically, demand of service tax cannot be confirmed merely on the basis of figures reflected in other statutory records. Be it pre or post-Negative List regime, the Department is under obligation to prove that the Appellants have rendered such and such service and to such and such persons and that the consideration was received towards the rendering of such service. Without doing the same, demand merely on the basis of figures does not survive. Tribunal has been continuously holding that such demands are not sustainable. Chandigarh Bench of this Tribunal in the case of M/S INDIAN MACHINE TOOLS MANUFACTURERS ASSOCIATION VERSUS THE COMMISSIONER OF CENTRAL EXCISE, PANCHKULA 2023 (9) TMI 815 - CESTAT CHANDIGARH held it is a settled principle of law that service tax can be levied only when there is a clear identification of service provider, service recipient and consideration paid for the same. In the absence of any such evidence of the service recipient and the service provided, service tax cannot be demanded and confirmed. The Impugned Orders cannot be legally sustained - Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the demand of service tax based on income from sale of service shown in Balance Sheet and ITR Returns, discrepancy between statement 26AS and ITRs/ST3 Returns, and the obligation of the Department to prove the provision of a particular service to demand service tax.

Appeal ST/30412/2023:
The Appellant, engaged in training candidates in movie making, sought exemption under Mega Exemption Notification, claiming a mistake in reflecting cash deposits under 'Sale of service' in ITR. The demand of service tax was confirmed by lower authorities without considering the explanation provided by the Appellant. The Counsel argued that demand cannot be based solely on ITR/26AS statements, citing relevant cases.

Appeal ST/30454/2023:
The Appellant, facing a demand based on statement 26AS, argued that the Department ignored the explanation that the statement included payments received for services rendered in the previous year. The Counsel contended that demand cannot be raised on the basis of differences between figures without proper verification.

The Tribunal examined the cases and records, emphasizing that demand of service tax should be based on logical connection between service provider, recipient, service rendered, and consideration received. It was noted that demands solely on figures from other statutory records are not sustainable. Citing precedents, the Tribunal highlighted the necessity for the Department to prove the rendering of services and consideration received before confirming service tax demands. The Tribunal referred to specific cases to support the view that demands based on differences in figures without proper verification are not legally sustainable.

The judgment concluded by setting aside the Impugned Orders and allowing the Appeals, emphasizing the obligation of the Department to establish the connection between service provider, recipient, service rendered, and consideration received before confirming service tax demands.