2024 (12) TMI 355 - AT - Service Tax

Non-payment of service tax by the appellant for the period from April 2015 to March 2016 - Department has initiated action after obtaining the ITR of the appellant and comparing it with the STR - suppression of facts or not - Extended period of limitation - HELD THAT - No investigation into the information received from the ITR is shown to have been attempted. No service rendered by the appellant has been identified in the SCN nor has any document been relied upon in the SCN apart from the figures purportedly taken from ITR. Just because the appellant was registered under the Courier Agency Services , is not conclusive that services have been rendered by him under the said category, without any documentary proof. The basis of calculating the tax demand in the absence of identifying the actual service provided and the tax rate applicable, is a serious lacuna in the SCN and the subsequent order. While the ITR could have triggered an enquiry into the non-payment of Service Tax, if any, by the appellant, it cannot be the basis of determining the value of service rendered during any period of time. Much less under the extended period of time, invoking fraud, suppression etc. without an iota of investigation or proof of evasion of duty. Mere entertaining of suspicion cannot be the basis to put a citizen s right to do business in difficulty and oblige him to pay tax which is improperly demanded. The burden of proof is on revenue to establish the blame worthy conduct of the appellant. It is also a well-accepted norm of judicial discipline that a Bench of lesser quorum / strength should follow the view taken by Bench of larger quorum / strength, in a case whose ratio covers the legal issue involved in the impugned matter. The impugned order merits to be set aside - Appeal disposed off.

Summary

Issues:
- Non-payment of service tax by the appellant for the period from April 2015 to March 2016.
- Validity of show cause notice issued by the department.
- Burden of proof on the revenue to establish taxability.
- Lack of investigation into information received from the Income Tax Return (ITR).
- Applicability of penalty and interest under relevant sections of the Finance Act, 1994.

Analysis:
1. The appellant, engaged in 'Courier Agency Services,' did not file ST-3 returns for the period in question. A show cause notice was issued based on the information obtained from the Income Tax Return, demanding service tax, interest, and penalties. The original authority confirmed the demand, interest, and penalties, which was partially upheld by the Commissioner (Appeals), leading to this appeal.

2. The appellant's advocate argued that the department did not consider the income derived from interest and failed to specify the services rendered in the show cause notice. It was contended that the notice was time-barred and lacked clarity on the services considered for taxation. The burden of proof was emphasized to be on the department, and the advocate cited numerous case laws to support the appeal.

3. The Tribunal found that the department's action was solely based on a comparison between ITR and STR without investigating the actual services provided by the appellant. The lack of identification of services, tax rates, and proper basis for calculating the tax demand were highlighted as serious deficiencies in the show cause notice and subsequent order.

4. It was emphasized that while the ITR could prompt an inquiry, it could not be the sole basis for determining the value of services rendered. The Tribunal stressed that suspicion alone cannot compel a citizen to pay improperly demanded taxes without proper investigation or proof of evasion. The burden of proof rested on the revenue, and the show cause notice was deemed presumptive and faulty.

5. Referring to a similar case, the Tribunal highlighted the necessity of establishing charges based on admissible evidence before issuing a show cause notice. The importance of examining reasons for differences in turnovers before demanding service tax was underscored. The Tribunal dismissed the appeal filed by the revenue and allowed the cross-appeal by the respondent, setting aside the impugned order.

6. In conclusion, the Tribunal ordered the impugned order to be set aside, emphasizing the importance of following precedents in judicial decisions. The appeal was disposed of accordingly, with the order pronounced in open court on the specified date.