2025 (3) TMI 381 - AT - Service Tax

Non-payment or short payment of service tax - entire case demand has been raised on the basis of Balance Sheet Profit and Loss Account and ST-3 Returns which were always open to the Department for any query/scrutiny and those are public documents - suppression of facts or not - time limitation - penalties - HELD THAT - The demand of service tax has been raised on the basis of Form-26AS supplied by the Income Tax Department and the information available in the Balance Sheet Profit and Loss Account and ST-3 Returns. The department has not conducted any verification to find out the nature of service rendered. By the appellant and whether the appellant is liable to pay service tax or not. It is observed that the being a registered service provider and filing Service Tax Returns regularly the demand cannot be raised only on the basis of Form-26AS obtained from the Income Tax Department. The department had raised the allegation of non-payment or short payment of service tax related to the period F.Y. 2014-15 and 2015-16 and the Show Cause Notice for the said period was issued on 07.11.2019 i.e. after a period of 30 months from the date of filing the last ST-3 Return for the period October 2015 to March 2016 (ST-3 return filed on 20.06.2016) by which time the normal period of limitation of 30 months had already been over. Even the first query about the difference between the income form sale between ITR and ST-3 was made only on 13.09.2019 and even by that time the normal period of limitation had already been expired. Thus the demand confirmed by invoking the extended period of limitation is not sustainable. As the entire demand in the impugned order falls beyond the normal period of limitation the demands confirmed in the impugned order along with interest is not sustainable and accordingly the same is set aside. Penalties - HELD THAT - The suppression of facts with intention to evade the tax is not established in this case. In these circumstances no penalty is imposable u/s 78 of the Finance Act 1994. Accordingly the penalties imposed on the appellant set aside. The appellant has been registered with the Department and have been filing returns regularly. Thus the penalties imposed in sections 77(1)(c)(ii) and section 77(2) of the Finance Act 1994 are not warranted and hence set aside. Conclusion - i) No verification was conducted by the department to determine the liability of the appellant for service tax. ii) Demands cannot be solely based on Form-26AS when the appellant is a registered service provider regularly filing Service Tax Returns. iii) The demand confirmed beyond the normal limitation period was not sustainable and subsequently are set aside along with interest. iv) There was no established suppression of facts by the appellant to evade tax thus no penalty under Section 78 of the Finance Act 1994 was warranted. The impugned order is set aside - appeal allowed.

Summary

The legal judgment issued by the Appellate Tribunal CESTAT Kolkata involved the following core legal questions:1. Whether the demand for service tax based on Form-26AS supplied by the Income Tax Department is sustainable without conducting a verification of the nature of services rendered by the appellant?2. Whether the demand for service tax for the financial years 2014-15 and 2015-16, issued after the normal period of limitation, is valid?3. Whether the penalties imposed on the appellant under Sections 77 and 78 of the Finance Act, 1994 are justified?The Tribunal analyzed these issues as follows:1. The Tribunal noted that the demand for service tax was solely based on Form-26AS provided by the Income Tax Department and information from the Balance Sheet, Profit and Loss Account, and ST-3 Returns. It was observed that no verification was conducted by the department to determine the liability of the appellant for service tax. The Tribunal cited a precedent in the case of M/s. Piyush Sharma v Commissioner of CGST & CX, Patna-I, highlighting that demands cannot be solely based on Form-26AS when the appellant is a registered service provider regularly filing Service Tax Returns. Consequently, the Tribunal held that the demand based on Form-26AS was unsustainable.2. Regarding the demand for service tax for the financial years 2014-15 and 2015-16, the Tribunal found that the Show Cause Notice was issued after the normal period of limitation had expired. The Tribunal emphasized that the first query regarding the alleged discrepancies was made after the normal limitation period had lapsed. Therefore, the Tribunal concluded that the demand confirmed beyond the normal limitation period was not sustainable, and subsequently set aside the demands along with interest.3. The Tribunal determined that there was no established suppression of facts by the appellant to evade tax, thus holding that no penalty under Section 78 of the Finance Act, 1994 was warranted. The penalties imposed under Sections 77(1)(c)(ii) and 77(2) were also set aside as the appellant had been compliant with filing returns regularly.In conclusion, the Tribunal set aside the impugned order and allowed the appeal filed by the appellant, providing consequential relief as per the law.This judgment establishes the principles that demands cannot be solely based on Form-26AS without verification, demands issued beyond the normal limitation period are not sustainable, and penalties require evidence of intentional evasion.