2025 (4) TMI 247 - AT - Service Tax

Recovery of service tax - subcontractor engaged in civil works for government projects - service tax demand based solely on third-party data specifically Form 26AS - invocation of extended period of limitation - scope of SCN - failure to pay appropriate stamp duty - exemption under N/N. 25/2012-ST - HELD THAT - The issue is no more res-integra. This Tribunal has consistently held that merely based on 26AS statement Service tax cannot be demanded. For service tax demanded to be upheld there has to be evidence of provision of service its nature of service etc. This requirement has not been satisfied by the Department. This Tribunal has in several decisions held that such demands cannot be sustained merely on the basis of Form 26AS. In the case of M/s Gopichenna vs. Commissioner of Central Tax Medchal 2024 (3) TMI 11 - CESTAT HYDERABAD this Tribunal observed 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. Conclusion - Service tax demands cannot be based solely on Form 26AS without evidence of service provision. The impugned order set aside - appeal allowed.

The judgment from the Appellate Tribunal CESTAT Bangalore addresses several key issues related to the demand for service tax from the appellant, a subcontractor engaged in civil works for government projects. The Tribunal's decision revolves around the following core issues:

1. Issues Presented and Considered

The primary legal questions considered were:

Whether the service tax demand based solely on third-party data, specifically Form 26AS, is sustainable.
Whether the invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994, is justified.
Whether the adjudicating authority's findings exceeded the scope of the show cause notice.
Whether the failure to pay appropriate stamp duty invalidates the exemption claimed under Notification No. 25/2012-ST.

2. Issue-Wise Detailed Analysis

Service Tax Demand Based on Form 26AS

Relevant Legal Framework and Precedents: The Tribunal cited multiple precedents establishing that service tax demands cannot be based solely on third-party data like Form 26AS without concrete evidence of service provision. Key cases include Rishu Enterprises, Gopichenna, and Indian Machine Tools and Manufacturing Association.
Court's Interpretation and Reasoning: The Tribunal emphasized that service tax can only be levied when there is clear evidence of service provision, identification of the service provider, recipient, and consideration paid. The reliance on Form 26AS alone does not meet these criteria.
Key Evidence and Findings: The Tribunal found that the Department failed to provide evidence of actual service provision, relying instead on discrepancies between Form 26AS and ST-3 returns.
Application of Law to Facts: The Tribunal applied the principle that service tax demands require concrete evidence of service transactions, which was absent in this case.
Treatment of Competing Arguments: The appellant argued that figures in Form 26AS are already included in public documents like the balance sheet, negating suppression allegations. The Tribunal agreed, noting the lack of evidence for evasion intent.
Conclusions: The Tribunal concluded that the demand based on Form 26AS was unsustainable.

Invocation of Extended Period of Limitation

Relevant Legal Framework and Precedents: The extended period under Section 73(1) of the Finance Act, 1994, requires evidence of suppression, willful misstatement, or fraud.
Court's Interpretation and Reasoning: The Tribunal found no evidence of suppression or intent to evade tax, as the figures were part of public financial documents.
Key Evidence and Findings: The appellant's consistent filing of returns and the inclusion of figures in public documents negated the grounds for invoking the extended period.
Application of Law to Facts: The Tribunal held that the lack of evidence for suppression or fraud rendered the extended period invocation unjustified.
Conclusions: The Tribunal set aside the invocation of the extended period of limitation.

Exceeding the Scope of the Show Cause Notice

Relevant Legal Framework and Precedents: The show cause notice must clearly specify the allegations and basis for demand.
Court's Interpretation and Reasoning: The Tribunal noted that the adjudicating authority's findings went beyond the show cause notice, which lacked specific allegations regarding the nature of services.
Key Evidence and Findings: The absence of specific service allegations in the notice rendered the adjudication findings unsustainable.
Conclusions: The Tribunal held that the adjudication exceeded the notice's scope, warranting setting aside the demand.

Stamp Duty and Exemption Claim

Relevant Legal Framework and Precedents: Notification No. 25/2012-ST provides exemptions subject to specific conditions, including appropriate stamp duty payment.
Court's Interpretation and Reasoning: The Tribunal considered whether the failure to pay appropriate stamp duty invalidated the exemption claim.
Key Evidence and Findings: The Tribunal found that the appellant's role as a subcontractor did not directly involve stamp duty payment, and the exemption notification should be construed beneficially.
Application of Law to Facts: The Tribunal applied the principle that procedural lapses by the main contractor should not deny the exemption to the appellant.
Conclusions: The Tribunal concluded that the exemption claim was valid despite the stamp duty issue.

3. Significant Holdings

The Tribunal reaffirmed that service tax demands cannot be based solely on Form 26AS without evidence of service provision.
The invocation of the extended period of limitation requires evidence of suppression or fraud, which was absent in this case.
The adjudication findings exceeded the scope of the show cause notice, rendering the demand unsustainable.
The exemption under Notification No. 25/2012-ST was upheld despite procedural lapses in stamp duty payment.

The Tribunal set aside the impugned order, allowing the appeal with consequential reliefs, emphasizing the need for concrete evidence in service tax demands and the proper scope of adjudication based on show cause notices.

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