2023 (11) TMI 473 - AT - Service Tax

Non-payment of service tax - difference in ST-3 returns and income tax return - demand raised without examination of the books of accounts or not - invocation of provisions of sub-section (1) of Section 73 of Finance Act, 1994 - HELD THAT - The said provision of Finance Act empowers Revenue for recovery of service tax which has not been levied or which has not been paid or which has not been short levied or which has not been short paid or which has been erroneously refunded. Therefore, the first step for Revenue is to establish that a specific amount to be demanded through show cause notice by invoking the said provision is service tax either not paid or short paid or not levied or short levied. Therefore, it is essential to establish that the value on which such service tax is calculated is the value under Section 67 and the same is derived from the consideration received by the appellant out of the activity which has to satisfy definition of service under sub-section (44) of Section 65B of Finance Act, 1994. Such type of examination of the facts and arriving at the prima facie view that the appellant had received the consideration by providing service is missing in the show cause notice. The said show cause notice dated 26.06.2020 is not sustainable in law - the impugned order set aside - appeal allowed.

Summary

Issues:
The issues involved in the judgment are the demand of service tax based on difference in ST-3 returns and income tax return without examination of books of accounts, and the sustainability of the show cause notice.

Issue 1: Demand of service tax without examination of books of accounts

The appellant, a professional cricket player registered with Service Tax, was issued a show cause notice for a difference of Rs.1,97,71,881 between income shown in ITR and value of service shown in ST returns for the year 2014-15. The Revenue demanded service tax of Rs.24,43,804, alleging that the difference was due to services rendered by the appellant on which service tax was not paid. The original authority dropped the demand, relying on a ruling by Calcutta High Court. However, the Commissioner (Appeals) set aside the order, holding that the issue was the difference in income shown in tax returns. The appellant contended that the demand was raised without examining the books of accounts and without establishing that the transactions were for provision of services. The Tribunal observed that the show cause notice did not establish that the difference was consideration received for providing services. It held that the demand was not sustainable in law, as the Revenue failed to establish that the value on which service tax was calculated satisfied the definition of service under the Finance Act, 1994.

Issue 2: Sustainability of the show cause notice

The Tribunal examined the provisions of sub-section (1) of Section 73 of the Finance Act, 1994, which empower Revenue to recover service tax that has not been levied, paid, short levied, short paid, or erroneously refunded. It emphasized the need for Revenue to establish that the amount demanded through a show cause notice is service tax not paid or short paid. The Tribunal noted that the show cause notice failed to prima facie establish that the appellant received consideration by providing services as defined under the Finance Act, 1994. Consequently, the Tribunal held that the show cause notice dated 26.06.2020 was not sustainable in law. As a result, the impugned order was set aside, and the appeal was allowed.

Separate Judgment:
No separate judgment was delivered by the judges in this case.