2024 (9) TMI 1028 - AT - Service Tax

Time limitation for filing SCN - discrepancy between the figures reflected in balance sheets etc. and the service tax Returns - extended period of limitation - HELD THAT - It is found that the case is made by the Department on the ground that there is discrepancy between the figures reflected in balance sheets etc. and the service tax Returns. No effort to co-relate the income/ receipt shown in the balance sheet to any particular service rendered by the appellants to any particular entity appears to have been made. It is not open for the Department to allege evasion of service tax on this count. The onus to prove the nexus between consideration and the service is on the Department who have made the allegations and issued the Show Cause Notice. Moreover, it is not open for the Revenue to invoke extended period under such circumstances. When no positive act, with intent to evade payment of duty, on the part of the appellant has been shown, has been evidenced. It has been held in a catena of judgments that under such circumstances, extended period cannot be invoked. By following the ratio of such decision, the Revenue has not made out any case for invocation of extended period. Moreover, the Department also does not have any case on merits on other issues. Learned Commissioner (Appeals) could have easily seen that the appellants have satisfactorily explained their stand and have displayed that no service tax is payable by them in respect of the issues raised in the Show Cause Notice. The appellants have also submitted copies of necessary certificates, affidavits, Chartered Accountant certificates. It was not proper on the part of Commissioner (Appeals) to brush aside the glaring evidence in favour of the appellants. In view of the same, it is found that neither the Show Cause Notice nor the impugned order can be sustained - appeal allowed.

Summary

Issues:
1. Whether the Show Cause Notice is time-barred?
2. Whether the demand of service tax based on discrepancies in ST-3 Returns and balance sheet is valid?
3. Whether the demand of service tax denying exemption for service to SEZ is justified?
4. Whether the demand of service tax on other operating income is sustainable?

Analysis:
1. The appellant argued that the Show Cause Notice issued beyond the 30-month limit, and all required documents were submitted in 2018. Citing precedents, they contended that since they regularly filed ST-3 Returns, the Department's reliance on balance sheets alone is unjustified. They referred to specific cases and circulars to support their position, asserting that the extended period of limitation cannot be invoked. The appellant also presented various judgments to strengthen their argument, emphasizing that the Department failed to establish any intent to evade duty. The Tribunal agreed, concluding that the Department lacked grounds for invoking the extended period and that the Show Cause Notice was unsustainable.

2. Regarding the demand based on discrepancies in ST-3 Returns and balance sheets, the appellant explained that the mismatch arose due to an invoice error, which was rectified with supporting documentation. They provided an affidavit and Chartered Accountant certificate to support their claim. The Tribunal found the explanation satisfactory and ruled in favor of the appellant on this issue.

3. Concerning the demand for service tax on services to SEZ developers, the appellant clarified that they submitted a copy of the A-2 certificate as the original was not provided by the SEZ authorities. They also submitted an affidavit to substantiate their position. The Tribunal accepted the appellant's explanation and held that the demand for service tax in this regard was not sustainable.

4. Lastly, on the issue of service tax on other operating income, the appellant attributed it to the recovery of bad debts from previous years on which service tax had already been paid. The Tribunal found the appellant's explanation reasonable and ruled in their favor on this matter as well. The Authorized Representative for the Department reiterated the impugned order's findings, but the Tribunal found in favor of the appellant, allowing the appeal and setting aside the Show Cause Notice and impugned order.