Service Tax Demand Not Sustainable Merely On The Basis Of Form 26AS Issued By Income Tax Department: CESTAT

The Kolkata Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that merely on the basis of Form 26AS issued by the Income Tax Department, the demand of Service Tax is not sustainable against the appellant.

The bench of Ashok Jindal (Judicial Member) and K.Anpazhakan (Technical Member) has observed that initially, the investigation started against the appellant in April, 2015 when they came to know that the appellant is not paying service tax on taxable services and no efforts were made by the Department to issue the show-cause notice in time or to further investigate the matter, no efforts were made by the Department to find out for what purposes these amounts have been paid by the service recipient.

The appellant/assessee is a proprietorship concern and had been engaged in providing services such as, supply/renting of passenger vehicles and load carrier vehicles to the Indian Army. The appellant had also supplied fresh eggs, fish, chicken and fruits to the Indian Army for consumption of its personnel. During the period October, 2014 to March, 2017, the appellant has provided services exclusively to the Indian Army and during the period April, 2017 to June, 2017, they rendered services to the District Health Society, Sonitpur and to Patanjali Ayurveda Limited in addition to rendering the services undertaken to the Indian Army.

On the basis of the information received from the Income Tax Department, it came to know that the appellant is providing taxable services. Therefore, an enquiry was initiated against the appellant through letters seeking copies of Form 26AS, copies of profit and loss account, copies of Balance Sheet, copies of Contract Agreement, copies of Bills/Invoices raised and copies of ST-3 Returns for the said period.

On non-submission of the documents, the matter was transferred to Tezpur CGST and Divisional Anti Evasion Branch, who further initiated an investigation against the appellant seeking relevant documents.

In the meantime, a request was also made to the Income Tax Department to provide the details of Form 26AS for the financial year, but the appellant supplied Form 26AS for the Financial year 2014-15, 2016-17 to 2017-18 and Income Tax Return for the Financial Year, 2015-16.

On the basis of the documents, a show-cause notice dated 30th December, 2020 came to be issued to the appellant for the period October, 2014 to June, 2017 to demand service tax.

The appellant contended that during the period October, 2014 to March, 2017, the appellant provided supply/renting of passenger vehicles and load carrier vehicles to the Indian Army. The appellant had also supplied fresh eggs, fish, chicken and fruits to the Indian Army for consumption of its personnel. During the period Ocotber, 2014 to March, 2017, on all the payments made by the Indian Army, the Income Tax was deducted, which was reflected in Form 26AS as for supply of fish, chicken etc. to Indian Army, no service tax is payable as it is an activity of trading. With regard to supply/renting of passenger vehicles and load carrier vehicles to the Indian Army the service is exempted from payment of service tax in terms of Notification No.30/2012-ST dated 20.06.2012 under negative list regime as the appellant has not issued any consignment notes.The service involved is transport agency service.

For the period April, 2017 to June, 2017, the appellant contended that the total amount of Rs.2,75,876/- has been received by the appellant, which is exempted from payment of service tax being less than Rs.10.00 lakhs threshold limit to demand service tax. Therefore, on that amount, the appellant is not liable to pay service tax.

The assessee urged that the proceedings were initiated against the appellant in year 2015 itself and for the period October, 2014 to June, 2017, a show-cause notice came to issue on 30th December, 2020, which is barred by limitation as there is no suppression on the part of the appellant.

The department contended that the appellant did not join the proceedings during investigation despite several letters written to them. Further, as per agreement filed by the appellant in appeal papers, the appellant was engaged in supply of vehicle for use of passengers, which is not exempted service under negative list regime. Therefore, the appellant is liable to pay service tax.

The tribunal has held that as the investigation is faulty and the show-cause notice has been issued by invoking an extended period of limitation, the demand is not sustainable on limitation itself.

Counsel For Appellant: Indranil Banerjee

Counsel For Respondent: S.S.Chattopadhyay

Case Title: M/s Rishu Enterprise Versus Commissioner of CGST & Excise, Dibrugarh

Case No.: Service Tax Appeal No.75509 of 2022

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