Kirodiwal Associates Vs Commissioner (CESTAT Delhi)
The appeal challenges Order-in-Appeal No. 172/2023-24 dated 05.10.2023, which upheld a service tax demand against the appellant. The dispute arose when the department, during verification of third-party data for FY 2015-16 obtained from the Income Tax Department, noticed that the gross receipts declared in the appellant’s Income Tax Return were ₹1,24,91,872, while the gross value declared in ST-3 service tax returns for the same period was ₹1,08,11,345. The difference of ₹16,80,527 led to a proposed service tax demand of ₹2,43,637 along with interest and penalties. The appellant was issued multiple communications seeking clarification but did not respond. A show cause notice was issued on 17.12.2020, and the adjudicating authority confirmed the demand with equivalent penalty under Section 78, an additional penalty of ₹637, and a penalty of ₹10,000 under Section 77(1)(c). Commissioner (Appeals) upheld the order, leading to the present appeal before the Tribunal.
The appellant argued that the demand was based solely on third-party data and relied on CBIC Circular No. 137/47/2020-ST. It was contended that Form 26AS is not a statutory document for confirming service tax liability. Several case laws were cited to support the position that tax cannot be demanded merely on third-party information. The appellant asserted that the department incorrectly computed the taxable value by including service tax within the value itself and that the difference in figures between the ITR and ST-3 returns was due to accounting treatment and revenue classification. It was explained that part of the receipts related to exempt services, particularly construction of single residential units, which qualified for exemption under Entry 14(b) of Notification No. 25/2012-ST. The appellant stated that service tax was properly discharged.
