Sudesh Kumar Gupta Vs Commissioner of CE & CGST (CESTAT Allahabad)
Shri Sudesh Kumar Gupta, proprietor of M/s. Laxmi Electricals, Sadar Bazar, Hardoi, was engaged in supply and installation of street lights for various Municipal Corporations and municipalities. The supplied order states that a show cause notice dated 12.10.2010 was issued on the basis of information reflected in Form 26AS, showing receipts of Rs.18,07,83,649/- during financial year 2016-17. The notice alleged that no service tax had been paid and proposed service tax of Rs.2,71,17,547/- under the proviso to sub-section (1) of Section 73 of the Finance Act, 1994, invoking the extended period of limitation.
In reply, the appellant stated that he had executed work orders awarded by different Municipal Corporations for installation of street lights in municipal areas and that street lighting was one of the functions entrusted to municipalities under Article 243W of the Constitution of India. He also relied on Entry No. 12A of mega exemption Notification No. 25/2012-ST dated 20.06.2012, contending that services rendered to a local government were exempt from service tax. He further stated that VAT had been paid on goods sold to municipalities and returns had been filed. The original authority did not accept these submissions, confirmed the service tax demand of Rs.2,71,17,547/- and imposed equal penalty along with other penalties.
Before the Tribunal, the appellant contended that services provided to Local Self Government were exempt under Entry No. 12A of the mega exemption notification. He further argued that a demand based primarily on Form 26AS data, without examination of the assessee’s records to establish whether the receipts represented taxable services, was unsustainable. Reliance was placed on Umesh Tilak Yadav, Maa Kalika Transport Pvt. Ltd., Go Bindas Entertainment Pvt. Ltd. and Reynolds Petrochem Ltd.. The Revenue supported the impugned order-in-original.
The Tribunal found that the entire show cause notice was based on data received from the Income Tax Department in Form 26AS and that the Revenue had not examined the data to determine whether any service had actually been rendered by the appellant which attracted service tax. It also noted that, although exemptions had been claimed before the original authority, those submissions had been ignored and the entire demand had been confirmed.
In considering the issue, the Tribunal relied on Umesh Tilak Yadav, where it was held that the Revenue must first establish that the amount proposed to be demanded represents service tax and that the underlying value is the value of taxable service under Section 67. The Tribunal also referred to Maa Kalika Transport Pvt. Ltd., which held that service tax demand cannot be raised merely on data received from the Income Tax Department without corroborating evidence that the receipts were connected with taxable services. Go Bindas Entertainment Pvt. Ltd. was referred to for the proposition that demand could not be confirmed merely by comparing figures without evidence that the excess income represented taxable services. The Tribunal further reproduced findings from Reynolds Petro Chem Ltd. concerning reliance on TDS/26AS statements and the distinction between income-tax and service-tax legislation.
The Tribunal then examined the statutory framework referred to in the order. Section 66B of the Finance Act, 1994 provides for levy of service tax at a specified percentage on the value of service. Section 67 concerns determination of the value of taxable service with reference to consideration in money charged by the service provider. Clause (44) of Section 65B defines “service” and identifies activities excluded from that definition, while Section 66D contains the negative list of services. The Tribunal observed that these aspects, as well as cases involving full or partial payment of service tax by the recipient and exemptions under mega Notification No. 25/2012-ST dated 20.06.2012, had to be examined before treating receipts appearing in Form 26AS as the value of taxable service.
The Tribunal concluded that the required scrutiny had not been carried out in the present case. It held that, on the basis of the settled position discussed in the order, only the data in Form 26AS could not be used to issue a show cause notice demanding service tax. It therefore set aside the impugned order-in-original and allowed the appeal. The order was pronounced in the open court on 25.02.2025.
Cases Discussed
- Umesh Tilak Yadav, 2023 (11) TMI 473 (CESTAT Mumbai) — relied upon for the finding that the Revenue must establish that the amount proposed to be demanded represents taxable service and that the underlying value satisfies Section 67.
- Maa Kalika Transport Pvt. Ltd., 2023 (79) GSTL 263 (T-Kol) — relied upon for the finding that service tax demand cannot be based merely on Income Tax Department data without corroborating evidence connecting the receipts with taxable services.
- Go Bindas Entertainment Pvt. Ltd., 2019 (27) GSTL 397 (T-All) — relied upon for the finding that demand cannot be confirmed merely by comparing figures without evidence that the income represented taxable services.
- Reynolds Petro Chem Ltd., 2023 — referred to for the finding that service tax demand cannot be made merely on the basis of TDS/26AS statements.
- Larsen & Toubro Ltd. Vs. ACST, (2023) 2 Centax 327 (Cal.) — cited in the reproduced passage from Maa Kalika Transport Pvt. Ltd..
- CST Vs. Hindustan Cables Ltd., 2022 (382) ELT 188 (Cal.) — cited in the reproduced passage from Maa Kalika Transport Pvt. Ltd..
- M/s Ved Security Vs. CCE, Rachi-III, 2019(6) TMI 383 CESTAT, Kolkata — referred to in the reproduced Reynolds Petro Chem Ltd. passage concerning TDS statements and determination of taxable-service value.
- Synergy Audio Visual Workshop Pvt. Ltd. Vs. Commr. of S.T. Bangalore, 2008 (10) S.T.R. 578 (Tri.-Bang.) — referred to for the treatment of amounts shown in Income Tax returns or balance sheets in determining service tax liability.
- Commissioner of C.Ex. Jaipur-I Vs. Tahal Consulting Engineers Ltd., 2016(44) S.T.R. 671 (Tri. Del) — referred to for the finding that income-tax returns cannot, without evidence of taxable service, form the basis of a service tax demand.
- Calvin Wooding Consulting Ltd. Vs. Commissioner of C.Ex. Indore, 2007 (7) S.T.R. 411 (Tri.-Del.) — referred to for the distinction between income-tax TDS requirements and statutory service-tax liability.
FULL TEXT OF THE CESTAT ALLAHABAD ORDER
Brief facts of the case are that Shri Sudesh Kumar Gupta (hereinafter referred to as appellant) is proprietor of M/s. Laxmi Electricals, Sadar Bazar, Hardoi. As proprietor of M/s. Laxmi Electricals, he is engaged in supply and installation of street lights for various Municipal Corporations and municipalities. Appellant received a show cause notice dated 12.10.2010. It was stated in the said show cause notice that during the financial year 2016-17 appellant had received amount of Rs.18,07,83,649/- as per statement in Form 26AS. The show cause notice stated that the appellant did not pay any service tax during the financial year. Therefore, by taking the said amount reflected in Form 26AS as value for rendering service, appellant was called upon to show cause as to why service tax amounting to Rs.2,71,17,547/- should not be demanded from him under proviso to sub-section (1) of Section 73 of Finance Act, 1994. The said show cause notice was issued by invoking extended period of limitation. Appellant submitted his defence reply to the said show cause notice through his letter dated 22.03.2022. Appellant submitted that the he had executed work orders awarded by different Municipal Corporations for installation of street lights in municipal area and that street lighting is one of the functions entrusted to municipalities by Article 243W of the Constitution of India. He further stated that under Entry No. 12A of mega exemption Notification No. 25/2012-ST dated 20.06.2012, services rendered to a local government are exempt from levy of service tax. Further, he has stated that for the goods sold to municipalities, VAT was paid and returns were filed. In view of the said submissions, he requested to set aside the show cause notice. Original authority adjudicated the said show cause notice through impugned order-in-original wherein the original authority did not appreciate the contentions raised by the appellant and confirmed the demand of service tax of Rs.2,71,17,547/- and imposed equal penalty. Some other penalties were also imposed on the appellant. Aggrieved by the said order, appellant is before this Tribunal.
2. Heard the learned counsel for the appellant. Learned counsel for the appellant has submitted that the appellant had provided services to Local Self Government and services provided to local Government are exempted under Entry No. 12A of mega exemption notification. Further, he has submitted that the issue of sustainability of show cause notice issued primarily relying on the data received from Income Tax Department in Form 26AS and without examining the records of the assessee is no more res integra and settled through series of decisions of this Tribunal. He has relied on the decision of this Tribunal in the case of Umesh Tilak Yadav 2023 (11) TMI 473 (CESTAT Mumbai) and the decision of this Tribunal in the case of Maa Kalika Transport Pvt. Ltd. 2023 (79) GSTL 263 (T-Kol). Further he has also relied on the decision of this Tribunal in the case of Go Bindas Entertainment Pvt. Ltd. 2019 (27) GSTL 397 (T-All) and the decision in the case of Reynolds Petrochem Ltd. 2023. He has prayed to set aside theimpugned order and allow the appeal.
3. Heard the learned AR. Learned AR has supported the impugned order-in-original.
4. We have carefully gone through the record of the case and submissions made. On perusal of the show cause notice, we note that the entire show cause notice is based on the data received from Income Tax Department in Form 26AS. Revenue has not examined the data received by them to know whether any service was rendered by the appellant which attracted service tax. When the exemptions were claimed by the appellant before the original authority, he has simply ignored the submissions and confirmed the entire demand as raised in the show cause notice. Therefore, both show cause notices and order-in-original put together have solely relied on the information received in Form 26AS which is the amount received by the appellant. This Tribunal in the case of Umesh Tilak Yadav (supra) in para 4 has stated as follows:-
“4. We have carefully gone through the record of the case and submissions made. The demand was raised invoking the provisions of sub-section (1) of Section 73 of Finance Act, 1994. 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. We, therefore, hold that the said show cause notice dated 26.06.2020 is not sustainable in law.”
Further, this Tribunal in para 19 of its decision in the case of Maa Kalika Transport Pvt. Ltd. (supra) has held as follows:-
“19. The next issue raised by the Appellant is that the demand has been confirmed on the basis of the data received from Income Tax department. No effort was made by the department to ascertain whether the amount received by the Appellant was on account of rendering of any taxable service on which the Appellant was liable to pay service tax. There is no finding in the impugned order to this effect. We observe that there is no new material evidence brought on record for raising the demand of service tax on the value mentioned in the records received from the Income Tax department. The demand cannot be raised merely on the basis of the data received from the Income Tax Department, without any corroborating evidence to substantiate that the value received were in connection with taxable service rendered by the Appellant. This view has been supported by the following judgments:-
i. Larsen & Toubro Ltd., Vs. ACST Reported in (2023) 2 Centax 327 (Cal.);
ii. CST Vs. Hindustan Cables Ltd., reported in 2022 (382) ELT 188 (Cal.).”
As also in the case of Go Bindas Entertainment Pvt. Ltd. (supra), this Tribunal in para 4 has held as follows:-
“4. After hearing both the sides duly represented by learned Advocate Shri Kamal Jeet Singh for appellant and learned A.R. Shri Sandeep Kumar Singh, Deputy Commissioner for revenue, we note that the entire case of revenue is based upon the comparison of figures, as pointed out in the balance sheet with the figures reflected in the ST-3 returns. The appellant has explained that such difference has occurred on account of the accounting system as per the Income Tax Law, which explanation, in principle, stands accepted by the lower authorities. Even then the lower authorities have gone ahead and confirmed the demand.
In any case and in view of the declaration, we note that it is well settled law that no demand can be confirmed by comparing the ST-3 return figures with balance sheet figures, in the absence of any evidence to the contrary that income in the balance sheet, if excess, reflects the providing of taxable services. It is the revenue who is making the allegations and as such, the onus to prove said allegation lies very heavily upon the revenue. Inasmuch as, the same has not been done and in view of the foregoing discussions, we find no merits in the revenue’s stand.”
Further we reproduce below para 5.7 and 5.8 of final order of this Tribunal in the case of Reynolds Petro Chem Ltd. (supra):-
“5.7 We also find that in the present matter for confirmation of service tax demand revenue also relied upon the TDS /26ASStatement. The said statement under provisions of Income Tax Act, 1961 is an Annual Consolidated tax statement. Income tax and service tax are two different/ separate and independent special Act and their provisions operate in two different fields. Therefore by relying the 26AS /TDS Statement under the Service Tax Act, demand of service tax cannot be made. We also find the support from the decision of M/s Ved Security Vs. CCE, Rachi -III 2019(6) TMI 383 CESTAT, Kolkata wherein it was held that the value of taxable services cannot be arrived at merely on the basis of the TDS statements filed by the clients inasmuch as even if the payments are not made by the client, the expenditure are booked based on which the form 26AS is filed, which cannot be considered as value of taxable services for the purpose of demand of Service tax.
5.8 In the matter of Synergy Audio Visual Workshop Pvt. Ltd. Vs. Commr. of S.T. Bangalore 2008 (10) S.T.R. 578 (Tri. – Bang.), the Tribunal observed as under :
The other ground is for confirming demands is that the appellants had shown certain amounts due from the parties in their Income Tax returns and Revenue has proceeded to demand Service Tax on this amount shown in the Balance Sheet. The appellants have relied on large number of judgments which has settled the issue that amounts shown in the Income Tax returns or Balance Sheet are not liable for Service Tax. In view of these judgments, the appellant succeed on this ground also. The impugned order is set aside and the appeal is allowed.
In the matter of Commissioner of C.Ex.Jaipur-I Vs. Tahal Consulting Engineers Ltd. – 2016(44) S.T.R. 671 (Tri. Del) the Tribunal also observed as under
2. The brief facts of the case are that respondents are engaged in providing taxable service. Certain proceedings were initiated against them for not paying the Service Tax mainly on the basis of income-tax return filed by them at Jaipur. It is the case of the Revenue that the respondent failed to discharge the Service Tax on full taxable value as reflected in the income-tax returns. Accordingly, the original authority, after due process, confirmed the Service Tax of Rs. 8,25,789/- under the category of ‘Consulting Engineer service’. He also imposed penalties under various sections on the respondent. On appeal by the respondent, the learned Commissioner (Appeals) vide impugned order set aside the Order-in-Original and allowed the appeal. Aggrieved by this, Revenue is in appeal.
3. The main grounds of appeal is that respondent could not produce documentary evidence about Service Tax payment properly for the impugned period at Chandigarh and Lucknow. The ST-3 return filed at Chandigarh and Lucknow did not tally with income-tax return filed in Jaipur office.
4. We have heard the AR who reiterated the grounds of appeal. None represented the respondent.
5. We find that Commissioner (Appeals) examined the respondents appeal against confirmation of demand and allowed the same mainly on the ground that income-tax return cannot be the basis for demanding Service Tax. Further, the respondent’s contention that they have rendered services outside the jurisdiction of Rajasthan and have discharged the Service Tax in Chandigarh and Lucknow, could have been verified with the concerned jurisdictional Chandigarh Commissionerate office. Departmental authority at Jaipur have no jurisdiction to proceed against the respondent for demanding Service Tax without any evidence of taxable service being provided within their jurisdiction. We find that there is nothing in the grounds of appeal which makes us to interfere with the finding of the learned Commissioner (Appeals). The appeal did not advert to any assertion as to how the Service Tax demand can be made when there is no evidence to any taxable service having been rendered in the Jurisdiction of Rajasthan. No inquiries have been conducted by the Revenue to support their case. As such, we find that present appeal is without merit and accordingly, the same is dismissed.
In the matter of Calvin Wooding Consulting Ltd. Vs. Commissioner of C.Ex. Indore 2007 (7) S.T.R. 411 (Tri. – Del.) also Tribunal observed as under :
21. The liability of the recipient cannot arise merely from the fact that, the income-tax was deducted at source, which was the requirement of the Income-tax Act, on the recipient who made payment to the foreign supplier. Such a statutory requirement, as exists under the Income-tax law on the person making the payment to deduct tax at source, as a tax collecting agency of the Revenue, does not exist under the provisions of the Service Tax law, and no obligation was cast upon the recipient of the service to make any deduction from the amounts payable by way of consideration, under the statutory provisions. Authorization to pay Service tax under a contractual arrangement which obliged the recipient to pay the tax and file return, was a matter distinct and different from a statutory obligation to make tax deduction as a collecting agency, as envisaged under the Income-tax law. The Commissioner (Appeals) has, therefore, rightly set aside the orders-in-original insofar as respondent of Service Tax Appeals Nos. 170, 171 and 173 of 2005 was concerned.
As per the above settled legal position, we hold that the demand of service tax is not sustainable on the basis of TDS /26AS statements.”
5. On perusal of the above stated findings of this Tribunal in various cases, we note that the issue is no more res integra and it has been decided that only on the basis of data in Form 26AS, Revenue cannot issue show cause notice demanding service tax. Here we note that charging Section 66B of Finance Act, 1994 provides for levy of service tax at a specific percentage on the value of service. Section 67 of Finance Act, 1994 provides that where service tax is chargeable on a taxable service with reference to its value, then such value shall be the consideration in money charged by the service provider. Therefore, it is primarily important to determine the value on which service tax shall be levied at a specific percentage and such value should be the value of taxable service. Clause (44) of Section 65B of Finance Act, 1994 has provided for definition of service and it has elaborately dealt with a list of activities which shall not be included in such definition.Further, Section 66D of Finance Act, 1994 has provided for negative list of services where the activities covered by such negative list do not qualify to be a taxable service. Therefore, it is clear that while determining value of taxable service under Section 67 ibid, such aspect as to the activities which are covered by negative list and which are mentioned in the definition of service as those which are not covered by such definition become important. Therefore, we come to a conclusion that for arriving at amount of service tax not paid or not levied arriving at correct value of taxable service which has not suffered service tax needs to be determined as the first step. Further, there are services where entire or part of service tax is to be paid by service recipient. Further, through mega Notification No. 25/2012-ST dated 20.06.2012, large number of services are exempted from levy of service tax. From any data, unless scrutiny in respect of all the above stated aspects is not done, then such data cannot be taken as such as value for calculation of service tax. Precisely this exercise has not been carried out in the present order-in-original.
6. We, therefore, set aside the impugned order-in-original and allow the appeal.
(Order pronounced in the open court on 25.02.2025)
