Bajrang Construction Company Vs Commissioner (Appeals) of CGST & Central Excise (CESTAT Delhi)
Form 26AS Proves Receipts, Not Taxable Services: Department Must Establish the Nature of the Transaction
Background: Nil Returns and Receipts Disclosed in Income-Tax Records
Bajrang Construction Company was registered with the Service Tax Department but had filed nil ST-3 returns for the relevant period from 1 April 2013 to 31 March 2016.
During an enquiry, the Department obtained income-tax returns, Forms 26AS, TDS certificates, balance sheets, contracts, invoices and other records. On examining these documents, it concluded that the appellant had provided taxable services valued at ₹19,29,887 without paying service tax.
A show-cause notice dated 10 October 2018 followed. The Assistant Commissioner confirmed a demand of ₹1,11,859, after allowing the ₹10 lakh exemption available to the appellant. The Commissioner (Appeals) upheld that order.
Before CESTAT, the appellant contested the inclusion of receipts from one customer, the taxability of services supplied to the Rajasthan Housing Board, and invocation of extended limitation.
Receipts from Amit Colonizer Were Claimed to Be Sales of Goods
The appellant submitted that amounts received from Amit Colonizer Ltd. represented consideration for supplying grit, sand, dust and water. It maintained that no service had been supplied to that customer.
The lower authorities rejected this explanation because the appellant had not produced evidence establishing that the receipts related to sales of goods rather than taxable services.
The Revenue defended that approach before the Tribunal, contending that the appellant’s assertion remained unsupported.
CESTAT, however, examined whether the Department had first established the existence of a taxable service.
Form 26AS Does Not Establish Why a Payment Was Made
The Tribunal explained that Form 26AS records payer-wise payments and tax deducted at source. It establishes that money was paid to the assessee, but does not, by itself, establish the underlying transaction’s character.
Receipt of money from Amit Colonizer was undisputed. The relevant enquiry was why that money had been received.
CESTAT held that, when issuing a show-cause notice demanding service tax, the Department bears the burden of proving that taxable services were rendered. The absence of evidence supporting the assessee’s explanation could not substitute for evidence establishing the Department’s allegation.
On the record before it, there was no contrary evidence disproving the appellant’s explanation that the receipts represented consideration for goods. The Tribunal therefore accepted that explanation and directed exclusion of the Amit Colonizer receipts from taxable turnover for each financial year.
The decision thus distinguished between evidence of a receipt and evidence of a taxable service.
Rajasthan Housing Board Services Were Not Exempt
The appellant separately argued that its services to the Rajasthan Housing Board should be exempt because the Board was a government organisation.
The Revenue relied on A. S. Construction Co. Ltd. v. Commissioner, Service Tax Appeal No. 51298 of 2016, in which the Tribunal had held that the services supplied to the Rajasthan Housing Board were not exempt under Notification No. 25/2012-ST dated 20 June 2012.
CESTAT followed that decision, noting that it had also been followed in other cases. Accordingly, the exemption argument concerning the Rajasthan Housing Board was rejected.
The appellant’s description of the recipient as a government organisation therefore did not secure the exemption claimed in this case.
Nil Returns Supported Invocation of Extended Limitation
The appellant contended that the notice was issued beyond the normal limitation period.
The Tribunal found that the appellant had filed nil ST-3 returns despite having supplied taxable services and received consideration. It treated this conduct as suppression of facts and upheld invocation of the extended period.
Consequently, relief concerning the Amit Colonizer receipts did not invalidate the entire demand on limitation grounds. The remaining taxable receipts continued to attract the consequences sustained by the Tribunal.
Limited Remand for Recalculation
CESTAT partly allowed the appeal and remanded the matter to the Assistant Commissioner for a limited purpose.
The authority was directed to deduct the amounts received from Amit Colonizer and recalculate the service tax, interest and mandatory penalty payable.
The remand did not reopen the findings concerning the Rajasthan Housing Board exemption or extended limitation. Nor did the Tribunal quantify the final surviving liability itself. The operative relief was exclusion of the identified goods-sale receipts followed by consequential recalculation.
Author’s Comments
The principal value of the decision lies in its treatment of Form 26AS as a source of information rather than conclusive proof of service-tax liability. Income-tax reporting may justify an enquiry, but the Department must connect the receipts with an identifiable taxable activity.
The ruling should nevertheless be understood in its factual setting. The Tribunal accepted the goods-sale explanation because no contrary evidence was available. It does not establish that every unsupported description offered by an assessee must prevail regardless of contracts, invoices or other material.
The limitation finding also deserves separate attention. While the Department failed to establish taxable services for one receipt stream, the appellant’s nil returns were held to suppress its other taxable activities.
For practitioners, the useful approach is to reconcile receipts customer-wise and transaction-wise, supported by sale invoices, service contracts and accounting entries. Such a reconciliation addresses the real question—what the payment represents—rather than merely explaining the numerical difference between Form 26AS and service-tax returns.
Cases Discussed
- A. S. Construction Co. Ltd. v. Commissioner, Service Tax Appeal No. 51298 of 2016 — Relied upon for the finding that services supplied to Rajasthan Housing Board were not exempt under Notification No. 25/2012-ST. No verified direct TaxGuru judgment link established.
FULL TEXT OF THE JUDGMENT/ORDER OF CESTAT, NEW DELHI
M/s. Bajrang Construction Company1 filed this appeal to assail the Order dated 31.8.20212 passed by the Commissioner (Appeals) in which he upheld the Order dated 21.7.2020 passed by the Assistant Commissioner deciding the proposals made in the Show Cause Notice dated 10.10.20183 issued to the appellant.
2. We have heard Ms. Kainaat, learned counsel for the appellant and Shri Anil Kumar, learned authorised representative for the Revenue and perused the records The appellant was registered with the Service Tax department but had filed Nil ST-3 Returns during the relevant period (1.4.2013 to 31.3.2016).
3. An enquiry was initiated and the appellant’s records were called for by the Superintendent through several letters and copies of ITRs, Forms 26AS and TDS certificates, balance sheets, contracts, invoices, etc. were obtained. On examining these documents, it was felt that the appellant had provided taxable services of value of Rs. 19,29,887/- but had not paid service tax of Rs.2,48,86/-. Accordingly, the SCN was issued. The Assistant Commissioner confirmed demand of only Rs. 1,11,859/- as service tax after reckoning the exemption of upto Rs. 10,00,000/- available to the appellant.
4. On appeal, the Commissioner (Appeals) upheld the order of the Assistant Commissioner.
5. Learned counsel’s submissions before us were on three grounds:
a. The turnover which has been reckoned as taxable value based on Forms 26AS included the amounts received from M/s Amit Colonizer Ltd. to whom the appellant had only sold material such as Grit, Sand, Dust and water. The appellant had not rendered any service to Amit Colonizer.
b. The services rendered to the Rajasthan Housing Board (RHB) by the appellant should be treated as exempt as it is a Government organisation.
c. The demand is time-barred as the SCN was issued beyond the normal period of limitation.
6. Learned authorised representative for the Revenue vehemently supported the impugned order and asserted that it calls for no interference.
7. Regarding the amounts received from M/s. Amit Colonizer, he submitted that the appellant had not provided any evidence in support of its claim that it had only sold goods and had not provided any service to this customer.
8. Regarding the services rendered to RHB, he relied on the decision of this Tribunal in A.S. Construction Co Ltd. vs. Commissioner4 to assert that RHB is not a government organisation and therefore, the services rendered to it were not exempted by notification no. 25/2012-ST dated 20.6.2012.
9. Regarding the invocation of extended period of limitation, he submitted that despite having rendered taxable services and receiving consideration, the appellant had wrongly filed Nil ST-3 returns and it is only the investigation which revealed that the appellant had indeed rendered taxable services.
10. In view of the above, he prayed that the impugned order is correct and proper and it may be upheld and the appeal may be dismissed.
11. We have considered the submissions advanced by both sides and perused the records. We find that the appellant was given the exemption based on turnover which it was entitled to. The three issues to be decided are (a) the taxability of the amounts received by the appellant from M/s. Amit Colonizer; (b) taxability of the services rendered to RHB; and (c) invocation of extended period of limitation.
12. On the first question, we find that Form 26AS of the income tax only shows that certain amounts were paid to the assessee by a person after deducting tax at source. This form gives payer- wise details and undisputedly some amounts were received from Amit Colonizer. The next question is why the amounts were received from Amit Colonizer. According to the appellant, it received the amounts for selling certain goods. The lower authorities did not agree with this contention on the ground that the appellant had not provided evidence that the payments were for selling goods and not providing taxable services. We find that when an SCN is issued, it is for the department to prove that taxable services were rendered. While Form 26AS gives details of payments received, in the absence of any evidence to the contrary, if the appellant (assessee) says that amounts were received as a consideration for sale of goods, it must be accepted. Therefore, the amounts received from Amit Coloniser must be deducted from the total receipts to determine the value of taxable services during each financial year.
13. On the second question of taxability of services rendered to RHB, we find that this bench had, in A S Construction Co. Ltd. decided that services rendered to RHB were not exempted under notification no. 25/2012-ST. This decision was followed in a few other decisions. Accordingly, we hold that the services rendered to RHB were not exempted.
14. On the question of invoking extended period of limitation, we find that the appellant had filed Nil ST-3 Returns when it had, in fact, rendered taxable services and thereby suppressed facts. In view of the above, we find in favour of the Revenue on the question of invoking extended period of limitation.
15. In view of the above, we partly allow the appeal and remand the matter to the Assistant Commissioner for the limited purpose of calculating the amount of service tax, interest and mandatory penalty payable after deducting the amounts received by the appellant from Amit Colonizer. [Order pronounced on 07.10.2026]
Notes:
1 Appellant
2 Impugned order
3 SCN
4 Service Tax Appeal No. 51298 of 2016
