Forward Resources Pvt. Ltd. Vs C.C.E. (CESTAT Ahmedabad)
Held that the demand of services tax is not sustainable on the basis of TDS /26AS statements.
Facts-
Appellant are engaged in providing of various services namely ‘management or business consultancy service and ‘Business Auxiliary Service and GTA Service. Acting on the intelligence that the appellant was indulging in evasion of Service tax, search was conducted at the office of the appellant. During the search documents related to income tax TDS statements, copies of Balance Sheet /audit reports, bank statement were seized and statement of Shri Jagdishchandra Somani was recorded. Since, no documents like invoices/ bills were issued by the Appellant to various parties against the provisions of services could be found and recovered during the search, the revenue authorities collected the copies of invoices/ debits notes from the customers of the Appellant. On examination of the said debit notes/ invoices it was alleged that the Appellant have provided the Business Auxiliary Service, Management or Business Consultancy Services and Advertising Agency Services to customers. The officers also searched the premises of M/s Consumer Marketing Pvt. Ltd. and statement of Mr. Rajesh Ramchandra Stave, Authorized Signatory of M/s Consumer Marketing Pvt. Ltd. was recorded. It was alleged that the Appellant have collected the service tax from the customers. Investigation also revealed that Appellant have availed the cenvat credit without having any corroborative evidence. The said investigation was culminated into show cause notice.
The demand of service tax, along with interest and penalties, was confirmed. Being aggrieved, the assessee preferred the present appeal.
Conclusion-
Held that in the present matter for confirmation of service tax demand Ld. Commissioner also relies upon the TDS /26AS Statement. 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 Acts and their provisions operating 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.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The present appealis directed against the impugned Order-In-Original No. SUR-EXCUS-000-COM-029-18-19 dated 07.03.2019 passed by the Principal Commissioner of Central Excise & GST, Surat.
2. The brief facts of the case are that the appellant are engaged in providing of various services namely ‘management or business consultancy service and ‘Business Auxiliary Service and GTA Service. Acting on the intelligence that the appellant was indulging in evasion of Service tax, search was conducted at the office of the appellant. During the search documents related to income tax TDS statements, copies of Balance Sheet /audit reports, bank statement were seized and statement of Shri Jagdishchandra Somani was recorded. Since, no documents like invoices/ bills were issued by the Appellant to various parties against the provisions of services could be found and recovered during the search, the revenue authorities collected the copies of invoices/ debits notes from the customers of the Appellant. On examination of the said debit notes/ invoices it was alleged that the Appellant have provided the Business Auxiliary Service, Management or Business Consultancy Services and Advertising Agency Services to customers. The officers also searched the premises of M/s Consumer Marketing Pvt. Ltd. and statement of Mr. Rajesh Ramchandra Stave, Authorized Signatory of M/s Consumer Marketing Pvt. Ltd. was recorded. It was alleged that the Appellant have collected the service tax from the customers. Investigation also revealed that Appellant have availed the cenvat credit without having any corroborative evidence. The said investigation was culminated into show cause notice asking them to show cause as to why –
“(i) the service tax amounting to Rs. 3,50,25,248/- including cess, should not be demanded and recovered under proviso to section 73 of the Act and Rs. 2,25,95,000/- paid by them should not be appropriated.
(ii) appropriate interest on the amount of Service tax should not be demanded and recovered under Section 75 of the said Act;
(iii) the penalty for contravention of provision of the said Act or any rule made there under should not be imposed on as provided under Section 77 of the said Act;
(iv) the penalty should not be imposed under Section 78 of the said Act;
(v) the Cenvat Credit availed of Rs. 49,88,527/- as shown in their ST-3 returns should not be demanded and recovered under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A(4) of the Central Excise Act, 1944.
(vi) Interest at applicable rate under the provisions of Rule 14 of Cenvat Credit Rules 2004 read with Section 11AA of Central Excise Act, 1994 should not be demanded and recovered.
(vii) the penalty should not be imposed under Rule 15 of the Cenvat Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944.
In addition the show cause notice also proposed the penalty on Shri Jagdishchandra Somani under Section 78A of the Finance Act, 1944 and penalty under Rule 15 of Cenvat Credit Rules, 2004.
2.1 The show cause notice was adjudicated by the Principal Commissioner, Excise & GST, Surat confirming the demand of Service Tax along with interest and penalties as proposed in the show cause notice. Aggrieved by the impugned order present Appeals have been filed.
3. Shri Jigar Shah, Learned Counsel along with Shri Ambarish Pandey, Advocate appearing on behalf of the appellant submits that the impugned proceedings are without Jurisdiction, unconstitutional and erroneous, as the department has completely failed to comply with the scheme so applicable after the enactment of the Central Goods and Service Tax Act, 2017. In the present case, the legislature has omitted the provisions of Chapter -V of the Finance Act, 1994. Thus, Section 6 of the General Clauses Act, 1897 shall not be applicable in view of the Judgment of Hon’ble Supreme Court in case of Rayala Corporation Vs. Directorate of Enforcement, 1969 (2) SCC 412, supra. Therefore, no proceedings can be initiated, and no liability can be fastened by the Government in respect of the any alleged violation or noncompliance of the provisions contained in Chapter -V of the Finance Act, 1944 as omitted vide Section 173 of CGST Act. The initiation of the proceedings vide the present show cause notice and the confirmation of demands by the impugned order is without jurisdiction, unconstitutional and erroneous and hence, deserves to be quashed and set aside.
3.1 He submits that the impugned order failed to consider that the show cause notice invoked wrong provision of the Finance Act, 1994 to demand Service tax. The demand of Service tax should have been proposed under Section 73A of the Finance Act, 1994 and not under Section 73. Therefore, there can be no demand of Service tax as the impugned order is passed without jurisdiction and hence liable to be quashed and set aside. He placed reliance on the following decisions:
(i) Checkmate Industries Services Vs. CCE, Pune -III, 2016(44)S.T.R. 290 (Tri. -Mumbai)
(ii) M/s Fusion India Inc V. CCE & ST., Lucknow- 2018(11)TMI 358 – CESTAT Allahabad.
3.2 He also submits that the show cause notice proposes to recover service tax amounting to Rs. 3,50,25,248/- under Section 73 of the Finance Act, 1994 which is the provision for recovery of Service tax. However, the show cause notice failed to invoke the relevant provision for charging of service tax on alleged activities. In the Finance Act, 1994, Section 66B provides for levy of Service tax on services other than those services specified in the negative list. Since the charging provision was not invoked, therefore, no demand is sustainable. He placed reliance on the decision in the case of Frisco Foods Pvt. Ltd. Vs. Commissioner, Customs & Central Excise, Dehradun – 2022-VIOL-49-CESTAT-Del-ST.
3.3 He argued that the show cause notice dtd. 26.09.2017 baldly alleged that the Appellant have rendered taxable services. However, the show cause notice dated 26.09.2017 does not analyse the activities allegedly carried out by the Appellants and whether the same would fall within the definition of any taxable services. It is settled principle of law that unless and until the clear analysis of the activity done by the assessee is carried out, demand of service tax cannot be confirmed. He placed reliance on the following decisions:
