Case Law Details
Maheshwari Transport Vs Commissioner of CE & ST (CESTAT Mumbai)
Introduction: The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Mumbai recently made a significant decision in the case of Maheshwari Transport vs. Commissioner of CE & ST. In this article, we will delve into the details of the case and the implications of CESTAT’s decision to quash a show cause notice (SCN) that contained contradictory statements.
Detailed Analysis:
1. Background of the Case: The appellant, Maheshwari Transport, was issued a show cause notice on April 27, 2021. The notice alleged a mismatch between the values declared in Form 26AS (filed with Income Tax) and the values declared in Service Tax Returns for the financial years 2015-16 and 2016-17. It also claimed that the appellant had not filed Service Tax Returns for the entire period covered by the notice.
2. Presumption of Taxable Value: The show cause notice presumed a 25% value addition for the period from April 2017 to June 2017, based on turnover figures in Form 26AS. This presumed value addition was considered in calculating the gross taxable value, resulting in a demand of approximately Rs. 51.38 crores in service tax.
3. Appellant’s Response: In response to the notice, the appellant argued that they were a goods transport agency, and service tax should be paid by the recipients under the reverse charge mechanism. They contended that since they had not collected service tax from customers, there was no need to pay service tax. They requested the adjudication and withdrawal of the show cause notice.
4. CESTAT’s Decision: CESTAT, in its decision, pointed out a crucial contradiction in the show cause notice. On one hand, it alleged a mismatch between Income Tax Returns and Service Tax Returns, while on the other hand, it claimed that the appellant had not filed any Service Tax Returns for the same period. This inconsistency raised questions about the validity of the notice.
5. Precedent and Legal Rulings: The appellant’s counsel cited several legal precedents, including cases such as Lord Krishna Real Infra Pvt. Ltd., Sharma Fabricators & Erectors Pvt. Ltd., and Go Bindas Entertainment Pvt. Ltd., to support their argument that a demand cannot be raised merely based on differences between ST-3 returns and Form 26AS, without examining whether the income was for the provision of taxable services.
6. CESTAT’s Finding: CESTAT found that the show cause notice lacked proper reasoning and had contradictory statements. It emphasized that charges in a show cause notice should be based on books of account and admissible evidence, which was not the case here. Therefore, CESTAT concluded that the show cause notice dated April 27, 2021, was not legally sustainable.
Conclusion: The decision by CESTAT Mumbai to quash the contradictory show cause notice in the Maheshwari Transport case highlights the importance of consistency and proper reasoning in tax-related legal proceedings. It also reinforces the principle that demands should be based on concrete evidence and not presumptions. This decision serves as a reminder of the need for meticulousness and fairness in tax enforcement actions.
FULL TEXT OF THE CESTAT MUMBAI ORDER
Brief facts of the case are that the appellant was issued with a show cause notice dated 27.04.2021 wherein it was stated that there was a mismatch in values declared in Form 26AS filed with Income Tax and the values declared in Service Tax Returns for the financial years 2015-16 and 2016-17. It was further stated in the said show cause notice that in spite of various letters and emails, the appellant did not submit any record to the authorities for examination for issue of the said show cause notice. It was further alleged in the show cause notice that the appellant had not filed Service Tax Returns for the entire period for which the said show cause notice was issued. On the basis of turnover of the amounts received in the financial year 2016-17 as reflected in Form 26AS, it was presumed that for the period from April 2017 to June 2017, there was 25% value addition in the proportionate transaction and such value was also taken into consideration and the amounts reflected in Form 26AS and the said calculated values were taken together and was treated as gross taxable value which were worked out to around Rs.51.38 crores. The service tax payable on the said worked out gross taxable value was calculated, which was worked out to Rs.7,61,08,731/- and the said amount was demanded through the said show cause notice by invoking proviso to sub-section (1) of Section 73 of Finance Act, 1994. Appellant submitted a reply to the show cause notice wherein the appellant inter alia stated that the appellant is goods transport agency and that the services by goods transport agency were attracting the provisions of reverse charge mechanism and, therefore, the recipients were required to pay service tax and that if the goods transport agency collects service tax from the customer, then such service tax is to be paid by the goods transport agency and that they have not collected any service tax from the customer and, therefore, there was no need to pay service tax and since they have not short paid any service tax, the show cause notice issued to them may be adjudicated and dropped. The said show cause notice was adjudicated through the impugned order-in-original dated 28.07.2022. Learned original authority has scrutinized the record submitted by the appellant during the hearing and after giving 70% abatement in respect of transportation charges received from individual and proprietorship concerns, he confirmed the demand of service tax of Rs.55,96,593/- and dropped the remaining demand and ordered to pay interest on the said amount of Rs.55,96,593/- and imposed penalty of equal amount under Section 78 of Finance Act, 1994. The original authority also held that the appellant had contravened the provisions of law to the extent that they did not file ST-3 returns for the relevant period and, therefore, imposed penalties and late fee. 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 original authority has not considered the submissions made by the appellant in reply to the show cause notice and the said submissions were dismissed by the original authority without giving any proper reasoning. He has further submitted that the demand cannot sustain merely by comparing the figures of balance sheet and profit and loss account with ST-3 returns and Form 26AS in the absence of any evidence establishing that the income is for provision of taxable service. He has further relied on the final orders of this Tribunal in following cases:-
a) Lord Krishna Real Infra Pvt. Ltd. [2019 (2) TMI 1563 – CESTAT Allahabad]
b) Sharma Fabricators & Erectors Pvt. Ltd. [2017 (7) TMI 168 – CESTAT Allahabad]
c) Go Bindas Entertainment Pvt. Ltd. [2020-TIOL-890-CESTAT-ALL]
Learned counsel for the appellant has submitted that the issue is no more res integra and settled by this Tribunal in number of cases that on the basis of difference between figures reflected in ST-3 return and Form 26AS statement without examining the reasons for the difference and without examining as to whether the said difference was on account of provision of taxable service or not, demand cannot be raised as held by this Tribunal consistently and repeatedly.
3. Heard the learned AR for Revenue. Learned AR for Revenue has supported the impugned order-in-original.
4. We have carefully gone through the record of the case and submissions made. We observe that in para 8(b) of the show cause notice dated 27.04.2021, it is stated that the appellant has not filed service tax returns for the period from October 2015 to June 2017 and at the same time in para 2 of the show cause notice, it is stated that there was mismatch in the values declared in ST-3 returns and in the Income Tax Returns for financial years 2015-16 and 2016-17. We observe that the above two statements in the said show cause notice are contradictory to each other. The contention of Revenue in para 2 is that there was mismatch of the values declared in Income Tax Return and Service Tax Returns and in the same show cause notice, Revenue states that the appellant had not filed any Service Tax Returns for the same period. Therefore, we find that there was non-application of mind for issue of the said show cause notice dated 27.04.2021. In addition, it is stated in para 4 of the said show cause notice that the appellant had not submitted the required details and not assisted in the investigation and that the details of turnover and bifurcation were not available with Revenue for issue of the said show cause notice and, therefore, Revenue has calculated service tax payable by the appellant under best judgment method. Further, for the period from April 2017 to June 2017, the said show cause notice considers gross taxable value presuming value addition of 25% over the relevant quarter of the earlier financial year, which is also a presumption. Learned counsel has relied on the finding of this Tribunal in the final order issued in the case of Sharma Fabricators & Erectors Pvt. Ltd. reported at 2017 (7) TMI 168 – CESTAT Allahabad. The findings of this Tribunal in the said final order recorded at para 5 are reproduced below:-
“5. Having considered the rival contentions and on perusal of record, we find that in the cases of both the Show Cause Notices dated 20.04.2009 & 13.10.2009 there is no whisper of examination of books of account maintained by M/s Sharma to arrive at the value of consideration received by them. Surprisingly the draft audit report was the relied upon document. It may be worth mentioning here that the purpose of audit report is to point out any discrepancy to the notice for examination by the executive and it is the duty of executive to examine the records and examine the objection raised with reference to the records and facts of the case and take a view whether there is a sustainable case for issue of Show Cause Notice. Such vital aspects of framing of charges have been missing in the present case. The charges in the Show Cause Notice have to be on the basis of books of account and records maintained by the assessee and other admissible evidence. The books of account maintained by M/s Sharma were not looked into for issue of above stated two Show Cause Notices.
Therefore, the transactions recorded in the books of account cannot be held to be contrary to the facts. Therefore, we hold that the said Show Cause Notices are not sustainable. Since the said Show Cause Notices are not sustainable, appeal bearing No. ST/890/2010 filed by M/s Sharma is allowed and appeal bearing No. ST/949/2010 filed by Revenue is dismissed. Miscellaneous Applications are also stand disposed of. Cross Objection also disposed of.”
The findings of this Tribunal in the above stated case of Sharma Fabricators & Erectors Pvt. Ltd. are squarely applicable in the present case. We, therefore, hold that the said show cause notice dated 27.04.2021 is not sustainable in law. As a result, the impugned order-in-original is not sustainable.
5. We, therefore, set aside the impugned order and allow the appeal.
(Order pronounced in the open court on 31.08.2023)
