Umesh Tilak Yadav Vs Commissioner of Central Excise (CESTAT Mumbai)
Summary: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, in Umesh Tilak Yadav Vs Commissioner of Central Excise, Nagpur, Service Tax Appeal No. 85246 of 2023, decided on 8 November 2023, held that a difference between income declared in an income-tax return and the value of services declared in service tax returns cannot, by itself, establish liability to service tax. The Tribunal set aside the appellate order that had revived a service tax demand of ₹24,43,804 against the appellant, a professional cricketer, for financial year 2014-15.
The dispute arose from a show cause notice dated 26 June 2020 alleging a difference of ₹1,97,71,881 between the income disclosed in the appellant’s income-tax return and the value reported in his service tax returns. Revenue presumed that the difference represented consideration received for taxable services on which service tax had not been paid. The original adjudicating authority rejected the demand, relying on the Calcutta High Court judgment in Saurav Ganguly Vs Union of India, reported at 2016 (43) STR 482 (Cal.). However, the Commissioner (Appeals) reversed that decision, holding that the dispute concerned the difference between the two sets of returns rather than the taxability of services.
Before the Tribunal, the appellant argued that the demand was based entirely on a numerical mismatch without examination of his books of account, underlying transactions or the nature of the activities generating the income. He submitted that Revenue had not identified any specific taxable service or established that the disputed amount constituted consideration for such a service. Reliance was placed on several Tribunal decisions, including Commissioner Vs Modern Road Makers Pvt. Ltd. and Lord Krishna Real Infra Pvt. Ltd. Vs Commissioner, supporting the proposition that differences between financial or tax records cannot automatically be treated as taxable service receipts.
The Tribunal examined Section 73(1) of the Finance Act, 1994, which permits recovery of service tax that has not been levied or paid, has been short-levied or short-paid, or has been erroneously refunded. It held that before invoking this provision, Revenue must establish that the amount demanded actually represents unpaid or short-paid service tax. This requires identifying the value of taxable services under Section 67 and establishing that the relevant consideration arose from an activity satisfying the definition of service under Section 65B(44) of the Finance Act, 1994.
The Tribunal found that the show cause notice lacked the necessary examination of the appellant’s activities and transactions. It did not establish even a prima facie basis for concluding that the difference of ₹1,97,71,881 represented consideration received for providing services. Accordingly, the Tribunal held that the show cause notice dated 26 June 2020 was legally unsustainable, set aside the impugned order and allowed the appeal. The ruling reinforces that a mismatch between income-tax and service-tax returns is not, without supporting evidence, sufficient to establish service tax liability.
Cases Discussed
- Saurav Ganguly Vs Union of India — 2016 (43) STR 482 (Cal.). Relied upon by the original adjudicating authority while dropping the demand.
- Commissioner Vs Modern Road Makers Pvt. Ltd. — Final Order No. 86160/2023 dated 28.07.2023. Cited by the appellant concerning demands based on differences in tax records.
- Lord Krishna Real Infra Pvt. Ltd. Vs Commissioner — 2019 (2) TMI 1563 – CESTAT Allahabad. Cited by the appellant regarding the need to examine underlying transactions.
- Sharma Fabricators & Erectors Pvt. Ltd. Vs Commissioner — 2017 (7) TMI 168 – CESTAT Allahabad. Cited by the appellant in support of its objection to a demand founded solely on return differences.
- Go Bindas Entertainment Pvt. Ltd. Vs Commissioner — 2020-TIOL-890-CESTAT-ALL. Cited by the appellant on the same issue.
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER
Brief facts of the case are that the appellant is a professional player of cricket. He is registered with Service Tax. On 26.06.2020, appellant was issued with a show cause notice. It was stated in the said show cause notice that for the year 2014-15, there was difference of Rs.1,97,71,881/- between the returns filed by the appellant as income shown in ITR and the value of service shown in ST returns for the same period. Therefore, it appeared to Revenue that the said difference is on account of value of services rendered by the appellant on which service tax was not paid. Therefore, through the said show cause notice, service tax of Rs.24,43,804/- was demanded and proposals were made for imposing penalties under various sections. On contest, the original authority dropped the demand and concluded proceedings. For dropping the demand, the original authority relied on ruling by Hon’ble Calcutta High Court in the case of Saurav Ganguly vs. UOI reported at 2016 (43) STR 482 (Cal.). The original authority has given a clear finding that service tax cannot be demanded from the present appellant on the grounds stated in the subject show cause notice. Aggrieved by the said order, Revenue preferred appeal before Commissioner (Appeals). Learned Commissioner (Appeals) in para 12 of the impugned order has held that in the instant case there was no issue of taxability of service tax, but the issue was regarding difference of Rs.1,97,71,881/- towards income shown in income tax return vs. value shown in ST returns. Learned Commissioner (Appeals) has set aside the order-in-original and allowed the appeal filed by Revenue. Aggrieved by the said order, appellant is before this Tribunal.
2. Learned counsel for the appellant has submitted that the entire demand is based on difference in ST-3 returns and income tax return and that the demand is raised without examination of the books of accounts and, therefore, the said demand is bad in law. Learned counsel for the appellant has submitted that there should have been examination of the record and the nature of transactions and Revenue should have established that the said transactions were in respect of provision of service. He has submitted that nowhere in the show cause notice, it is established that the difference is consideration received for providing any service. He has relied on various decisions of this Tribunal such as Commissioner vs. Modern Road Makers Pvt. Ltd. decided by this Tribunal through final order No. 86160/2023 dated 28.07.2023, Lord Krishna Real Infra Pvt. Ltd. vs. Commissioner reported at 2019 (2) TMI 1563 – CESTAT Allahabad, Sharma Fabricators & Erectors Pvt. Ltd. vs. Commissioner reported at 2017 (7) TMI 168 – CESTAT Allahabad and Go Bindas Entertainment Pvt. Ltd. vs. Commissioner reported at 2020-TIOL-890-CESTAT-ALL. He has further submitted that in all the above stated decisions of this Tribunal, it was held that only on the basis of difference between the figures reposted in ST return and income tax return, it cannot be presumed that the difference is on account of provision of service and only by calculating the service tax leviable on the said value without further examination of the activities of the appellant and without examination of the transactions, service tax cannot be demanded.
3. Heard the learned AR who has supported the impugned order.
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.
5. We, therefore, set aside the impugned order and allow the appeal.
(Order pronounced in the open court on 08.11.2023)
