Custom, Excise & Service Tax Tribunal
Allied Concern Dhanchari Part Ii vs Shillong on 30 January, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH : KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 75877 of 2015
(Arising out of Order-in-Original/ST/SHILLONG No. 06/2015 dated 17.06.2015 passed
by the Commissioner of Central Excise, Morellow Compound, M.G. Road, Shillong -
793 001)
M/s. Allied Concern, Dhanchari - Part II : Appellant
Silchar, Aizawl Road, P.O.: Sildubi,
PIN - 788 112 (Assam)
VERSUS
Commissioner of Central Excise : Respondent
Morellow Compound, M.G. Road,
Shillong - 793 001
APPEARANCE:
Shri Pranab Sikdar, Consultant
Shri Dipanjoy Bhattacharya, Advocate
For the Appellant
Shri S. Dey, Authorized Representative
For the Respondent
CORAM:
HON'BLE SHRI ASHOK JINDAL, MEMBER (JUDICIAL)
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO. 75312 / 2025
DATE OF HEARING / DECISION: 30.01.2025
ORDER:[PER SHRI ASHOK JINDAL] The appellant is in appeal against the impugned order demanding Service Tax under the category of 'works contract service' for the period from 2009-10 to 2013-14 by issuance of the Show Cause Notice dated 22.10.2014, which was issued to the appellant on the basis of scrutiny of their balance sheets, bills, vouchers, Form 26AS and S.T.-3 Returns.
2. It was alleged by the Revenue that the appellant had short paid Service Tax during the impugned period and accordingly, the impugned proceedings Page 2 of 11 Appeal No.: ST/75877/2015-DB came to be initiated against the appellant. Thereafter, vide the impugned order dated 17.06.2015, the demand of Service Tax, along with interest, was confirmed; penalties were also imposed on the appellant.
2.1. Aggrieved from the said order, the appellant is before us.
3. The Ld. Counsel appearing on behalf of the appellant submits that the impugned demand is based solely on the appellant's financial records without any corroborative piece of evidence being adduced by the Revenue to substantiate their allegations. Therefore, he contends that the demand itself is void ab initio under the established legal provisions. To support his contentions, the Ld. Counsel for the appellant relied upon the decision in the case of M/s. Rishu Enterprise v. Commissioner of C.G.S.T. & Excise, Dibrugarh [Final Order No. 75177 of 2024 dated 08.02.2024 in Service Tax Appeal No. 75509 of 2022 - CESTAT, Kolkata] and also the decision in the case of M/s. Luit Developers Pvt. Ltd. v. Commissioner of C.G.S.T. & Central Excise, Dibrugarh [Final Order No. 75120 of 2022 dated 23.02.2022 in Service Tax Appeal No. 75792 of 2021 - CESTAT, Kolkata].
2.1. It is his further submission that the appellant has engaged in the activity of construction of dams for the Government of Assam and the said activity is exempt since the same relates to transmission and/or distribution of electricity, in terms of Notification No. 45/2010-S.T. dated 20.07.2010, Notification No. 11/2010-S.T. dated 27.02.2010 and thereafter vide Notification No. 25/2012-S.T. dated 20.06.2012. Accordingly, the appellant contends that there is no liability on its part to pay Service Tax.
Page 3 of 11Appeal No.: ST/75877/2015-DB 2.2. Moreover, it is their submission that wherever they were liable to pay Service Tax, being a sub- contractor, the main contractor has deducted the Service Tax from the amount payable to the appellant and the same has been paid by the main contractor, on behalf of the appellant.
2.3. In view of the above submissions, the Ld. Counsel for the appellant submits that no demand is sustainable against the appellant.
3. On the other hand, the Ld. Authorized Representative of the Revenue supported the impugned order.
4. Heard the parties and considered their submissions.
5. We find that in this case, the demand has been raised under the category of 'works contract service' on the basis of comparison of their financial records along with Form 26AS and S.T.-3 Returns filed by them. No proper investigation has been conducted to find out as to the activity that was being undertaken by the appellant and as to whether the appellant have paid Service Tax on that activity or whether the said activity was exempt from the levy of Service Tax. Therefore, we are of the view that the demand against the appellant raised merely on the basis of financial records is not sustainable, since the Revenue has not adduced any supportive evidence in support of its allegations.
5.1. We also find that a similar issue has been examined by this Tribunal in the case of M/s. Rishu Enterprise (supra), wherein it has been observed as under: -
Page 4 of 11Appeal No.: ST/75877/2015-DB
"6. We find that it is evident from the facts of the case that the whole of the demand has been raised against the appellant on the basis of Form 26AS issued by the Income Tax Department. It is also evident from the fact that the appellant has also provided the copies of Balance Sheet, Form 26As, Income Tax Return etc. during the investigation itself. Further, the appellant also joined the adjudication proceedings through virtual hearing, but in the show-cause notice, the demand has been raised based only on the basis of Form 26AS issued to them. Therefore, the issue arises whether the demand can be raised on the basis of Form 26AS supplied by the Income Tax Department or not ?
The said issue has also been examined by this Tribunal in the case of Pijush Sharma (supra), wherein this Tribunal has held as under :
"10. In this case, the appellant has contended that the demand has been raised on the basis of Form-26AS supplied by the Income Tax department. Although summons were issued to the appellant and the appellant did not join the proceedings, therefore, the demand has been raised on the basis of Form 26AS. Admittedly, no investigation has been conducted in this case at the end of the appellant by the adjudicating authority. Being the appellant a registered service provider and filing their Service Tax returns, in that circumstances, the demand cannot be raised on the basis of Form-26AS obtained from the Income Tax Department. Further, the adjudication order has been passed ex parte.
11. Moreover, the show cause notice has been issued to the appellant by invoking extended period of limitation and some of the demand pertains to beyond five years and in this case, the demand has to be calculated in terms of Valuation Rules, 2006. The issue in this case is whether the appellant is eligible for the benefit of Notification No.30/2012-ST dated 20.06.2012 or not? 12. In that circumstances, we hold that extended period of limitation is not invocable. Moreover, on the basis of Form-26AS, no demand is sustainable against the appellant."Page 5 of 11
Appeal No.: ST/75877/2015-DB
7. Further, in the case of M/s Lord Krishna Real Infra Private Limited (supra), this Tribunal Tribunal has examined the issue and observed as under :
"We also note that there were no other record of the appellant which were taken into consideration for entertaining a prima facie view that appellant was required to pay short paid service tax of around Rs.8 crores for the said period than the information that was available in returns in the form 26AS. In this regard we note that this Tribunal had an occasion to examine sustainability of demand raised only on the basis of form 26AS. It was held by this Tribunal in the case of Sharma Fabricators Pvt. Ltd. Vs Commissioner of Central Excise, Allahabad reported at 2017 (5) GSTL 96 (Tri.-All.) as follows:
"3. Heard the ld. Counsel for M/s. Sharma he has basically argued that the said Show Cause Notices were not issued by examining the books of account maintained by M/s. Sharma. The Show Cause Notices were based on the presumptions and third party information. He has argued that even when the payments were not made by the clients but the clients booked the expenditure in their books of account they were required to pay the related tax deducted at source to the exchequer and issue a certificate of TDS and incorporate the same in the return called 26AS filed with the Income Tax Authorities and such information cannot be the basis for arrival of the consideration received by the service provider. He has submitted that both the Show Cause Notices were issued without examining the books of account maintained by M/s. Sharma and were issued on the basis of presumptions about the consideration received by M/s. Sharma. The considerations taken into account for issue of Show Cause Notices was in no way near to the actual consideration received by M/s. Sharma during the relevant period which should be the basis for arriving at the assessable value. He has stated that they had elaborated before the Original Authority various reasons for discrepancies in the figures arrived at presuming the considerations received by M/s. Sharma on the basis of such TDS Page 6 of 11 Appeal No.: ST/75877/2015-DB Certificates and the figures in the returns. He has further relied upon this Tribunal's Final Order in the case of Alpa Management Consultants P. Ltd. v. Commissioner of Service Tax, Bangalore reported in 2007 (6) S.T.R. 181 (Tri. - Bangalore). He submitted that this Tribunal in the said case has held that demands, solely based on the income-tax returns for liability of Service Tax under Finance Act, 1994 is not sustainable. In respect of appeal filed by Revenue ld. counsel for M/s. Sharma has contended that the grounds of appeal are travelling beyond the Show Cause Notice and therefore that is not sustainable. He has further elaborated that cargo handling was brought in as ground by Revenue in the appeal filed by Revenue whereas that issue was not at all dealt with in the Show Cause Notices dated 20- 4-2009 & 13-10-2009.
4.Heard the ld. DR, who has presented the grounds of appeal in appeal filed by Revenue.
5.Having considered the rival contentions and on perusal of record, we find that in the cases of both the Show Cause Notices dated 20-4- 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 abovestated two Show Cause Notices. Therefore, the transactions recorded in the books of account cannot be held to be Page 7 of 11 Appeal No.: ST/75877/2015-DB 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 also stand disposed of. Cross Objection also disposed of."
From the record it is very clear that none of the records of appellant were taken into consideration for framing of charges that appellant had short paid service tax to the tune of around Rs.8 crores and the said charges were framed only on the basis of information in the form 26AS. We further note that the audit report as explained by the Chartered Accountant for appellant found that Cenvat credit to the tune of Rs.6,38,024/- was inadmissible to the appellant out of total Cenvat credit of Rs.2,21,35,916/- whereas the learned Original Authority has disallowed the same only on the basis that original documents were not produced before him. We accept the claim by the appellant that original documents were seen by the audit party visited by the appellant and such evidence was not taken into consideration by the Original Authority. The learned Original Authority was required to follow the principles of natural justice and direct the appellant to produce the original documents on the basis of which Cenvat credit was availed by the appellant, in case he had doubt about the availability of original documents with the appellant. The order of Original Authority presuming that the appellant did not have original documents is not sustainable in respect of availment of Cenvat credit. Further, there was no proposal in the said show cause notice to deny said Cenvat credit. Further, we find that on the basis of form 26AS return filed under Income Tax Act without examining any other records of the appellant. Charges of short payment of service tax to the tune of Rs.8 crores were made against the appellant. It was possible for Revenue to know the transactions between other parties & appellant from form 26AS. Revenue could Page 8 of 11 Appeal No.: ST/75877/2015-DB have investigated into the nature of such transactions & should have established that the said transactions were in respect of provision of said service. Then alone the charges of short payment of Service Tax would have sustained. We find that Final Order of this Tribunal in the case of Sharma Fabricators Pvt. Ltd. (supra) is squarely applicable in the present case. We, therefore, hold that Revenue did not discharge its burden to prove short payment of service tax. We also hold that the said show cause notice dated 05.10.2016 is not sustainable."
8. In view of the judicial pronouncement of this Tribunal, we hold that merely on the basis of Form 26AS issued by the Income Tax Department, the demand of Service Tax is not sustainable against the appellant.
9. We further take note of the fact that the appellant had contested on limitation also. We find that initially, the investigation started against the appellant in April, 2015 when they came to know that the appellant is not paying service tax on taxable services and no efforts were made by the Department to issue the show-cause notice in time or to further investigate the matter, no efforts were made by the Department to find out for what purposes these amounts have been paid by the service recipient.
10. In that circumstances, we hold that as the investigation is faulty and the show-cause notice has been issued by invoking extended period of limitation, the demand is not sustainable on limitation itself.
11. In view of this, we hold that the impugned demand is not sustainable against the appellant on the basis of the details provided by the Income Tax Department in Form 26AS and the extended period of limitation is not invokable.
12. In view of the aforesaid observations, we set aside the impugned order and allow the appeal with consequential relief, if any."
Page 9 of 11Appeal No.: ST/75877/2015-DB 5.2. Further, in the case of M/s. Luit Developers Pvt. Ltd. (supra), again this Tribunal examined the said issue and observed as under: -
"10. I find force in the contention of the Ld Counsel of the appellant that CA Certified Reconciliation of ST-3 Returns and Form 26AS clearly shows that inflated figure in Form 26AS is because some Service Recipients deducted TDS not only on the rent/commission but also on the Service Tax component. The Service Recipients also confirmed the same. I also find force in the contention of the appellant that part of the service tax being demanded by the Department on RCM basis cannot be sustained since Service tax was already collected by Service Providers as seen from invoices and Reconciliation Certificate. Moreover, some service providers for which the Department is demanding Service Tax on RCM basis are Limited companies or Pvt Ltd Companies like Blue Star Ltd, Kone Elevator India Pvt Ltd and Tractors India Pvt Ltd and therefore tax is not on Reverse Charge, but on forward charge basis as per Point I(A)(v) of Notification No 30/2012-Service Tax [Reverse Charge Notification] dated 20.06.2012.
11. I also find force in the submission of the Ld Counsel for the appellant that figures reflected in Form 26AS cannot be used to determine Service Tax liability unless there is any evidence shown that it was due to a taxable service as held in Kush Constructions(supra). Also, figures shown to Income Tax authorities cannot be used to determine Service Tax as held in Synergy Audio Visual Workshop Pvt Ltd(supra) and Deluxe Enterprises(supra).
12. I find that the Service tax demand for the period April 2014 September 2014 is beyond the extended period of 5 years. I also find that the Department has done audit of the appellant for February, 2014- 15 as per Detailed Manual Scrutiny Report dated 15.12.2017, which includes checking of Form 26AS as clearly mentioned in Para 5.2 of CBEC Circular No.185/4/2015-ST dated 30.6.2015 vide F.No 137/314/2012 and therefore no suppression can be alleged for this period. I also find that as held in Gannon Dunkerley & Co Ltd (supra), since the appellant was filing all ST-3 Returns regularly, the Department's stand that it could examine the factual Page 10 of 11 Appeal No.: ST/75877/2015-DB position only on receiving details of Form 26AS cannot be sustained because CBEC Circular No. 113/7/2009-S.T., dated 23-4-2009 vide F.No. 137/158/2008-CX.4 and CBEC Circular No 185/4/2015-ST dated 30.6.2015 vide F.No 137/314/2012 categorically puts duty on the Assessing Officer to effectively scrutinize the returns at the preliminary stage. I also find that proviso to Section 73(1) has not been invoked in the operative part of the SCN and therefore extended period cannot be invoked as held in Satish Kumar and Co (supra). I also find that invoking extended period cannot be sustained for part of tax demand raised on RCM basis by virtue of it being a revenue neutral situation since the appellant is eligible for credit if it had done tax payment as also held in Universal Dredging & Reclamation Corporation Ltd (supra).
13. I also find that the appellant is a Pvt Ltd Company and figures in Form 26AS are already included in Revenue from Operations in the Profit/Loss Account of Balance Sheet, which is a public document, and therefore no suppression can be alleged as held in Hindalco Industries Ltd(supra). I also find that the Department has not adduced any positive evidence to show malafide intention for evasion of service tax and therefore extended period cannot be invoked as held in Pushpam Pharmaceuticals Limited(supra).
14. Therefore, in view of the above discussions and decisions cited, the entire demand fails on merits as well as on limitation. Thus, there can be no imposition of Service tax, interest and penalty on the appellant. The impugned order cannot be sustained and is set aside. Accordingly, the appeal is allowed with consequential benefits."
6. We further take note of the fact that the appellant was engaged in the activity of construction of dams. The said activity was related to transmission and distribution of electricity, which is exempt as per Notification No. 45/2010-S.T. dated 20.07.2010, Notification No. 11/2010-S.T. dated 27.02.2010 and Notification No. 25/2012-S.T. dated 20.06.2012. Thus, we find that on the said activity, the appellant is not liable to pay Service Tax.
Page 11 of 11Appeal No.: ST/75877/2015-DB
7. Moreover, wherever the appellant provided services, being a sub-contractor, the main contractor has deducted the Service Tax component from the payments made to the appellant and paid the said Service Tax in the Government treasury, on behalf of the appellant. In these circumstances, we find that the demand of Service Tax is not sustainable against the appellant.
8. Since no demand of Service Tax is sustainable against the appellant, no penalty can be imposed on the appellant.
9. In view of the above observations, we set aside the impugned order and allow the appeal, with consequential relief, if any, as per law.
(Operative part of the order was pronounced in open court) Sd/-
(ASHOK JINDAL) MEMBER (JUDICIAL) Sd/-
(K. ANPAZHAKAN) MEMBER (TECHNICAL) Sdd