10 June 2024


Customs, Excise and Service Tax Appellate Tribunal

South Eastern Coalfields Limited vs. Commissioner of Central Excise& Service Tax



Service Tax

Demand cannot be confirmed by comparing the ST -3 returns with balance sheet figures, in the absence of any evidence to the contrary

In facts of the present case, in the course of an audit by the Audit Commissionerate, the figures of ST-3 Returns filed during the period April 2015 to June 2017 was compared with some specific ledger account balances appearing in the Trial Balance for the period April 2015 to June 2017.

Based on such comparative figures as appearing in the Trial Balance and ST-3 returns, the Revenue authorities held that, the difference in the two set of figures represent the value of taxable services on which due service tax has not been paid. A demand of Rs. 11,36,80,999 was proposed in the Show Cause Notice. The Adjudicating Authority remanded the matter for further verification to the Range Office and thereafter confirmed the demand of Rs. 8,92,567 plus applicable interest and equivalent penalty under Section 78 of the Finance Act, 1994.

The issue before present Tribunal is whether the difference in the figures found in the Trial Balance as compared to the figures declared in the ST-3 returns amounts to prima-facie short payment of service tax, and whether the invocation of extended period of limitation and imposition of penalties is correct.

It is a settled principle of law that, service tax can be levied only when there is clear identification of a service provider, service recipient and consideration paid for the same. In the absence of any such evidence of the service recipient and the service provided, service tax cannot be demanded and confirmed. It is not open for the Department to raise demands on the basis of other statutory returns or balance sheets without proving that such service has been rendered by the appellant and consideration thereof has been received.

The Tribunal in a catena of decisions has held that it is well settled law that, no demand can be confirmed by comparing the ST -3 returns with balance sheet figures, in the absence of any evidence to the contrary that income in the balance sheet, if excess, reflects the provision of taxable service. As it is the Revenue authorities who have made the allegations of on payment of tax, and as such, the onus to prove the said allegation lies with them to substantiate the allegations. In the case of Principal Commissioner, CGST vs. SBI Life Insurance Company Limited, the Tribunal held that demand/penalty on the basis of difference between ST-3 Returns and Income tax returns of any period, without further examination to establish that the difference is on account consideration received towards discharge of services, cannot be sustained.

Further, it is a fact on record that, the Appellant was filing his ST-3 returns regularly. The Department did not raise any query or seek any clarification from the Appellant. Thereafter, merely on the basis of audit observation as per the figures of Trial Balance, the Revenue, cannot, at this stage allege suppression. Accordingly, the impugned order cannot be sustained and is set aside. Appeal allowed.

Tags : Demand Confirmation Legality

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