Service Tax Demand Based Solely on Form 26AS Unsustainable: CESTAT Allows Appeal by Shree Ganesh Telecom
Pranav B Prem
The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT), presided by Dr. Rachna Gupta (Judicial Member), set aside a service tax demand raised against M/s Shree Ganesh Telecom Pvt. Ltd., holding that reliance solely on Form 26AS data from the Income Tax Department is insufficient to sustain such a demand. The Tribunal emphasized that demand cannot be confirmed merely on the basis of mismatch between income reflected in Form 26AS and figures declared in ST-3 returns without establishing that consideration was actually received.
The appellant, engaged in providing Erection, Commissioning and Installation Services and Maintenance or Repair Services to various telephone service providers, came under departmental scrutiny during the audit of its records for the period April 2016 to March 2017. The department observed a difference between the taxable value declared in the ST-3 returns and income reflected in the balance sheet vis-à-vis job work receipts. Based on this, a show cause notice was issued on 30.07.2021, demanding service tax of ₹25,66,614 along with interest and penalties under Sections 77 and 78 of the Finance Act, 1994. This demand was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals), prompting the appellant to approach the Tribunal.
The appellant contended that the demand was unsustainable as it was raised on the basis of third-party data, particularly Form 26AS, without corroborating evidence of actual receipt of payments. It was submitted that service tax had been paid on the consideration actually received, and the balance shown in Form 26AS pertained to amounts which were never realized due to billing disputes. The appellant further argued that the extended period of limitation was wrongly invoked, as the relevant returns had been filed in July 2019 and all information was available with the department well in advance.
The Tribunal noted that under Rule 3 of the Point of Taxation Rules, 2011, the time of taxation is generally linked to the date of invoice or receipt of payment. In this case, while invoices were raised, the department failed to produce any evidence showing that payments against those invoices were actually received. The reply to the show cause notice dated 16.07.2021 had clearly stated that the invoices remained unpaid due to disputes with the client, and this was not disproved by the department.
It was also observed that the sole basis for the demand was the data from Form 26AS. The Tribunal held that such reliance is impermissible unless it is first established that the differential amount shown in Form 26AS is indeed consideration for taxable services provided. Citing its own precedent in Kush Constructions v. CGST NACIN, ZTI, Kanpur [2019 (5) TMI 1248-CESTAT Allababad] and Indus Motor Company v. CCE, Cochin [2008 (9) STR (Tri.-Bang.)], the Tribunal reaffirmed that service tax demand cannot rest on assumptions and presumptions.
Additionally, the Tribunal found merit in the appellant’s contention that the show cause notice was time-barred. The demand pertained to the financial year 2016–2017, and the show cause notice was issued only in July 2021. The Tribunal referred to the Supreme Court’s ruling in Pushpam Pharmaceuticals Co. v. Collector of Central Excise [1995 (3) TMI 100; 1995 (78) ELT 401 (SC)], which clarified that “suppression of facts” must be intentional to invoke the extended limitation period. In this case, since all relevant data had been disclosed in filed returns and statutory records, there was no case of deliberate suppression.
Another flaw noted in the proceedings was the lack of a valid Document Identification Number (DIN) in the adjudication order, as mandated by CBIC Circular No. 122/41/2019-GST dated 05.11.2019. The Tribunal observed that the incorrect or missing DIN rendered the order unsustainable.
In conclusion, the Tribunal found that the department had failed to substantiate the allegations and that the reliance on Form 26AS alone, without supporting evidence of actual consideration received, was misplaced. The show cause notice was declared time-barred, and the impugned orders were quashed. Accordingly, the appeal was allowed, and the demand confirmed against M/s Shree Ganesh Telecom Pvt. Ltd. was set aside.
Appearance
Counsel for Appellant/ Assessee: Pankaj Sethi
Counsel for Respondent/ Department: Anuj Kumar Neeraj
Cause Title: M/s Shree Ganesh Telecom Pvt. Ltd. v. Commissioner (Appeals), Central Goods & Service Tax & Central Excise, Indore
Case No: Service Tax Appeal No. 50211 of 2024
Coram: Dr. Rachna Gupta [Judicial Member]
