CESTAT Kolkata Rejects Tax Demand, No Verification By Dept for the Amount Noted in Form 26AS

The demand for Service Tax only based on form 26 AS given via the income tax department has been set aside by the Kolkata Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT).

The Appellant, Shri. Rajeshwar Prasad Choudhari contested the impugned order passed through the Commissioner (Appeals), CGST & CX Ranchi, wherein the Appellate Authority has kept the Order-in-Original.

In the Order-in-Original, the Adjudicating authority has authorized the service tax demand, along with the Cess, of Rs. 6,98,811 including interest and an equal amount of tax as a penalty.

Under Sections 77(1) (a),(b), (c) and 77(2) of the Finance Act, 1994 the penalty is levied. The appellant furnished that the demand in the case is barred by the limitation.

They argued that the whole proceedings were taken out based on the available data in Form 26AS of the Income Tax department. As such numbers are been included in the profit or loss account in the balance sheet which is a public document and hence there could be no suppression.

The Department has failed to present any affirmative evidence demonstrating malicious intent or mens rea for the evasion of Service Tax under any specific category of Taxable Services.

As none of the essential elements required to invoke an extended period of limitation, as outlined in the proviso to Sec. 73(1) of the Act, are present in this instance, the demand validated in the contested order by resorting to an extended period of limitation is not tenable.

The Appellant has argued that the imposition of Service Tax cannot be solely based on the information in the Form 26AS Statement provided by the Income Tax department.

Citing the precedent set in the case of Luit Developers Pvt. Ltd. vs. Commissioner, the Appellant contends that the figures reflected in Form 26AS should not be utilized to ascertain Service Tax liability unless there is accompanying evidence establishing that it was attributable to a taxable service.

The confirming authority appropriately upheld the demand, a decision affirmed by the Commissioner (Appeals) in the contested order. Consequently, the plea to dismiss the Appellant’s appeal was made.

The department failed to conduct any verification to establish whether the amount specified in Form 26AS was received by the Appellant for providing any taxable service.

Read Also:- CESTAT, Kolkata: Tax Demand Basis on 26AS Form Without Investigation is Not Valid

In a decision by a single-member bench featuring Mr. K. Anpazhakan, Member (Technical), it was noted that the Department did not present any conclusive evidence indicating malicious intent or mens rea regarding the Appellant’s evasion of Service Tax. The CESTAT ruled that an extended period could not be invoked in this scenario to demand service tax from the Appellant.

Given that the entire demand was raised beyond the normal period of limitation, the Tribunal dismissed the demand on grounds of limitation.