2024 (6) TMI 771 - AT - Service Tax

Determination of service tax not levied or not paid under the provisions of Section 73 of Finance Act 1994 - determination of value of taxable services for charging service tax as provided under Section 67 of the said Act - value of taxable services for charging service tax is properly determined during the proceedings of this case or not. Whether for determination of service tax not levied or not paid under the provisions of Section 73 of Finance Act 1994 it is essential to determine the value of taxable services for charging service tax as provided under Section 67 of the said Act? - HELD THAT - Section 67 of Finance Act 1994 provides that where service tax is chargeable on any taxable service with reference to its value then such value shall be the consideration in money charged by the service provider. Therefore it is primarily important to determine the value on which service tax shall be levied as a specific percentage and such value should be the value of taxable service. Clause (44) of Section 65B of Finance Act 1994 has provided for definition of service and it has elaborately dealt with a list of activities which shall not be included in such definition - while determining value of taxable service under Section 67 ibid such aspect as to the activities which are covered by negative list and activities which are mentioned in the definition of service as those which are not covered by such definition becomes important - for arriving at amount of service tax not paid or not levied arriving at correct value of taxable service which has not suffered service tax needs to be determined as the first step. Whether the value of taxable services for charging service tax is properly determined during the proceedings of this case? - HELD THAT - In the present case the charges were framed in the show cause notice for arriving at taxable value of Rs.4, 54, 64, 051/- without examining the books of account and records maintained by the appellant and without quoting any admissible evidence for making out a prima facie case. It is noted that in the case of M/S KUSH CONSTRUCTIONS VERSUS CGST NACIN ZTI KANPUR 2019 (5) TMI 1248 - CESTAT ALLAHABAD this Tribunal had held that without examining the records for difference in the figures reflected in income tax returns and ST-3 returns Revenue cannot raise demand without establishing the entire amount received by the appellant as reflected in the income tax returns is consideration for providing services. There was no basis for arriving at taxable value of Rs.4, 54, 64, 051/- for the period from October 2013 to March 2014 in the subject show cause notice dated 24.04.2019. The subject show cause notice is not sustainable in law. Whether the impugned order is sustainable in law or whether any part of the said impugned order is not sustainable? - HELD THAT - Since the subject show cause notice is held as non- sustainable the impugned order passed by learned Commissioner (Appeals) is set aside and the appeal is allowed. Appeal allowed.

Summary

Issues Involved:
1. Determination of service tax not levied or not paid under Section 73 of the Finance Act, 1994.
2. Proper determination of the value of taxable services for charging service tax.
3. Sustainability of the impugned order.

Detailed Analysis:

Issue A: Determination of Service Tax Not Levied or Not Paid
For the determination of service tax under Section 73 of the Finance Act, 1994, it is essential to determine the value of taxable services as provided under Section 67 of the said Act. Section 66B of the Finance Act, 1994, provides for the levy of service tax at 14% on the value of service. Section 67 specifies that the value shall be the consideration in money charged by the service provider. The definition of service under Clause (44) of Section 65B and the negative list under Section 66D must be considered. Thus, the first step is to determine the correct value of taxable service.

Issue B: Proper Determination of Value of Taxable Services
The Tribunal noted that the Revenue, without examining any records of the appellant, concluded that a taxable value of Rs.7,19,93,389/- for the period from October 2013 to March 2014 had not been subjected to service tax. The show cause notice did not provide evidence that this amount was received for providing services. The Tribunal cited several precedent decisions:

1. Umesh Tilak Yadav (2024) 159 taxmann.com 336 (Mumbai-CESTAT):
- The Tribunal emphasized that the demand must be based on the value derived from consideration received for services, which was not established in the show cause notice.

2. Commissioner vs. Modern Road Makers Pvt. Ltd. (Appeal No. ST/86984/2021):
- The Tribunal held that the show cause notice was presumptive and lacked examination of the respondent's activities or reasons for the turnover difference.

3. Principal Commissioner vs. SBI Life Insurance Co. Ltd. [2024] 159 taxmann.com 168:
- The Tribunal reiterated that the demand based on the difference between ST-3 returns and income tax returns without further examination is not sustainable.

4. Lord Krishna Real Infra Pvt. Ltd. 2019 (2) TMI 1563 - CESTAT All.:
- It was held that Revenue must investigate transactions and establish that they were for providing services.

5. Sharma Fabricators & Erectors P Ltd. 2017 (7) TMI 168 - CESTAT All.:
- The Tribunal noted that charges must be based on the assessee's books of account and other admissible evidence.

6. Kush Construction 2019 (5) TMI 1248 - CESTAT All.:
- The Tribunal held that without examining reasons for differences in figures between income tax returns and ST-3 returns, Revenue cannot raise a demand.

The Tribunal concluded that the show cause notice lacked a basis for arriving at the taxable value and was thus not sustainable in law.

Issue C: Sustainability of the Impugned Order
Since the show cause notice was held to be non-sustainable, the impugned order passed by the Commissioner (Appeals) was set aside. The appeal filed by the appellant was allowed, and the cross-application filed by Revenue was dismissed.

Conclusion:
The Tribunal allowed the appeal by setting aside the order passed by the Commissioner (Appeals) and dismissed the cross-application filed by Revenue. The primary reason was the lack of examination of the appellant's records and the presumptive nature of the show cause notice, which failed to establish that the amount in question was received for providing taxable services.