Value of taxable services cannot arrived merely on basis of Form 26AS: CESTAT

CESTAT, Ahmedabad: The Appellant is engaged in providing financial consultancy services under business auxiliary service and management or business consultancy services. Appellant received commission charges to the tune of Rs. 10,56,34,930 from various customers but did not pay any service tax on the same, which came down to Rs. 1,05,34,774. However, the appellant provided diverse services to various entities and the department has classified them all as commission agents under the category of “Business Auxiliary Service” and “Management Consultancy Service”. On the basis of the investigation conducted and scrutiny of the records of the Appellant, it appeared that the Appellant was engaged in providing services as Commission agents to M/s Windsor Machines Ltd., and Management or Business Consultancy to various customers in India. Appellant neither filed ST-3 returns nor paid any amount of service tax. A show cause notice on 20.10.2016 was issued proposing the Service tax demand along with interest, and penalty which was confirmed by the Additional Commissioner under proviso to Section 73(1) of the Finance Act, 1994 and ordered for the appropriation of Rs. 20,00,000 paid by Appellant during the investigation. Further demand of Interest under Section 75 of the Finance Act, 1994, and Penalty of Rs. 20,000 under Section 77, Penalty of Rs. 1,05,34,774 under Section 78 of the Finance Act, 1994 was also confirmed.

Appeal before Commissioner (Appeals): Aggrieved, the appellant filed an appeal before the Commissioner (Appeals) who by impugned order -in-appeal dated 18-10-2018 upheld the order passed by the Additional Commissioner and dismissed the appeal. Aggrieved by the impugned order-in-appeal present Appeal was filed.

Appeal before CESTAT: The main question was whether the appellant can submit additional documents/records and additional evidence before the appellate tribunal in their support.

The court held that this Tribunal being a final fact-finding authority can very well admit fresh evidence and argument, and relied on the case of National Thermal Power Co. Ltd. v. Commissioner of Income Tax, which held that the Tribunal has jurisdiction to examine the question of law which arises on facts, as found by the authorities below, and having bearing on the tax liability of the assessee, even though the said question was neither raised before the lower authorities nor in appeal memorandum before the Tribunal

In the present case, the service tax was demanded on the basis of the TDS statement / 26AS Statement / 3CD Statement and financial statements seized from the premises of M/s Forward Resources Pvt. Ltd. However, the presumption of documents in certain cases under Section 36A of the Central Excise Act is available only when the documents are produced by or seized from the present matter for confirmation of service tax demand revenue also relies upon the TDS /26As Statement /3CD Statement. Therefore, by relying on the 26AS /TDS Statement / 3CD statement under the Service Tax Act, the demand for service tax cannot be made. The court found support from the decision of M/s Ved Security Vs. CCE, CESTAT, Kolkata wherein it was held that the value of taxable services cannot be arrived at merely on the basis of the TDS statements filed by the clients inasmuch as even if the payments are not made by the client, the expenditure is booked based on which the form 26AS is filed, which cannot be considered as the value of taxable services for the purpose of demand of Service tax.

The Tribunal held that only on the basis of the 26AS statement and other grounds mentioned in the judgment, no service tax demand is sustainable. Therefore, the demand of service tax (except the amount of service tax payable as per the appellant, admitted by the appellant, and deposited as stated in the appellant’s submission) interest and penalty are not sustainable and the same was accordingly set aside.

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