SCN based on difference in TT returns & ST-3 returns - matter remanded for examining actual receipt of amount.

PJ/Case Laws/2012-12/1015

Case: M/S ASK MANAGEMENT CONSULTANCY SERVICES PVT LTD V/s COMMISSIONER OF CENTRAL EXCISE, VADODARA

Citation: 2012-TIOL-305-CESTAT-AHM

Issue:- Whether demand of service tax can be made on ground that there was a difference between income shown in income tax returns and ST-3 returns?

Brief Facts:- Show Cause Notice was issued to the appellant by comparing the income tax return with the ST-3 return and it was found that the income shown in the income tax return was much more than the ST-3 return. The appellant, in the reply to the Show Cause Notice, submitted that in the income tax return, the income is shown on accrual basis, whereas the Service Tax is required to be paid only after the receipt of payment. Many times, amount is invoiced and on some occasion, the amount may not be received at all. That being the situation, notice cannot be issued only on the basis of difference between the income tax return and Service Tax return.

The Original Authority confirmed the demand. In appeal, the Commissioner (Appeal) observed that the appellant had shown higher income in the income tax return to paint a rosy picture of the financial affairs of the company.

Appellant is in appeal before the Tribunal.

Both the Appellant and the Respondent agree that the matter is required to be remanded at this stage itself in view of the fact that the claim made by the appellant should have been verified before confirming the demand.

Reasoning of Judgment:- The Tribunal noted that the Original Adjudicating Authority called for bank statement, which was submitted by the appellant. Even though, the appellant explained that receipts on bank statements includes receipt of various other amounts such as interest, loan etc and therefore without proper verification that cannot be taken as income for rendering services, the original adjudicating authority proceeded to confirm the demand on the basis of bank statement. In fact, the original adjudicating authority confirmed bigger amount than what was mentioned in the Show Cause Notice also, which was rightly set aside by the Commissioner (Appeals), hence is not the subject matter of the appeal. However, while the Commissioner (Appeals) renders justice on the confirmation of higher amount than what was indicated in the Show Cause Notice, for confirmation of demand on the basis of income tax return, he observed that the appellant had shown higher income in the income tax return to paint a rosy picture of the financial affairs of the company, which was not the ground on which the Show Cause Notice was issued nor as a defence advanced either at original authority's adjudication stage or at the appeal stage. He further held that on going through the records, nowhere the appellant has made such a claim. Under these circumstances, the matter is required to be remanded to original adjudicating authority who shall verify the amount actually received for providing service by the appellant during the whole period covered by the Show Cause Notice, verify the same and thereafter come to a conclusion, Needless to say that the appellant shall be given an opportunity to present their case before a final decision is taken.

Decision:- Matter remanded.

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PJ/Case Laws/2012-12/1015

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