Service Tax Demand based on Form 26 AS from Income Tax Department without Investigation is Invalid

Last updated: 23 November 2023

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Quick Summary

The CESTAT has ruled that a service tax demand cannot be raised simply by referencing Form 26AS from the Income Tax Department. The tribunal found that without a thorough investigation by the adjudicating authority, such demands are invalid. This ruling is particularly relevant when extended periods of limitation are invoked, as the demand must be calculated according to specific valuation rules.

Court :
CESTAT, Kolkata

Brief :
The CESTAT, Kolkata in M/s. Piyush Sharma v. Commissioner of CGST & CX, Patna-I [Service Tax Appeal No.75856 of 2021 dated October 17, 2023] held that service tax demand based on Form 26 AS from the Income Tax Department without Investigation is Invalid.

Citation :
Service Tax Appeal No.75856 of 2021 dated October 17, 2023

The CESTAT, Kolkata in M/s. Piyush Sharma v. Commissioner of CGST & CX, Patna-I [Service Tax Appeal No.75856 of 2021 dated October 17, 2023] held that service tax demand based on Form 26 AS from the Income Tax Department without Investigation is Invalid.

Facts

M/s. Piyush Sharma, ("the Appellant") has undertaken and/or rendered services to telecommunication companies viz. Tata Teleservices Ltd., ATC Telecom Pvt. Ltd., ATC Infrastructure Services Pvt. Ltd. and Idea Cellular Infrastructure Ltd. of erection, commissioning, installation, completion fitting-out, repair and maintenance services to telecommunication towers of those companies, which also includes execution of Civil Construction Work.

The Income Tax Department, in form 26AS found that the Appellant has received an amount of Rs. 1,19,67,288/- during the period from 2012-13 to 2016-17 on which TDS was deducted by the service recipient, therefore, show cause notice dated April 23, 2018 ("the SCN") was issued to the Appellant for demanding service tax.

Another demand was raised on February 11, 2020 for the period April 2017 to June 2017 based on the Best Judgement Method. The Appellant contested the SCN, but the demand proposed in the show cause notice was confirmed against the Appellant and passed an Order ("the Impugned Order")

The Appellant appealed and submitted that the demand cannot be raised based on the figure of Form 26AS. Further submitted that the Appellant received contractual payments on the execution of ‘Works Contract Services’ and the Appellant had submitted the copies of work orders, payment particulars, copies of the invoices and Form 26AS for proper adjudication.

The Department reiterated the findings of the Impugned Order and submitted that the Appellant did not co-operate during the investigation, therefore, the demand has been rightly calculated based on Form 26AS.

Issue

Whether Service Tax demand can be raised on the basis of Form 26AS without proper investigation by the Adjudicating Authority?

Held

The CESTAT in Service Tax Appeal No.75856 of 2021 held as under:

Noted that, the Appellant is a registered service provider and filing their Service Tax returns and no investigation has been conducted by the Adjudicating Authority, in these circumstances, the demand cannot be raised on the basis of Form 26AS obtained from the Income Tax Department.
Observed that, the SCN has been issued to the Appellant by invoking an extended period of limitation and some of the demand pertains to beyond five years and in this case, the demand has to be calculated in terms of Valuation Rules, 2006.
Held that, the extended period of limitation is not invocable. Moreover, on the basis of Form 26AS, no demand is sustainable against the Appellant.

FAQ :

No, the CESTAT has held that a service tax demand cannot be raised solely on the basis of Form 26AS obtained from the Income Tax Department without proper investigation.

The CESTAT ruled that a service tax demand based on Form 26AS without investigation is invalid, and the extended period of limitation cannot be invoked in such cases.

Form 26AS is a tax credit statement that reflects the TDS (Tax Deducted at Source) and other tax credits available to a taxpayer, as reported by deductors to the Income Tax Department.

The ruling emphasises that tax authorities must conduct their own investigation to verify information and build a case, rather than relying solely on data from another department's forms without independent inquiry.

The extended period of limitation can be invoked when there is suppression of facts or wilful misstatement by the assessee. However, in this case, it was deemed not invocable due to the lack of proper investigation.