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2026 Supreme(Online)(CESTAT) 1485
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL
Ashok Jindal, Member (Judicial), K. Anpazhakan, Member (Technical)
Shiv Enterprises – Appellant
Versus
Commissioner of C.G.S.T. and Central Excise – Respondent
Service Tax Appeal No. 77339 of 2019
For the Appellants/Petitioners: Amit Kumar
For the Respondents: S.K. Singh
Trading income from the sale of goods is not subject to Service Tax, and the extended period of limitation cannot be invoked to raise a demand without substantive evidence of willful suppression or misstatement by the assessee.
Headnote:(A) Finance Act, 1994 - Section 67, 68 and 70 - Service Tax Rules, 1994 - Rule 6 and 7 - Service tax applicability on trading activity - Appellant engaged in providing clearing and forwarding agent services and business auxiliary service, while also dealing in sale and purchase of stone chips - Tribunal held that the turnover derived from trading activities is not liable to Service Tax and the taxpayer had sufficiently provided documentary evidence including ITRs, VAT returns, and audit reports to establish this - Appellate order demanding service tax on total turnover including non-taxable trading income set aside. (Paras 6, 8, and 9)
(B) Limitation - Extended period of limitation - Invocation of extended period under proviso to Section 73(1) of Finance Act, 1994 requires proof of suppression of facts or willful misstatement - Revenue failed to establish active suppression where record showed the appellant had replied to investigation queries in 2015 - Notice issued in 2018 is barred by limitation. (Para 10)
Facts of the case:
The appellant renders 'clearing and forwarding agent' and 'business auxiliary' services. Following an investigation based on Income Tax data, the Revenue alleged the appellant had under-reported service receipts compared to TDS and balance sheet figures. The Adjudicating Authority confirmed the tax demand, interest, and penalties on the total turnover. The appellant contended that a significant portion of their turnover originated from the VAT-paid sale/purchase of stone chips, which is a non-taxable trading activity, and provided documentation to support this.
Findings of Court:
The documents produced by the appellant sufficiently demonstrate that they were engaged in the trading of goods (stone chips) and paid VAT thereon. The Adjudicating Authority failed to consider these evidences. Consequently, the demand on trading turnover is unsustainable.
Issues: Whether the appellant is liable to pay service tax on turnover derived from trading activities in stone chips; and whether the invocation of the extended period of limitation in the Show Cause Notice is legally sustainable.
Ratio Decidendi: Service tax is not leviable on income received from the sale of goods. Since the appellant provided sufficient evidence (tax returns, VAT invoices, audit reports) to delineate taxable service receipts from non-taxable trading receipts, tax cannot be charged on the latter. Furthermore, in the absence of evidence of willful suppression by the assessee, the extended period of limitation cannot be invoked.
Result: Appeal allowed.
ORDER: [PER SHRI ASHOK JINDAL]
The appellant is in appeal against the impugned order.
The facts of the case are that the appellant is engaged in providing services namely, ‘clearing and forwarding agent service’ and ‘business auxiliary service’. They were paying Service Tax on their taxable services.
As per the data sharing policy of the Government of India, the Income Tax Department apprised that the appellant had received a total amount of Rs.28,17,83,695/- during the period from 2012-13 (July, 2012 to March, 2013) to 2015-16 from different parties. However, upon scrutiny of the corresponding Service Tax Returns filed by the appellant, it was found that an amount of Rs.2,92,08,761/- had been declared by the appellant, on which they had paid Service Tax amounting to Rs.37,38,819/-, which was not in consonance with the TDS details, Form 3CD, Balance Sheet and Profit & Loss Account details of the appellant. On the basis of the information received from the Income Tax Department and the ST-3 Returns filed by the appellant during the Financial Year 2012-13, a verification was conducted.
The appellant replied thereto and filed certain documents for the period 2012-13 wherein the appellant stated that they were also engaged in the activity of supply of stone chips on which Service Tax is not leviable.
However, on the basis of the difference between the TDS details, sale figures, figures in the Balance Sheet and the ST-3 Returns filed during the said period, a Show Cause Notice was issued on 09.04.2018 by invoking the extended period of limitation, to demand the impugned Service Tax from the appellant, along with interest, and to impose penalty on the appellant.
During the course of adjudication, the appellant contested the issue by filing a reply before the ld. adjudicating authority, stating that the appellant were also engaged in the activity of sale / supply of stone chips. However, the same has not been considered by the ld. adjudicating authority on the ground that during the course of investigation the appellant did not file the said documents. Therefore, for want of documents, he confirmed the demand as proposed in the Show Cause Notice, along with interest, vide the impugned order; penalties were also imposed.
Aggrieved from the said order, the appellant has filed this appeal before us.
The Ld. Counsel appearing on behalf of the appellant submits that the appellant is engaged in providing ‘clearing and forwarding agent service’ and ‘business auxiliary service’ and paying Service Tax to the Department on the taxable services i.e., receipts by way of commission. It is submitted that the appellant is also engaged in the activity of sale and purchase of stone chips; for that, the appellant is issuing invoices and paying VAT thereon. He thus submitted that the said trading activity is not liable to be taxed for the purpose of collection of Service Tax.
It is further submitted by the Ld. Counsel for the appellant that in this case, investigation was started against the appellant in the year 2015, for which the appellant had replied to the queries, which were made on the basis of the Income Tax Data collected by the Revenue, on 20.06.2015; whereas, the Show Cause Notice has been issued on 09.04.2018 by invoking the extended period of limitation; that no evidence has been brought on record by the Revenue to substantiate the allegation of suppression of facts or wilful mis-statement on the part of the appellant. He therefore submits that the said Show Cause Notice is also barred by limitation.
In view of the above submissions, the Ld. Counsel for the appellant prayed that the impugned order be set aside.
On the other hand, the Ld. Authorized Representative of the Revenue reiterated the findings in the impugned order.
Heard the parties and considered their submissions.
We find that during the course of adjudication, the appellant had duly filed their reply. For better appreciation of the facts, the same is extracted hereinbelow: -
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