Service Tax - Limitation - Amount Billed shown in ST 3 return

Service Tax - Limitation - Amount Billed shown in ST 3 return cannot be considered as relevant for purpose of time limit - Time limit of one year to be computed from ST 3 return showing amount realized: CESTAT

By TIOL News Service

NEW DELHI, JULY 25, 2011: AN interesting issue came up before the Tribunal recently. The assessee did not pay service tax on the amount received as sub-contractor as he was under the belief that the main contractor would have discharged the service tax on the total value. Show Cause Notice was issued demanding service tax from them on the amounts received from the main contractor during the period from 29-09-04 to 03-03-2005. The Show cause notice was issued on 10-03-2006. The demand was confirmed by the lower authorities and the assessee is appeal before the CESTAT.

On behalf of the appellants, it was strongly contested before the CESTAT that the demand was time barred.

The argument of the Appellant was that the invoices were dated 31-03-2004. If these amounts were taxable the same should have been included in the ST-3 return for March 2004, in the fourth row in item 4(A) for "Amount billed-gross". The Appellant did not include it and the position that it was not included was intimated to the department along with the reasons. As per provisions in section 73 of Finance Act 1994, SCN should have been issued within one year from 25-04-2004, that is the date on which ST-3 return for March 2004 was to be filed.

However, the Tribunal was not impressed with the above contention and rejected the same by holding inter alia that:

Going by the contention of the appellant, if an assessee raises bills for Rs.1,00,000/- in March 2004 and reports the same in the in ST-3 return for March in row 3 of item 4(A) of ST-3 and does not receive the billed amount till March 2005, no notice under section 73 can be issued because no short payment has occurred. In May 2005, if payment is received and the assessee does not pay tax, then SCN under section 73 cannot be issued because more than one year has passed after filing of return for March 2004 and consequently no tax can be demanded. Suppression also cannot be alleged since he has already reported the amount in ST-3 return of March 2004. The provisions of section 73 of Finance Act and the particulars called for in ST-3 return cannot interpreted to provide such loop holes for not paying taxes.

Thus, while rejecting the contention on limitation, the Tribunal has remanded the matter on merits on the issue of main contractor / sub-contractor to provide an opportunity to produce evidence of payment of service tax by the main contractor.