TMP Manoharn & Co vs PONDICHERRY

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHENNAI
REGIONAL BENCH – COURT No. I

Service Tax Appeal No. 41974 of 2016
(Arising out of Order-in-Original No. 32/2016 (C)(ST) dated 04.07.2016 passed by
Commissioner of Central Excise, No.1, Goubert Avenue, Puducherry – 605 001)


M/s. TMP Manoharan & Co. ...Appellant
Y-231, Block – 29,
Neyveli – 607 803.
Versus
Commissioner of GST and Central Excise ...Respondent
Puducherry Commissionerate,
No. 1, Goubert Avenue,
Beach Road,
Pondicherry – 605 001.

APPEARANCE:
For the Appellant : Mr. V. Ravindran, Advocate
For the Respondent : Ms. G. Krupa, Authorised Representative

CORAM:
HON’BLE MR. VASA SESHAGIRI RAO, MEMBER (TECHNICAL)
HON’BLE MR. AJAYAN T.V., MEMBER (JUDICIAL)


FINAL ORDER No. 40991 / 2026

DATE OF HEARING : 23.06.2026
DATE OF DECISION : 07.09.2026

Per Mr. VASA SESHAGIRI RAO

The present appeal has been filed by M/s. TMP
Manoharan & Co., Neyveli, hereinafter referred to as “the
appellant”, against Order-in-Original No.32/2016 (C)(ST)
dated 04.07.2016 passed by the Commissioner of Central
Excise, Puducherry, whereby service tax of Rs.24,48,370/-,
including an admitted liability of Rs.8,96,535/-, along with

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interest, late fee and penalties under Sections 77 and 78 of
the Finance Act, 1994, was confirmed for April 2012 to March
2013. The proceedings originated from Show Cause Notice
No.15/2015 (C)(ST) dated 22.04.2015, issued on the basis
of comparison of the appellant’s Balance Sheet, ST-3 Returns
and Income Tax records. The Department alleged, inter alia,
that the appellant had rendered Erection, Commissioning and
Installation Service without registration, wrongly claimed
abatement under Maintenance or Repair Service and short-
paid service tax.

2. The appellant, registered under Manpower
Recruitment or Supply Agency Service, Maintenance or
Repair Service and Commercial or Industrial Construction
Service, disputed the demand contending that the work
executed for Graphite India was only Manpower Supply
Service, that no work was executed for Siemens during the
relevant period, and that the demand was based essentially
on accounting differences without proper classification or
verification of the underlying transactions. The appellant
relied upon agreements, invoices, reconciliation statements
and the earlier decision of this Tribunal in its own case. The
Department, on the other hand, supported the impugned
order on the ground that the discrepancies were detected
during audit, the appellant had failed to file ST-3 Returns for

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April-June 2012, had not obtained registration under
Erection, Commissioning and Installation Service and had
wrongly claimed abatement under Maintenance or Repair
Service.

3. The Ld. Advocate Shri V. Ravindran for the
appellant, submitted that the demand could not be sustained
merely on the basis of the Balance Sheet and Income Tax
records without first establishing the taxable service and
taxable value. He submitted that the work for Graphite India
was Manpower Supply Service, no work was executed for
Siemens during the relevant period and the adjudicating
authority had travelled beyond the allegations in the Show
Cause Notice. He further submitted that the proceedings
were based on the appellant’s own statutory records and
therefore involved neither suppression nor wilful
misstatement. Reliance was also placed upon the earlier
Final Order of this Tribunal in the appellant’s own case.

4. The Ld. Authorized Representative Ms. G. Krupa,
for the Revenue, supported the impugned order and
submitted that the discrepancies between the Balance Sheet,
Income Tax records and ST-3 Returns established short-
payment of service tax. It was submitted that the appellant
had failed to file ST-3 Returns for April-June 2012, had not

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obtained registration for Erection, Commissioning and
Installation Service and had wrongly claimed abatement. The
Revenue accordingly supported invocation of the extended
period and the consequential penalties.

5. We have considered the rival submissions,
examined the records and the impugned order and perused
the judicial precedents relied upon by both sides. The
following questions arise for determination: -
i. Whether the service tax demand confirmed in the
impugned order is sustainable on merits?
ii. Whether the extended period and the consequential
interest, late fee and penalties are sustainable?

6. We now proceed to examine the issues framed
for determination sequentially.

Issue No. (i): Whether the service tax demand confirmed in
the impugned order is sustainable on merits?
7. The Department’s case is essentially founded
upon differences between the appellant’s Balance Sheet;
Income Tax records and ST-3 Returns. The appellant
disputes the classification of the activities and contends that
the receipts were not properly correlated with taxable
services. At the outset, however, the amount of
Rs.8,96,535/- requires separate treatment since the

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adjudicating authority has recorded in paragraphs 22.1 and
29 of the Order-in-Original that the said amount was
admitted by the appellant.

8. At the outset, it is necessary to examine whether
the controversy already stands concluded by the earlier
decision of this Tribunal in the appellant's own case. It is well
settled that a Coordinate Bench should ordinarily follow an
earlier decision rendered in the case of the same assessee
involving identical facts and issues unless it is shown to be
distinguishable or has been overruled by a Larger Bench, the
jurisdictional High Court or the Hon'ble Supreme Court.
Consistency in judicial decisions is an essential requirement
of certainty in tax administration.

9. The appellant relied upon the decision of this
Tribunal in M/s. T.M.P. Manoharan & Co. v. Commissioner of
Central Excise, Puducherry, 2023 (11) TMI 15 (CESTAT-
Chennai) [Final Order No.40962/2023 dated 30.10.2023],
covering the earlier period. In that case, on substantially
identical facts arising from scrutiny of the appellant's Balance
Sheet, Income Tax records and statutory records, this
Tribunal held that the Show Cause Notice failed to properly
identify and classify the taxable services or correlate the
receipts with the charging provisions of the Finance Act,

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1994 and that invocation of the extended period was
unsustainable. On comparison of the allegations in both
proceedings, we find that the foundation of the present
demand is substantially identical and the Revenue has not
pointed out any material factual distinction warranting a
different view. Judicial discipline therefore requires us to
respectfully follow the earlier Final Order.

10. Even otherwise, under the scheme of the Finance
Act, 1994, service tax can be levied only after the
Department identifies the taxable service, classifies the
activity under the appropriate charging entry and determines
the taxable value in accordance with Section 67. Mere
differences between the Balance Sheet, Income Tax records
and ST-3 Returns cannot, by themselves, constitute the
basis for confirming service tax liability. In the present case,
the Show Cause Notice substantially proceeds on such
accounting differences without first undertaking the above
statutory exercise or verifying the underlying agreements,
invoices, work orders and other contemporaneous records.

11. The appellant also relied upon CBEC Instruction
F. No. 137/22/2012-Service Tax dated 28.09.2012 and
Instruction F. No. 137/98/2006-CX-4 (Part-I) dated
22.02.2013. We have examined both these Instructions. The

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first directed assessees to file ST-3 returns for the period
from 1 April 2012 to 30 June 2012 in the existing format,
while providing that returns for the subsequent period would
be filed separately in the revised format. The second notified
the revised ST-3 format and extended the last date for filing
the return for the period July 2012 to September 2012 to
25.03.2013. These Instructions demonstrate that filing of
ST-3 returns during the relevant period was governed by a
transitional arrangement. Consequently, discrepancies or
delay arising from the revised ST-3 return mechanism could
not, by themselves, constitute evidence of suppression or
justify confirmation of service tax demand without
independent examination of the nature and taxability of the
services rendered.

12. As such, the Revenue’s approach is directly
contrary to the decision of this Tribunal in CCE & ST,
Pondicherry v. A.M. Manickam & Others, 2017 (6) TMI 57
(Tri.-Chennai), wherein it was held that a Show Cause Notice
must clearly identify the taxable services, specify the
appropriate taxable category and disclose the basis of
computation of the demand. A vague or omnibus demand
founded merely on financial statements without proper
classification cannot be sustained. The ratio squarely applies
here, where the Department has proceeded on consolidated

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figures derived from the Balance Sheet and Income Tax
records without first determining the taxable value relatable
to each taxable service.

13. The same principle emerges from CST v. Purni
Ads Pvt. Ltd., 2010 (19) S.T.R. 242 (Tri.-Ahmd.), where the
Tribunal held that service tax cannot be confirmed merely on
the basis of discrepancies between the Balance Sheet and
the ST-3 Returns unless the Department first establishes that
the receipts represent consideration for taxable services. It
was further held that once the assessee furnishes
reconciliation statements explaining the differences, the
burden shifts to the Department to disprove the same by
cogent evidence. In the present case, although the appellant
produced agreements, invoices and reconciliation statements
explaining the differences and asserted that the work
executed for M/s. Graphite India Ltd. was only Manpower
Recruitment or Supply Agency Service and that no work had
been executed for M/s. Siemens during the relevant period,
those explanations have not been objectively examined by
the adjudicating authority.

14. The judgments in Firm Foundations & Housing
Pvt. Ltd. v. Principal Commissioner of Service Tax, 2018 (16)
G.S.T.L. 209 (Mad.) and Balajee Machinery v. Commissioner

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of CGST & Central Excise, Bolpur, 2022 (66) G.S.T.L. 440
(Tri.-Kolkata) reinforce the same principle. The Hon'ble
Madras High Court held that accounting entries in the Profit
and Loss Account or financial statements cannot constitute
the sole basis for determining service tax liability, while the
Tribunal in Balajee Machinery held that figures reflected in
the Balance Sheet or Income Tax records may justify
investigation but cannot, by themselves, establish taxable
value without examination of the underlying contracts,
invoices and other contemporaneous evidence. In the
present case, however, the adjudicating authority has
substantially accepted the audit computation based on the
Balance Sheet without undertaking the detailed verification
required by law.

15. We also find merit in the appellant's submission
that the adjudicating authority travelled beyond the
allegations contained in the Show Cause Notice. The notice
principally proceeds on differences between the Balance
Sheet, Income Tax records and ST-3 Returns, whereas the
impugned Order-in-Original introduces additional reasoning
without first establishing, through the charging provisions of
the Finance Act, 1994, that the disputed receipts constituted
consideration for taxable services. Audit objections or
accounting discrepancies may justify investigation, but they

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cannot substitute legal proof. The burden of establishing
taxability always rests upon the Department and has not
been discharged in the present case.

16. In view of the foregoing, the disputed portion of
the demand is unsustainable. The position, however, is
different in respect of Rs.8,96,535/-, which the adjudicating
authority has recorded in paragraphs 22.1 and 29 of the
Order-in-Original as an admitted liability. We accordingly
sustain the service tax liability of Rs.8,96,535/-, with
applicable interest under Section 75, subject to adjustment
of any amount already paid. The balance disputed demand is
set aside. Issue No. (i) is answered accordingly.

Issue No. (ii): Whether the extended period and the
consequential interest, late fee and penalties are
sustainable?
17. Having sustained only the admitted liability of
Rs.8,96,535/-, we now consider limitation and the
consequential liabilities. The Revenue alleges suppression on
the basis of non-filing of returns, non-registration and
incorrect availment of abatement. The appellant submits that
the proceedings were based upon its own Balance Sheet,
Income Tax records and ST-3 Returns and that no
suppression or wilful misstatement was established.

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18. The proviso to Section 73(1), as applicable
during the relevant period, permits invocation of the
extended period only where the non-payment or short-
payment of service tax is by reason of fraud, collusion, wilful
misstatement, suppression of facts or contravention of the
statutory provisions with intent to evade payment of service
tax. The burden of establishing these ingredients lies
squarely upon the Department. In the present case, the
Show Cause Notice itself records that the demand was
worked out by comparing the appellant's Balance Sheet,
Income Tax records and ST-3 Returns. No incriminating
documents, parallel accounts or independent evidence of
deliberate concealment have been brought on record. The
proceedings are therefore founded entirely upon the
appellant's own statutory records, which substantially
negatives the allegation of suppression.

19. The appellant's contention also stands fortified
by the earlier Final Order of this Tribunal in its own case,
wherein, on substantially identical facts, it was held that the
Department was already aware of the appellant's activities
through earlier audits and proceedings and that invocation of
the extended period was therefore unwarranted. The
Revenue has attempted to distinguish the earlier decision by
contending that the present proceedings involved a more

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detailed audit and examination of work orders. We are
unable to accept the submission. The foundation of both
proceedings remains the same, namely scrutiny of the
appellant's disclosed statutory records, and no material
factual distinction has been demonstrated. Nor has the
Revenue brought to our notice any contrary judgment of the
Higher Judicial Forum. Judicial discipline therefore requires
us to respectfully follow the earlier Final Order.

20. The legal position is equally well settled. In
Chemphar Drugs & Liniments v. Collector of Central Excise,
1989 (40) E.L.T. 276 (S.C.), Pushpam Pharmaceuticals Co.
v. Collector of Central Excise, 1995 (78) E.L.T. 401 (S.C.)
and Nizam Sugar Factory v. Commissioner of Central Excise,
2006 (197) E.L.T. 465 (S.C.), the Hon'ble Supreme Court
consistently held that the extended period can be invoked
only where there is a positive act of fraud, wilful
misstatement or deliberate suppression with intent to evade
duty and that mere omission, accounting discrepancy or
difference in interpretation is insufficient. Applying these
principles, we find that the present dispute essentially relates
to classification of services, reconciliation of receipts and
admissibility of abatement, all arising from the appellant's
disclosed statutory records. The Department has therefore

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failed to establish the statutory ingredients necessary for
invoking the proviso to Section 73(1).

21. The Revenue relied upon paragraph 3.7 of CBEC
Circular No.1053/02/2017-CX dated 10.03.2017, Uniworth
International Ltd. v. Commissioner of Central Excise, Nagpur,
2023 (385) E.L.T. 332 (S.C.), Uniworth International v.
Commissioner of Central Excise, 2009 (244) E.L.T. 401 (Tri.-
Del.) and the judgment of the Hon’ble Kerala High Court in
South India Bank Ltd. These decisions are distinguishable.
The Circular merely states that a subsequent notice invoking
the extended period is not automatically barred and does not
dispense with the statutory requirement of establishing
suppression with intent to evade tax. Uniworth International
Ltd. referred to proved fraudulent misdeclaration and
valuation of DTA clearances by a 100% EOU, while South
India Bank Ltd. concerned with the maintainability of a writ
petition against a Show Cause Notice. None of these
decisions involved a demand founded merely on differences
between Balance Sheet and ST-3 figures or dispensed with
the requirement of independently establishing suppression.
They therefore do not advance the Revenue’s case.

22. As regards the consequences, interest under
Section 75 is payable on the admitted service tax liability of

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Rs.8,96,535/-, subject to adjustment of any amount already
discharged.

23. Regarding, the penalty under Section 78, the
disputed demand was substantially based on the appellant's
Balance Sheet, Income Tax records and ST-3 Returns, and
the larger demand has failed for want of proper
establishment of the taxable service and taxable value. The
admitted liability of Rs.8,96,535/- and the delay in filing
returns do not, by themselves, establish fraud, wilful
misstatement or suppression with intent to evade service
tax. The penalty under Section 78 is therefore set aside.

24. In the result, the impugned Order-in-Original No.
32/2016 (C)(ST) dated 04.07.2016 is modified. The service
tax liability of Rs.8,96,535/-, being the amount recorded as
admitted, is sustained with applicable interest under Section
75, subject to adjustment of amounts already paid. The
balance disputed service tax demand is set aside. Similarly,
the penalty under Section 78 is set aside. Thus, the appeal is
partly allowed in the above terms.
(Order pronounced in open court on 07.09.2026)



Sd/- Sd/-
(AJAYAN T.V.) (VASA SESHAGIRI RAO)
MEMBER (JUDICIAL) MEMBER (TECHNICAL)

MK