Service tax demand cannot rest on unverified attribution of identical PAN receipts to multiple registrations.

The appellant, proprietor of M/s Vishal Associates, held Service Tax Registration No. AIEPB0927DST001.

On the basis of information received from the Income Tax Department/DGARM, the Department alleged that receipts of ₹15,39,53,290 reflected in Form 26AS for FY 2016–17 had not been declared in the appellant’s ST-3 returns, resulting in alleged service-tax liability of ₹2,30,92,994.

A show-cause notice dated 22 October 2021 was issued proposing recovery of service tax under the extended period, interest, and penalties under Sections 75, 77 and 78 of the Finance Act, 1994.

The Commissioner adjudicated the matter ex parte and confirmed the entire demand with equivalent penalty and additional penalties of ₹10,000 each under Sections 77(1)(c) and 77(2).

The appellant contended that the same receipts and period had already been the subject of proceedings against two other registrations held under the same PAN, AIEPB0927D.

In those proceedings, the demands had been dropped by orders dated 28 January 2022 and 27 May 2022.

1. Whether the Department could confirm a service-tax demand by attributing the entire Form 26AS receipts of ₹15,39,53,290 to the appellant’s registration when the same receipts had already been used to initiate proceedings against two other registrations held under the same PAN?

2. Whether the impugned order confirming the demand, interest and penalties was sustainable in the absence of verification correlating the alleged receipts with taxable services provided from the appellant’s registered premises?

The Tribunal applied Sections 68, 73, 75, 77 and 78 of the Finance Act, 1994, read with the applicable Service Tax Rules and the saving/continuance provisions of Sections 142 and 174(2) of the Central Goods and Services Tax Act, 2017.

Section 68 required payment of service tax on taxable services; Section 73 authorised recovery of tax not levied or paid; Section 75 provided for interest; and Sections 77 and 78 provided for penalties for specified procedural defaults and suppression or wilful non-payment.

However, a demand must be based on a legally and factually verified attribution of taxable receipts to the particular assessee and cannot be confirmed repeatedly against different registrations on the basis of the same unverified receipts.

The Tribunal also applied the principle that adjudication must be founded on a proper examination of the relevant records and a demonstrated nexus between the alleged taxable turnover and the assessee’s taxable activities.

The Tribunal found that the same PAN was associated with three separate service-tax registrations: AIEPB0927DST001 in the name of Ram Kishan Bairwa, and AIEPB0927DST002 and AIEPB0927DST003 in the name of Vishal Associates.

The entire amount of ₹15,39,53,290 appearing in Form 26AS had been treated as undeclared receipts in separate proceedings against each registration.

One proceeding covering FY 2016–17 had been dropped by the Principal Commissioner, Noida, while another proceeding involving the same amount and period had also been dropped on the ground that the registration had been surrendered and the period was already covered by the Noida order.

The Tribunal held that the Department had not explained how the same receipts could form the basis of three separate demands, nor had it verified which registration, if any, had actually received the amounts or provided the corresponding taxable services.

Since the notices were issued without correlating the receipts with activities conducted from the respective registered premises, the confirmation of the demand and consequential penalties lacked factual and legal foundation.

It held that the impugned demand could not be sustained because the same Form 26AS information had already been used in proceedings against two other registrations under the same PAN, and the Department had failed to establish the appellant’s specific liability through proper verification.

The appeal was accordingly allowed, and the order confirming service tax of ₹2,30,92,994, interest and penalties under Sections 77 and 78 of the Finance Act, 1994, was set aside.