2026-VIL-1043-CESTAT-KOL-ST
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SERVICE TAX CESTAT Cases

Service tax liability on manpower supply services rendered by individual service provider to corporate service recipient – Appellant engaged by a corporate entity to supply manpower for OPGW work under a work order, with manpower deployed under direct supervision and control of the service recipient, and no responsibility for execution of work or delivery of specific result - Whether service tax liability rests on the service provider or the service recipient when an individual service provider supplies manpower to a body corporate, and whether the reverse charge mechanism applies under Rule 2(g) of the Service Tax Rules, 1994 read with Notification No. 30/2012-ST dated 20.06.2012 - HELD - The service tax liability rests entirely on the service recipient and not on the service provider in respect of manpower supply services where the service provider is an individual and the service recipient is a body corporate. The invoices raised by the appellant that no service tax was charged or received from the recipient, thereby establishing that the true nature of transaction is merely supply of manpower. The liability cannot be shifted between service provider and recipient which is contrary to the express statutory framework governing reverse charge mechanism. Therefore, the demand cannot be fastened upon the service provider - The demand of service tax in respect of manpower supply service stands set aside on meritsrnrnSmall Service Provider Exemption Threshold - Eligibility for small service provider exemption threshold in the first year of operation - In the first year of operation, the appellant received income from multiple work orders, where one work order value fell within the first Rs. 10,00,000 threshold limit for exemption, and the department confirmed demand without considering the threshold exemption benefit - Whether the value of services on which service tax is payable by the service recipient under the RCM should be included while computing the aggregate value of taxable services for determining eligibility under the small service provider exemption threshold - HELD - For the purpose of computing the aggregate value of taxable services for eligibility under the exemption threshold, the value of services on which service tax is payable by the service recipient under the reverse charge mechanism is not liable to be included. The appellant is entitled to exclude such value while determining the exemption limit. Since the second work order amount would qualify for threshold limit exemption and the first year of operation qualifies for the Rs. 10,00,000 threshold, the confirmed demand is not sustainable - The demand in respect of the second work order stands set aside as the benefit of small service provider exemption was wrongfully denied.rnrnValidity of Show Cause Notice Based on Form 26AS Data and Invocation of Extended Period - Issuance of show cause notice invoking extended period of limitation based solely on Form 26AS data without independent investigation or corroborative evidence - The Department issued notice after the appellant had been regularly filing ST-3 returns, by comparing figures from Form 26AS of income tax returns with ST-3 returns without conducting any scrutiny of returns or audit. The allegation of suppression or wilful misstatement was not supported by any independent evidence from service tax records - Whether the extended period of limitation under Section 73(1) of the Finance Act, 1994 can be invoked and a show cause notice can be sustained when issued solely on the basis of Form 26AS data - HELD - Mere mechanical reliance on Form 26AS data or income tax entries without verification of the nature of receipts or proof of taxable services rendered is impermissible in law. Form 26AS is maintained on cash or receipt basis by the income tax department for purposes of tax deducted at source and is not a statutory document for determining taxable turnover under service tax provisions. Service tax is chargeable on mercantile or accrual basis on service provided whether the value is received or not, whereas Form 26AS operates on cash basis, creating fundamental incompatibility. It is a settled legal position that mere entries in income tax returns or Form 26AS cannot by themselves establish liability under the Finance Act, 1994 unless corroborated by evidence demonstrating rendition of taxable service - When an assessee has been regularly filing returns and has provided documents as asked, the entire information was in the knowledge of revenue, and the extended period is not invocable. The allegation of suppression in the present case has not been corroborated by any evidence by the revenue - The impugned order stands set aside on account of time bar as the extended period is not invokable and the demand is barred by limitation.
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