2026-VIL-1061-CESTAT-ALH-ST
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SERVICE TAX CESTAT Cases

Service Tax - Goods Transport Agency services - Proceedings based on information received from income tax authority - Whether service tax can be demanded from the service provider on the difference between the total consideration and the amount on which the service recipient discharged tax under Reverse Charge Mechanism – Applicability of extended period of limitation applies when the service provider entertained a bonafide belief that the entire tax liability was on the service recipient – HELD – There is distinction between accrual basis of accounting (applicable to service providers under service tax law with effect from 2011) and receipt basis (applicable to service recipients as shown in 26AS statements). When services are provided on accrual basis and reflected in the service provider's books for the financial year 2016-17, but the service recipient makes payment and discharges tax in a subsequent period based on receipt, the liability to pay service tax on RCM basis rests with the service recipient only for that portion. The service provider cannot be held liable for tax on services not paid for during the financial year in question - The appellant entertained a bonafide belief that the entire service tax liability was on the service recipient under reverse charge mechanism, which belief is well-founded and supported by the records. The burden of proving mala fide lies on the Revenue, not on the assessee. Since the appellant made efforts to comply with law and entertained a reasonable bonafide belief regarding its tax obligations, the invocation of extended limitation period fails - The demand for service tax on the balance amount is set aside and the appeal is allowed
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