2026-VIL-1166-CESTAT-CHD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Services performed outside India - Liability to pay Service Tax under Reverse Charge Mechanism - Appellant, engaged in manufacture and export of motor vehicle parts, entered into agreements with foreign service providers for handling exported goods including inspection, sorting, and rework. The respondent demanded service tax on reverse charge basis under Business Auxiliary Services for amounts paid to overseas service providers – HELD - The services which are physically performed outside India and consumed outside the taxable territory cannot be subjected to service tax under RCM. The Board's Circular dated 19.04.2006 clarifies that services must be received in India to be taxable under Section 66A - Although the impugned order classifies the services under sub-clause (v) and (vii) of Business Auxiliary Services definition, the fundamental issue that the services were entirely performed outside India makes the entire demand unsustainable - The demand for service tax is set aside and the appeal is allowed - Service Tax - Best Judgement Assessment - Absence of evidence of payment - Validity of assumption - Respondent adopted best judgement method under Section 72 of the Act to assess service tax liability for the period 2008-2011 by assuming doubled figures from base year 2006-07 and 2007-08 without any evidence of actual payments made during subsequent years - Whether best judgement method can be applied to assume fictitious payment figures in absence of evidence of actual payments in the assessment period – HELD - The best judgement assessment presupposes adoption of available figures adjusted by reasonable methodology, but cannot mean adopting fictitious figures without any evidential basis. The appellant had claimed no payments were made to foreign service providers after 2008-09, but the respondent proceeded to calculate liability by doubling the 2006-07 and 2007-08 figures cumulatively over subsequent years. No service tax could have been confirmed without evidence of actual payment in the subsequent years, and such arbitrary assumption of doubled figures is not sustainable in law. Accordingly, the best judgement assessment is set aside on this count - Service Tax - Invocation of Extended Period - Whether extended period can be invoked when the issue is detected during routine audit conducted on the premises of the appellant – HELD - The Central Board of Excise and Customs' Manual for Scrutiny clarifies that assessment remains the primary responsibility of assessing officers even in self-assessment regime, and that the failure to detect an issue during regular audits does not justify invoking extended period. The appellant had been subjected to audits multiple times and had been filing returns, and the respondent failed to raise any questions upon scrutinizing the returns. The argument that extended period should be invoked due to appellant's non-cooperation in providing documents cannot rescue the respondent's case when the issue itself was detected during routine audit. Accordingly, no case has been made by the respondent for invoking extended period of limitation and the appeal succeeds on limitation ground as well.
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