2026-VIL-1573-CESTAT-DEL-ST
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SERVICE TAX CESTAT Cases

Service Tax – Cum Tax Benefit – Appellant was engaged in rendering taxable services and had obtained service tax registration but was neither paying service tax nor filing returns – Department issued Show Cause Notice proposing service tax demand and the Adjudicating Authority confirmed the demand on the basis that service tax liability should be computed on the gross receipts – Appellant contended that cum tax benefit should be extended as it had not paid service tax and there was no evidence that service tax was separately collected from the service recipients – Whether cum tax benefit should be extended when service tax is not paid and not separately collected from service recipients – HELD – It is a well-settled principle that if service tax is not paid and there is no evidence that it has been separately collected from the service recipients, the amounts received as consideration should be considered as cum tax consideration and cum tax benefit should be extended. When service tax is levied on the consideration received for services and the tax is not paid by the service provider and there is no evidence of separate collection from the recipient, the amounts received must be presumed to include the tax component. The benefit of computing service tax on a reduced taxable value after deducting the tax component is available to the assessee. The appellant is entitled to cum tax benefit for determining the taxable value and computing service tax liability - The matter is remanded to the Commissioner for the limited purpose of calculating the amount of service tax, interest and mandatory penalty payable after extending cum tax benefit for the years 2014-2015, 2016-2017 and 2017-2018 – The appeal is partly allowed - Service Tax – Computation of Demand – Gross Receipts – Appellant rendered taxable services during the period 2014-15 to 2017-18 and the Department issued Show Cause Notice proposing demand of service tax based on gross receipts reflected in Income Tax returns for the years 2014-15, 2015-16 and 2016-17 and on the basis of contract amounts for the year 2017-18 as IT returns and balance sheets were not available for that year – Appellant contested the demand for 2017-18 on the ground that the tax was computed on the basis of contractual amounts instead of actual consideration received – Whether the demand for service tax can be sustained on the basis of contract value when IT returns or balance sheets are not available – HELD – When the Department does not have access to Income Tax returns or balance sheets for the relevant period, the best judgment can only be based on whatever figures are available to it. The demand for service tax can be made on the basis of the agreements entered into by the service provider when other documentary evidence of actual consideration received is not available. The contract value constitutes a reasonable basis for determining the taxable value in such circumstances. However, even when the demand is computed on the basis of contract value, the same principle regarding cum tax benefit applies. If service tax is not paid and there is no evidence that it was separately collected from the service recipients, the amounts received or contracted to be received should be considered as cum tax consideration – The demand for the year 2017-18 computed on the basis of contract value is sustainable but cum tax benefit should be extended in computing the service tax liability for that year as well. The appeal is partly allowed and the matter is remanded to the Commissioner for the limited purpose of calculating the amount of service tax, interest and mandatory penalty payable after extending cum tax benefit.
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