In Service Tax Appeal No.52190 of 2022- CESTAT- Demand under Service Tax on Reverse Charge Mechanism cannot be raised based on apparent difference in expenses, must be calculated transaction-wise: CESTAT (Delhi)
Members Anil Choudhary (Judicial) [26-05-2023]

Read Order: M.P. Audyogik Kendra Vikas Nigam (Indore) Ltd v. Principal Commissioner of Central Goods & Service Tax and Central Excise

Chahat Varma

New Delhi, May 29, 2023: The Principal bench of the Customs, Excise and Service Tax Appellate Tribunal has held that the demand for service tax under the reverse charge mechanism (RCM) cannot be raised, solely based on the apparent difference in expenses mentioned in the balance sheet and the amount reported for service tax in the ST-3 Returns and should be calculated transaction-wise and invoice-wise.

The brief facts of the case were that M.P. Audyogik Kendra Vikas Nigam (Indore) Ltd (appellant) was engaged in providing taxable services under the category of ‘Renting of Immovable Properties, Manpower Supply Services, Legal professional and Consultancy and Rent-a-Cab Services’.  During the audit, the Revenue alleged that the appellant had suppressed taxable value and asked them to pay service tax on expenses incurred (service received) under reverse charge mechanism (RCM).

The bench of Anil Choudhary (Judicial) noted that the show cause notice did not contain the gist of allegations for raising the demand on RCM basis. Consequently, the bench held that the show cause notice was vague and lacked clarity, rendering them misconceived and misdirected. In light of this, the appeal of the appellant was allowed.