CESTAT Allahabad Quashes ₹2.16 Lakh Demand Against Doccel For Misclassification, No Suppression

On 23 October, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Allahabad, set aside a service tax demand against Doccel Services Pvt. Ltd., holding that the department cannot demand service tax without correctly classifying the services provided.

A Bench comprising Technical Member Sanjiv Srivastava also held that the extended period of limitation cannot be invoked without a specific finding that the company suppressed facts with the intention to evade tax. The Tribunal observed:

“In absence of classification of services demanding service tax in respect of these services would not have been a correct exercise.”

The case concerned a service tax demand of Rs. 2.16 lakh against Doccel Services for the financial year 2016-17, raised based on information received from the Income Tax Department.

The department treated the company's income as consideration for legal and administrative services provided to doctors. The original authority confirmed the demand, and the Commissioner (Appeals) upheld it.

Doccel Services challenged the demand, claiming exemption under Notification No. 33/2012-ST, which provides a threshold exemption of Rs. 10 lakh.

The Bench examined the company's financial records and found that its turnover in the preceding financial year was Rs. 9.16 lakh, below the prescribed exemption threshold. It therefore held that the company was eligible for the exemption.

It also found that the department had raised the demand without correctly classifying the services. On limitation, it noted that the department had failed to establish deliberate suppression or misdeclaration of facts with the intention to evade service tax.

Accordingly, the CESTAT set aside the service tax demand and allowed Doccel Services' appeal.

Appearances: Santosh Kumar, Authorised representative for the Respondent.