Suppression In ST-3 Returns Justifies Extended Limitation And Statutory Penalty: CESTAT Allahabad

On 2 June, the Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that suppression of the actual value of taxable services in ST-3 returns justifies a service tax demand based on mismatch with Income Tax Returns (ITR).

Technical Member Sanjiv Srivastava held that such suppression warrants invocation of the extended period of limitation and imposition of penalty and dismissed the appeal filed by Jain & Company against the demand of service tax, interest, and penalties. He held:

“Thus appellant was required to declare the gross amount charged/ received by him in the ST-3 towards the specific services provided by him. If that had been the case the amounts declared in the ST-3 return would be same as those declared in ST-3 returns. By not filling the returns in the prescribed manner appellant deliberately and knowingly suppressed the Gross Amounts charged/ received toward the provision of the taxable service with intention to evade the payment of due service tax.”

The dispute arose after the Department compared the appellant's Income Tax Return for the financial year 2014–15 with its ST-3 returns. The Income Tax Return reflected gross receipts exceeding Rs. 1.03 crore, while the ST-3 returns disclosed taxable services of about Rs. 55.58 lakh. Based on this discrepancy, the Department initiated proceedings alleging suppression of taxable value.

The appellant contended that a substantial portion of the receipts pertained to works contract services, that service tax had already been discharged under the reverse charge mechanism in certain transactions, and that the demand was raised solely on the basis of Form 26AS and income tax data without proper independent verification. It also argued that the demand was barred by limitation.

Rejecting these submissions, the Tribunal held that the case was not one where the Department had mechanically relied on Form 26AS alone. It found that the appellant failed to correctly disclose gross receipts in the statutory ST-3 returns despite being under a legal obligation to do so, and also failed to produce relevant records during investigation despite repeated summons.

It further held that classification of certain receipts as works contract or reverse charge transactions did not absolve the appellant from disclosing the full gross receipts in ST-3 returns. It concluded that incorrect filing of returns amounted to deliberate suppression of material facts with intent to evade payment of service tax.

Accordingly, the CESTAT upheld invocation of the extended period of limitation and confirmed the demand of service tax along with interest and penalties.

For the Appellant: Shri Kartikeya Narain, Advocate

For the Respondent: Shri Santosh Kumar, Authorised Representative