Failure of Investigating Officers to comply with Conditions of Section 36B of CEA: CESTAT rules Service Tax Demand not Leviable on Unauthenticated Data [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that service tax is demand not leviable on unauthenticated data as there was failure in the part of Investigating Officers to comply with conditions of Section 36B of the Central Excise Act, 1944 (CEA). Based on the intelligence received it was indicated that appellant, Poojan Décor Private Limited, were evading payment of service tax by resorting to suppression of taxable value of the services provided by them to their clients. The intelligence further indicated that they were suppressing the actual taxable value by collecting certain portion of such taxable value, of services so provided, in cash which was not accounted in their books of accounts and was also not considered at the time of computing service tax leviable on the same. During the search it was found that appellants were raising invoices for the service provided to their clients, for a certain parts of actual taxable value and consideration received was being accounted in their regular Tally account. It was also found that part of taxable value of such services being recovered by appellant in cash from their clients and this cash amount was not being entered into their regular books of accounts but was entered in a separate .xls sheets. Paresh Dave with Parth H. Bhatt and Khyati Chugh, Advocates who appeared for the appellants submitted that the entire amount allegedly received in cash is derived by totaling up the figures appearing in excel sheet printouts of pen drive and google drive. But there is no evidence of the appellants having actually received any such cash from the clients. More than one hundred names and address of the clients appeared in the printouts, but evidence of only three clients is on records and two out of theses have stated that no cash was ultimately paid to the appellants. It was further submitted that the mandatory procedure under Section 36B of the Central Excise Act as made applicable for service tax law by virtue of Section 83 of the Finance Act, 1994 has not been followed and the mandatory conditions of section 36B of CEA for admissibility of ‘computer printout’ are not satisfied in this case. The entire case of under-valuation is based on excel computer printouts. P.K. Rameshwaram, Additional Commissioner (AR) who appeared for the department reiterated the findings in the impugned orders. A Two-Member Bench comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member observed that “Electronic records being more susceptible to tempering, alteration, transposition, excision etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice. The provisions of Section 65B of Indian Evidence Act and Section 36B of Central Excise Act, 1944 of the Act are pari-materia. It is evident from the panchanama, and the appeals records that the investigating officer had failed to follow the safeguard as mandated under Section36B of the Act.” “In the present matter the investigating officers failed to comply with the conditions of Section36B of the Act in respect to relying upon this computer printout. In view of the above we hold that service tax demand based on such unauthenticated data is not sustainable and hence are set aside” the Bench concluded. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates