Vinyl Tech Return Mismatch Invalidated

The dispute arose from service tax proceedings initiated against M/s Vinyl Tech, a proprietary concern engaged in construction and related works. Based on third-party information and alleged discrepancies between ST-3 returns and Income Tax records, the Department issued show cause proceedings demanding service tax of approximately Rs. 4.77 lakhs along with interest and penalties for FY 2016-17 and FY 2017-18.

The Department proceeded on the assumption that receipts reflected in the assessee’s financial statements but not fully disclosed in ST-3 returns necessarily represented taxable services. The assessee, however, demonstrated through financial records that the receipts pertained to distinct categories including sales, works contracts executed for Government entities, and job work on which applicable service tax had already been discharged.

The Tribunal accepted the assessee’s contentions and held that the entire demand was unsustainable because it rested exclusively on return mismatches without establishing that the receipts constituted taxable consideration for services.