The Patna High Court recently upheld a ₹25.25 lakh service tax demand against a travel agency, rejecting its claim that key business records were destroyed in a fire.
A Patna-based travel agency challenged a show-cause notice and order demanding ₹25.25 lakh in service tax, along with interest and penalty, for the financial years 2015–16 and 2016–17. The agency argued that tax should apply only to commission earnings, not gross receipts, and claimed it couldn't submit records due to a fire that destroyed all documents.
The Division Bench comprising Justice Rajeev Ranjan Prasad and Justice Ashok Kumar Pandey observed, “this Court finds in the facts of this case that this petitioner having surrendered his service tax registration had not disclosed the transactions in ST-3. The Taxing Authority were not aware of this, they were looking for cooperation on the part of the petitioner, they called for relevant information and records during investigation but the petitioner did not provide those information to the Taxing Authority. In such circumstance, if the Taxing Authority has taken a view that it is a case of suppression and the facts which have surfaced during investigation were not earlier known to them and they would not have come to know it if the investigation would not have taken place, cannot be found fault with.”
Further the Court added, “This Court is, therefore, of the prima-facie view that no jurisdictional error has been committed by the respondent no. 2 or respondent no. 3 in invoking the extended period of limitation of five years under proviso to Sub-Section (1) of Section 73 of the Act of 1994.”
The Court found no violation of natural justice, noting the petitioner had sufficient opportunity to respond, including three hearings. It rejected the claim that tax should apply only to commission, as no proof was provided. Lacking records, the department’s assessment on gross receipts was upheld.
The Patna High Court upheld the ₹25.25 lakh service tax demand, along with interest and penalty, confirming the decisions of the CGST authorities. It allowed the petitioner to file an appeal within four weeks, directing the Appellate Authority to consider it on merits, acknowledging the petitioner’s good faith litigation.
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