2006 (9) TMI 31 - AT - Service Tax

Valuation(Service tax)-Demand of service tax raised based on gross receipts shown in profit and loss account and detail in income tax return HELD - Details filed in income tax return and service tax return are different

Summary

Issues:
1. Review of Order-in-Original dropping demands by Asst. Commissioner
2. Discrepancy in taxable amounts shown in Profit and Loss Account and Income-tax Returns
3. Applicability of Service Tax on gross receipts
4. Commissioner's error in levying tax on gross receipts
5. Interpretation of Section 68 of the Finance Act, 1994 and Rule 6 of the Service Tax Rules

Analysis:

1. The appeal arose from a Review Order where the Commissioner reviewed the Order-in-Original dropping demands by the Asst. Commissioner. The Revenue demanded Service tax based on the Profit and Loss Account and Income-tax Returns, leading to a discrepancy in taxable amounts.

2. The Asst. Commissioner found that the amounts in Income-tax returns were not received by the assessee, hence dropping the proceedings. However, the Commissioner, citing a Board's Circular, proceeded to levy tax on gross receipts as per the Profit and Loss Account, demanding short levy.

3. The appellants argued that they paid Service Tax on amounts received, complying with the Board's Circular. They contended that Service Tax should not be paid in advance on gross receipts. They referenced a previous case to support their stance.

4. The Tribunal clarified that Service Tax should be calculated on total receipts, not on amounts due from customers. Citing Section 68 of the Finance Act, 1994 and Rule 6 of the Service Tax Rules, it highlighted that tax payment is only required upon actual receipt of payments for taxable services.

5. Granting full stay, the Tribunal emphasized that Service Tax is not liable to be paid if the assessee has not received payments for taxable services. The issue of show cause notice beyond one year was deemed time-barred. The appeal was allowed, upholding the Asst. Commissioner's order and providing consequential relief.