2016 (2) TMI 978 - AT - Service Tax

Demand - Business Auxiliary Service - job work - appellant has cleared some goods after processing on issuance of the challan or invoices for job work without payment of service tax - Held that - the demand has been confirmed only on the basis of the record found in the computer of the appellant and these entries have been made by the computer operator on the instructions of Shri O.P. Gandhi. Shri O.P. Gandhi also filed an affidavit that he has directed to make entries who also filed complaint with the department against the appellant. Shri O.P. Gandhi has filed an affidavit to that extent. I also find that department has not come up with any clear evidence to controvert the affidavit filed by Shri O.P. Gandhi. Further, no investigation has been conducted at the end of the parties on whose behalf, the appellant did job work and no investigation was conducted at the end of the transporter. Therefore, the revenue has failed to come up with clear evidence against the appellant to demand the service tax - demand not sustainable against the appellant - penalties not sustainable - appeal allowed.

Summary

Issues:
Appeal against service tax demand under Business Auxiliary Service (BAS) and penalty imposition.

Analysis:
The case involved an appeal against an order demanding service tax under the category of Business Auxiliary Service (BAS) and proposing penalties on the appellants. The main appellant was engaged in job work activities and was paying service tax under BAS. A search was conducted, and it was alleged that the appellant cleared goods without paying service tax. The proceedings were initiated based on this allegation, leading to the demand for service tax, interest, and penalties. The appellant challenged this order, claiming that no incriminating evidence was found during the search. The appellant argued that the computer printouts used as evidence were fabricated by a disgruntled ex-Manager seeking revenge. The ex-Manager admitted to fabricating the entries in the computer and filing a false complaint. The appellant contended that the entries were fake, and no investigation was conducted with the transporter. The appellant also highlighted that the authorities did not examine the ex-Manager to challenge the affidavit. On the other hand, the Department argued that corroborative statements supported the allegation against the appellant.

Upon hearing both parties and considering the submissions, the judge found that no demand was proposed based on certain statements, making the demand unsustainable. The demand was primarily confirmed based on computer records allegedly manipulated by the ex-Manager. The ex-Manager admitted to directing the computer operator to make entries, and the Department failed to provide clear evidence to counter this admission. Additionally, no investigation was conducted with relevant parties involved in the job work. Consequently, the judge held that the demand was not sustainable against the appellant. As a result, the penalties were also deemed unsustainable. Therefore, the impugned order was set aside, and the appeal was allowed with consequential relief, if any.