2011 (1) TMI 101 - AT - Service Tax

Service tax - assessees manufacturers of automotive parts and accessories and registered with the Service tax department as a recipient of service and paying service tax on erection, commissioning and installation and consulting engineers services, paid tax on the net value which was arrived at after deducting TDS from the gross value while the gross amount was to be adopted for the payment of service tax - assessees had contended that they had correctly paid service tax on the gross value of taxable service namely 5% of the net sales value of the goods and that income tax was remitted for the purpose of compliance with the provisions of the Income Tax Act and the procedure for grossing up of amounts for the purpose of calculating income tax as per Section 195A of the Income Tax Act and that the income tax remitted on the value of taxable service over and above the amount charged by the service provider and does not form part of the amount payable as per the contract - order set aside and the case remitted for fresh decision to the adjudicating authority

Summary

Issues:
1. Incorrect calculation of service tax on gross value.
2. Failure of authorities to consider submissions based on a chart.
3. Order for remand and fresh decision by adjudicating authority.

Issue 1: Incorrect calculation of service tax on gross value
The case involved manufacturers of automotive parts and accessories registered with the Service tax department, paying service tax on erection, commissioning, and installation services. The department argued that the assessees had incorrectly paid service tax on the net value after deducting TDS, while the gross amount should have been used for tax payment. The assessees contended that they had paid service tax on the gross value of taxable service, which was 5% of the net sales value of goods. They explained that income tax remitted for compliance with the Income Tax Act was over and above the amount charged by the service provider and did not form part of the contract amount. The tribunal found merit in the assessees' arguments and ordered a remand for a fresh decision by the adjudicating authority.

Issue 2: Failure of authorities to consider submissions based on a chart
The tribunal noted that the authorities below had not considered the submissions made by the assessees based on a chart showing details of the gross sale value on which service tax was paid, including income tax paid over and above the sale value. Due to this oversight, the tribunal concluded that the impugned order should be set aside in the interest of justice. The case was remitted for a fresh decision, ensuring that the assessees are given a reasonable opportunity to present their defense before new orders are passed.

Issue 3: Order for remand and fresh decision by adjudicating authority
Ultimately, the tribunal allowed the appeal by way of remand, directing a fresh decision by the adjudicating authority. This decision was made to ensure that the submissions based on the chart detailing the gross sale value and income tax paid are properly considered, and the assessees are afforded a fair opportunity to present their case. The tribunal emphasized the importance of justice and due process in reaching a final resolution in the matter.

This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal CESTAT, Chennai, and the rationale behind the decision to remand the case for a fresh adjudication.