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2010 (11) TMI 294 - AT - Service TaxDemand and penalties imposed u/s 76 77 and 78- Mistakes were committed while filing ST-3 return - The Service Tax demand has been confirmed on the ground that the service tax payable has not been debited in the CENVAT Credit account and it has not been reflected in the ST-3 return - The cases of clandestine removal in Central Excise matters while confirming the demand the benefit of CENVAT Credit subject to verification of records that proper documents are available and raw input/capital goods have been received the benefit of CENVAT Credit is allowed - The appellant did not make debit of the CENVAT Credit and did not make proper entries in the ST-3 return confirmation of service tax demand is not justifiable - Therefore the matter is required to be remanded to original adjudicating authority who shall verify the CENVAT Credit account of the appellant and if sufficient credit is available deduct the same from the actual service tax liability after requiring the appellant to make the debit - As regards the service tax liability a circular issued by the Board stating that sub-contractor is not liable - Thus the appellant is not liable in the capacity of sub-contractor.- Held that the matter is remanded to the original adjudicating authority for fresh consideration and given reasonable opportunity to appellant .
Issues:
Demand of service tax, imposition of penalties, incorrect filing of ST-3 return, CENVAT Credit adjustment, liability of sub-contractor for service tax, remand to original adjudicating authority. Analysis: The appellant provided advertising services during October 2004 to September 2005, with a demand of service tax of Rs. 4,90,487 confirmed against them, along with penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The appellant's Chartered Accountant argued that the demand arose due to mistakes in filing the ST-3 return by a clerk unfamiliar with service tax provisions. The CENVAT Credit adjustment errors were highlighted, with discrepancies in showing credit amounts in the return. The appellant contended that the service tax should not be demanded twice due to clerical errors, and CENVAT Credit benefit should be allowed after proper examination of eligibility. Additionally, the liability of Rs. 28,373 as a sub-contractor was disputed, citing a circular exempting sub-contractors before September 2007. The Respondent argued that there was no evidence of the CENVAT Credit being debited towards service tax payment, justifying the demand and penalties. It was emphasized that even as a sub-contractor, the appellant was liable to pay service tax, with the contractor eligible for service tax credit. The Respondent rejected the appellant's claims of exemption based on the circular, stating the sub-contractor's obligation to pay service tax. The Tribunal considered both parties' submissions and decided to dispose of the appeal without pre-deposit. The Service Tax demand was questioned due to the failure to debit the tax in the CENVAT Credit account and reflect it in the ST-3 return. Drawing parallels with Central Excise matters, the Tribunal noted that the benefit of CENVAT Credit should be allowed upon verification of records. Consequently, the matter was remanded to the original adjudicating authority to verify the CENVAT Credit account and adjust the credit against the service tax liability. The appellant was granted the opportunity to present their case before a new order was issued. In conclusion, the Tribunal remanded the case for fresh consideration, directing the original authority to review the issues in light of the observations made. The appellant was assured a fair opportunity to present their case before any new decision was rendered. Both the stay petition and appeal were disposed of accordingly.
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