2011 (4) TMI 244 - AT - Service Tax

Demand, interest and penalty - Demand of service tax has been made on amounts received as grant in aid from different government sources - No service provider client relationship exists between the appellants and the government department - The work undertaken at the instance government departmenst cannot be treated as taxable service - The grant in aid paid by the Government cannot be treated as charges for the services rendered by the appellants to the government departments - He relies on voluminous documents in support of his claim - In fact, the appellants filed application for producing certain additional evidence before the Tribunal which evidence has not been considered by the adjudicating commissioner - Hence, it appropriate to set aside the order of the commissioner and remand the matter for fresh consideration after granting reasonable opportunity to the appellants.

Summary

Issues: Appeal against service tax demand, imposition of penalties under Finance Act, 1994.

Analysis:
1. The appeal was made against an order confirming a service tax demand amounting to 82,25,013/- along with interest and penalties under sections 76, 77, and 78 of the Finance Act, 1994. The appellant, a company registered under the Company Act, was engaged in providing consultancy services to the private sector, conducting research and development projects, and training programs on behalf of different Ministries of the Central Government.

2. The appellant argued that the demand was based on amounts received as grant-in-aid from government sources, asserting that no service provider-client relationship existed between them and the government departments. They contended that the work undertaken for government departments could not be considered taxable services, as the grant-in-aid was not payment for services rendered. The appellant also cited a similar decision by the Bangalore Bench of the Tribunal in a different case.

3. The Commissioner's order did not address the issues raised by the appellant adequately. The appellant's submissions and evidence were not considered fully, and the decision of the Tribunal in another case was not taken into account. The appellant claimed that the Commissioner did not properly differentiate between taxable and non-taxable services.

4. The Tribunal, after considering the arguments from both sides and reviewing the records, found that the Commissioner's order lacked thorough consideration of the issues. Due to this, the Tribunal set aside the Commissioner's order and remanded the matter for fresh consideration, allowing the appellant to submit additional evidence within 45 days. The Commissioner was directed to reevaluate the issue promptly, preferably within six months from the receipt of the Tribunal's order.

5. Consequently, the appeal was disposed of by setting aside the Commissioner's order and granting the appellant an opportunity to present their case with additional evidence for a fresh consideration of the matter.