2011 (3) TMI 458 - AT - Service Tax

Evasion of service tax - Willful suppression of facts - services provided by state bank of India - valuation before 18.4.2006 - Held that - The Notification No.12/2006-ST dated 19.04.2006 was issued only as a clarification for the newly introduced Service Tax (Determination of Value) Rules 2006 - Since there is wilful misstatements regarding omission of Postal charges, Telegram charges etc. collected from the customers in their ST3 returns, SBI is liable for penalty under section 78 - When the respondents have not disclosed the entire taxable value in the statutory ST 3 Return, and they have omitted to include part of the value coupled with non-payment of requisite amount of tax in respect of such amounts, it definitely amounts to suppression and wilful mis-statement and hence the extended period of limitation is applicable - Decided against the assessee

Issues:
- Allegation of intention to evade payment of service tax
- Suppression of facts in ST3 Returns
- Determination of taxable value as per Section 67 of Finance Act 1994
- Demand of service tax prior to 19.04.06
- Penalty under Section 78 for wilful misstatements
- Applicability of extended period of limitation
- Waiver of penalties under Section 80 for a public sector bank

Allegation of intention to evade payment of service tax:
The department filed an appeal against the lower appellate authority's order, arguing that the mere recording of transactions in records does not negate the intention to evade service tax. The department contended that the failure to assess the value and the non-inclusion of certain charges in the ST3 Returns indicated an intention to evade payment.

Suppression of facts in ST3 Returns:
The department established that a bank had collected certain charges from customers but failed to disclose these amounts in the ST3 Returns, leading to an allegation of suppression of facts. The tribunal held that the omission to include the complete taxable value and the non-payment of the requisite tax amount amounted to suppression and wilful misstatement, justifying the application of the extended period of limitation.

Determination of taxable value as per Section 67 of Finance Act 1994:
The tribunal emphasized that the taxable value for service tax purposes must be determined in accordance with Section 67 of the Finance Act 1994. It clarified that amounts collected for expenses like postage, telegraph, and telex charges are intrinsic to banking services and should be included in the taxable value. The tribunal rejected the argument that there was no statutory specification for assessing the value before a specific notification date.

Demand of service tax prior to 19.04.06:
The tribunal ruled that service tax demand for charges collected before 19.04.06 was valid, as Section 67 mandated the inclusion of the gross amount charged by the service provider in the taxable value. Therefore, the bank was required to include all amounts collected from customers while providing taxable services in the taxable value.

Penalty under Section 78 for wilful misstatements:
Due to wilful misstatements regarding the omission of charges in the ST3 Returns, the bank was held liable for penalties under Section 78. The tribunal upheld the penalties, emphasizing the importance of accurate reporting and compliance with tax regulations.

Applicability of extended period of limitation:
The tribunal found that the bank's failure to disclose the complete taxable value and the omission of certain charges justified the application of the extended period of limitation. Consequently, the duty demand along with interest relating to the extended period was confirmed.

Waiver of penalties under Section 80 for a public sector bank:
Considering the bank's status as a public sector entity and other circumstances, the tribunal decided to waive the penalties imposed on the bank under Section 80 of the Finance Act 1994. However, the bank was cautioned that any future violations of the law would lead to penal action.

In conclusion, the departmental appeal was partly allowed, confirming the duty demand and interest for the extended period while waiving penalties under Section 80 for the bank.

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