2011 (3) TMI 647 - AT - Service Tax

Demand - suppression of fact - No speaking order - Only because the discrepancy was noticed by the department by comparing ST3 return with the profit and loss account, the adjudication was made - While the ST 3 return was statutory document under Finance Act 1994, the balance-sheet and profit and loss account were statutory documents under Companies Act 1956 - When there is no prescription of law in respect of the statutory liabilities of the service provider, we are handicapped to provide any sort of relief to the appellant in the matter of EPF and ESI contribution received and forming part of the gross value of the service provided - it would be proper for the appellant to get an opportunity to exercise the option to comply with the law, making payment of the demand that shall arise inconsequente of this order within the statutory period so that the appellant may get concession of limiting the penalty to 25% of the tax - the appeal is dismissed except granting relief partly under section 78 subject to condition therein and complete waiver of penalty under section 76 of the Finance Act 1994

Issues Involved:
1. Discrepancy in service tax returns and financial statements.
2. Taxability of statutory payments like ESI and PF.
3. Limitation period for initiating proceedings.
4. Imposition of penalties under various sections of the Finance Act, 1994.

Detailed Analysis:

1. Discrepancy in Service Tax Returns and Financial Statements:
The appellant argued that discrepancies between the ST3 returns and the profit and loss account arose due to a bona fide belief about the non-taxability of certain statutory payments and profits. The Revenue contended that the entire value of payments received should be taxable. The Tribunal confirmed that discrepancies were evident in the appellant's documents, and the appellant failed to explain these differences. Therefore, adjudication was based on figures from the financial statements, with no concessions on statutory dues.

2. Taxability of Statutory Payments like ESI and PF:
The appellant believed that statutory payments like ESI and PF should not be included in the taxable value. However, the Tribunal referenced previous decisions, including Naresh Kumar and Co. Pvt. Ltd. vs. CST, Calcutta, which held that gross receipts are taxable, excluding certain items like ESI payments. The Tribunal reiterated that all expenses incurred up to the point of service delivery form the gross value of taxable service, as per the Service Valuation Rules of 1994 and supporting judgments from the Apex Court.

3. Limitation Period for Initiating Proceedings:
The appellant claimed that the proceedings were time-barred. The Revenue argued that the appellant's failure to provide complete details justified the initiation of proceedings within the limitation period. The Tribunal agreed with the appellate authority, finding that the element of suppression was present, making the proceedings timely and appropriate under Section 73.

4. Imposition of Penalties:
The appellant sought relief from penalties, citing a bona fide belief at the early stage of law implementation. The Revenue insisted on penalties due to suppression findings. The Tribunal upheld the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. However, it provided partial relief under Section 78, allowing the appellant to limit the penalty to 25% of the tax if payment was made within the statutory period. The penalty under Section 77 was confirmed due to late submission of ST3 returns, but the penalty for non-furnishing documents was waived due to lack of reasoning in the appellate order. The penalty under Section 76 was waived as Section 78 penalties were imposed.

Conclusion:
The appeal was dismissed except for partial relief under Section 78 and a complete waiver of the penalty under Section 76. The interest liability arising from the order was affirmed.

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