2011 (12) TMI 111 - AT - Service Tax

Exemption from Service Tax as a small service provider Revenue held non-eligibility of exemption - assessee deposited service tax under protest before issuance of show cause notice Revenue later accepted the contention - Refund claimed by assessee rejected on the ground that assessee may have collected it from customers- Held that - Just because the appellant issued invoice at gross amount and did not indicate that the Service Tax was exempt, conclusion cannot be reached that they have collected the Service Tax from the customers. Only when Service Tax was payable and was held to be payable, the question of determination of gross amount included Service Tax or not, would arise. As regards Profit & Loss Account, if the appellant followed the cash accounting method, they cannot be found fault with for showing it as expenditure. In any case, it has been paid under protest and the expenditure is booked. This does not mean that what was paid before issue of Show Cause Notice was subsequently collected from the customers. - Decided in favor of assessee.

Summary

Issues involved:
Proceedings initiated for exceeding exemption limit from Service Tax as a small service provider, rejection of refund claim due to lack of separate indication of Service Tax in invoices, inclusion of Service Tax liability in the value of services provided by the appellant, rejection of interest claim, and the applicability of cash accounting method for showing Service Tax as revenue expenditure.

Analysis:
The proceedings were initiated against the appellant for exceeding the exemption limit from Service Tax as a small service provider. However, the appellant paid the tax with interest under protest upon being informed of their ineligibility for the exemption. Subsequently, a refund claim was filed by the appellant for the Service Tax paid, which was rejected. The rejection was based on the ground that the invoices issued by the appellant did not separately indicate the Service Tax, leading to the assumption that the Service Tax had been collected from customers. Additionally, the appellant's Balance Sheet indicated the expenditure as revenue expenditure, implying the inclusion of Service Tax liability in the value of services provided. The appellant argued that they were not paying Service Tax during the relevant time and followed the cash accounting method, hence the Service Tax payment was shown as revenue expenditure.

The original adjudicating authority rejected the refund claim and credited the amount to the Consumer Welfare Fund, stating that the gross amount charged by the appellant was inclusive of Service Tax, passing on the incidence of Service Tax to the service recipients. The Commissioner (Appeals) upheld the rejection, citing the appellant's failure to provide concrete evidence that the burden of Service Tax was not passed on. However, the appellant contended that since they were not liable to pay Service Tax after Revenue accepted their exemption eligibility, it was unjustified to conclude that Service Tax had been collected based solely on the invoices.

The appellate authority found the reasoning of the lower authorities flawed, emphasizing that the mere absence of a separate indication of Service Tax in the invoices did not automatically imply its collection from customers. The authority highlighted that the determination of whether Service Tax was collected should be based on the actual liability and payment of the tax, rather than the invoice format. Moreover, the application of the cash accounting method by the appellant was deemed appropriate for showing the Service Tax payment as expenditure, especially when paid under protest. The appellate tribunal allowed the appeal, deeming the impugned order unsustainable and providing consequential relief to the appellant, emphasizing the importance of actual liability and payment of Service Tax in determining the collection from customers.