2012 (7) TMI 668 - AT - Service Tax

Difference between gross receipts shown in the profit and loss account and the value of service rendered by them as declared in their service tax return. - Construction of Residential Complexes - held that - The amounts are confirmed with reference to figures shown in profit and loss account as per AS7 standards prescribed by the Institute of Chartered a Accountants for maintaining accounts of Construction companies. This standard is for ascertaining the profit and loss of a construction company and does not straight away reflect the position of receipt of payments which is the relevant factor for paying service tax. Amounts received against taxable activities can be arrived at only if the accounts are examined diligently by a person having some knowledge about accounting methods which is not done in this case. - Pre condition of pre-deposit waived.

Summary

Issues:
Recovery of short paid tax, difference between gross receipts and service tax return, liability for payment of service tax, exclusion of certain amounts, due diligence in verifying facts, legal issues in the case, waiver of pre-deposit for appeal admission.

Analysis:
The case involves the appellants providing services of Construction of Residential Complexes and a dispute arising from the audit conducted by Revenue on their units for the periods 2005-06 to 2008-09. The audit revealed a variance between the gross receipts in the profit and loss account and the value of services declared in the service tax return, leading Revenue to initiate proceedings for recovery of short paid tax amounting to Rs. 67,20,597 along with interest and penalties under sections 76 and 78 of the Finance Act, 1994. The appellants challenged this order through an appeal.

The Counsel for the appellants presented several reasons for the differences in figures, including the sale of complete houses without services rendered, discrepancies in amounts received versus sale bookings, no liability for service tax on certain amounts, and the exclusion of recoverable amounts from debtors. The Counsel argued that the demand was not supported by law, and the adjudicating authority did not perform due diligence in verifying the facts. Therefore, the Counsel requested the admission of the appeals without any pre-deposit of dues arising from the impugned order.

The Revenue's representative contended that the adjudicating authority had considered the appellants' submissions and conceded where they were found correct. Referring to a table in the adjudication order, the representative highlighted the differential value of taxable services and the exclusion of certain amounts, justifying the confirmed demand of Rs. 67,20,597. The Revenue argued that the demand was rightfully confirmed and suggested that the appellants should make a reasonable pre-deposit.

Upon considering both sides' arguments, the Tribunal observed that the calculations did not account for outstanding payments reflected in the balance sheet, indicating a lack of due diligence in confirming the amount. The Tribunal noted legal issues and emphasized that the profit and loss account figures did not directly reflect the receipt of payments crucial for service tax liability. The Tribunal decided not to require any pre-deposit for appeal admission, waiving the need for payment of dues during the appeal's pendency.

In conclusion, the Tribunal waived the pre-deposit requirement for appeal admission, citing the lack of due diligence in confirming the amount and the necessity for a thorough examination of accounts to determine amounts received against taxable activities accurately.