2013 (9) TMI 625 - AT - Service Tax

Service tax demand - appellant had collected the service tax from their customers but has not remitted the same to the department Held that - The question of showing any leniency would not arise at all - appellant has played a fraud on the exchequer and any leniency would send wrong signals which should be avoided. CENVAT credit matter remanded back to the adjudication as to the claim of the CENVAT credit facility - even after allowing the margin for eligible credit, there is a differential tax to be paid by the assessee. One third amount of duty ordered to be submitted appellant eligible to examination of Cenvat credit would be admitted on the production of satisfactory evidence by the appellant. - Decided against the assessee.

Issues:
1. Service tax liability on taxable services provided by the appellant.
2. Eligibility for Cenvat credit.
3. Adjustment of advances received in bills issued.
4. Imposition of penalties under Sections 76, 77 & 78 of the Finance Act.

Analysis:

Issue 1: Service tax liability on taxable services provided by the appellant
The appellant, M/s. Sarth India Ltd., provided various taxable services but failed to discharge the service tax liability despite recovering it from customers. The Commissioner of Central Excise & Service Tax, Nagpur, issued a show-cause notice demanding service tax along with interest and penalties. The appellant did not dispute the demand but claimed eligibility for Cenvat credit. The appellate tribunal noted that the appellant collected service tax but did not remit it to the department, indicating fraudulent behavior. The tribunal directed the appellant to make a pre-deposit to cover the differential tax amount and report compliance to the adjudicating authority.

Issue 2: Eligibility for Cenvat credit
The appellant claimed Cenvat credit for excise duty paid on inputs and service tax paid on input services, amounting to Rs. 1,14,04,823. However, the adjudicating authority did not consider this claim as no documentary evidence was provided by the appellant. The tribunal decided to send the matter back to the adjudicating authority for a proper examination of the appellant's claim for Cenvat credit, subject to satisfactory evidence being produced.

Issue 3: Adjustment of advances received in bills issued
Regarding the demand of Rs. 47,51,362 related to advances received by the appellant, they claimed that these advances were subsequently adjusted in the bills issued. However, it was admitted that the service tax liability on this amount was not discharged. The appellant requested leniency due to financial hardship, but the tribunal emphasized the importance of fulfilling tax obligations and directed the appellant to make a pre-deposit to cover the outstanding tax amount.

Issue 4: Imposition of penalties under Sections 76, 77 & 78 of the Finance Act
Penalties under Sections 76, 77 & 78 of the Finance Act were proposed in the show-cause notice and confirmed in the impugned order. The Revenue supported the findings of the adjudicating authority, emphasizing that leniency should not be granted as the appellant had collected service tax from customers but failed to remit it to the department. The tribunal upheld the penalties and directed the appellant to comply with the payment requirements.

In conclusion, the appellate tribunal disposed of the appeal by directing the appellant to make a pre-deposit to cover the outstanding tax amount and report compliance to the adjudicating authority. The matter of eligibility for Cenvat credit was referred back to the adjudicating authority for further examination, emphasizing the importance of fulfilling tax obligations and avoiding fraudulent practices.

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