2013 (12) TMI 863 - AT - Service Tax

Demand of service tax - Onus of Assessment - who is to identify whether the income received is because of rendering a taxable service or as a receiver of taxable service and pay the tax on it - Held that - in the present system of levy of central excise and service tax, the assessment and payment of tax are entirely left to the assessee and it is the responsibility of the assessee to pay the tax correctly - if some income cannot be explained, it means self-assessment is incomplete - appellant was not able to produce a Chartered Accountant certificate. If the same was produced, Commissioner was inclined to consider the same - There are procedures in accounting where it will be possible to conduct audit on the basis of samples chosen on scientific basis to work out the liability across the whole organization based on such samples. We consider that it would be appropriate to direct the appellant to get such audit done and based on that if any liability arises, the same can be worked out across the organization and total liability arrived at - Decided against assessee.

Summary

Issues:
Demand of service tax on miscellaneous income, Responsibility of identifying taxable income, Requirement of documentary evidence for income verification, Fair resolution of disputes, Direction for audit to determine tax liability.

Analysis:
The judgment addresses the issue of demand for service tax on miscellaneous income by the appellant. The Tribunal confirms the demand of Rs.10,18,29,477 with interest for the period from 2005-06 to 2008-09. The key issue in this case is determining who is responsible for identifying whether the income received is from rendering a taxable service or as a receiver of taxable service and paying the tax on it. The Tribunal emphasizes that in the current system, the assessment and payment of tax are primarily the responsibility of the assessee. The appellant claimed to have ensured tax payment on all services received/provided but failed to explain some income, indicating incomplete self-assessment. The Tribunal acknowledges the need for a reasonable process to settle disputes efficiently.

The judgment highlights the importance of documentary evidence to substantiate claims regarding income. The Commissioner noted that the appellant failed to produce a Chartered Accountant certificate or any other documents supporting their claim that the income was not related to any taxable service/value. The absence of documentary evidence led to the Commissioner's reluctance to accept the appellant's contention. The observation underscores the significance of providing proper documentation to support claims and defend against allegations related to taxable income.

To expedite the resolution of the dispute, the Tribunal decides to waive the requirement of predeposit and proceed to decide the appeal finally. Recognizing the impracticality of individually examining every receipt/transaction of over 2500 branches, the Tribunal suggests conducting an audit based on scientific sampling methods to determine the liability across the organization. Both parties agree that this approach is reasonable, and the Tribunal directs the appellant to conduct the audit within six months and submit the results for fresh adjudication by the Commissioner. By providing this direction, the Tribunal aims to facilitate a fair and efficient resolution of the tax liability issue.

In conclusion, the judgment underscores the importance of fulfilling tax payment obligations, the necessity of documentary evidence to support income claims, and the significance of adopting practical approaches, such as audits based on scientific sampling, to determine tax liabilities across organizations. The decision reflects a balanced approach to resolving disputes and ensuring compliance with tax regulations.