2013 (12) TMI 1228 - AT - Service Tax

Demand of service tax on outstanding balance (Debtors) - Ledger balance due for realization - Held that - tax is chargeable on the amount shown outstanding by BSNL. As per BSNL outstanding balance is carry forwarded to next months and it cannot be a case of revenue demanding service tax every month on the same amount. Respondent (BSNL) contends that tax was leviable on amount realized and not on outstanding amount and they rely on Letter of Ministry of Finance, Department of Revenue F. No. 137/12/97-CX-4 dated 03.12.97 in this regard. We find that commissioner (Appeal) has considered these submissions of BSNL and allowed their appeal - Decided against Revenue.

Summary

Issues:
1. Tax liability on outstanding balance for service tax.
2. Interpretation of tax liability on amount realized vs. outstanding amount.

Issue 1: Tax liability on outstanding balance for service tax

The appeal was filed by the Revenue against an order-in-appeal regarding a case involving M/s. Bharat Sanchar Nigam Ltd (BSNL) where an outstanding balance for service tax was identified during an audit. The amount pending for realization from subscribers was Rs. 2,48,02,343/- with a service tax amounting to Rs. 12,40,117/-. BSNL explained that the outstanding balance from September 2001 was carried forward to subsequent months and added to the billed amount for realization from subscribers in a continuous process. Despite BSNL's explanation, they failed to produce documentary evidence regarding the payment of service tax for September 2001. Consequently, a Show Cause Notice was issued to BSNL demanding service tax, interest, and penalties. The Original Authority confirmed the tax, interest, and imposed penalties, leading BSNL to appeal before the Commissioner (Appeals) who allowed their appeal. The Revenue appealed against this decision.

Issue 2: Interpretation of tax liability on amount realized vs. outstanding amount

During the hearing, the Revenue contended that tax is chargeable on the outstanding balance shown by BSNL, while BSNL argued that tax should be levied on the amount realized and not on the outstanding amount. BSNL relied on a Letter of Ministry of Finance, Department of Revenue dated 03.12.97 to support their argument. The Commissioner (Appeals) considered these submissions and allowed BSNL's appeal. The Tribunal found that the Revenue's demand for service tax every month on the same outstanding amount was not justified. The Tribunal upheld the Commissioner's decision, stating that tax liability should be based on the amount realized rather than the outstanding balance. Consequently, the appeal of the Revenue was rejected, affirming the Order in Appeal in favor of BSNL.

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