2014 (2) TMI 1089 - AT - Service Tax

Demand of service tax - Penalty u/s 76, 77 & 78 - Recovery Agent for loans given by different Financial Institutions - Held that - applicant has not disclosed full details of the value of the service provided by them and amounts collected as service tax from various clients. Instead the applicant has only asked for cross examination of representatives of the Financial Institutions. Since this case is based on records, cross examination of representatives of the banks is not that important. Going by figures admitted by the applicant itself there is substantial amount of tax to be paid. Under the circumstances, the applicants failed to make the case of total waiver of pre-deposit of dues arising from the impugned order - Conditional stay granted.

Issues:
1. Taxability of services provided by the applicant firm as a Recovery Agent.
2. Non-payment of appropriate service tax by the applicant firm.
3. Adjudication proceedings initiated by the department for recovery of unpaid tax.
4. Imposition of penalties under sections 76, 77, and 78 on the applicant firm and the proprietor.
5. Appeal filed against the adjudication order by the applicants.
6. Request for waiver of pre-deposit during the appeal process.

Analysis:
1. The judgment dealt with the taxability of services provided by the applicant firm, acting as a Recovery Agent for loans given by Financial Institutions. The services were found taxable under Section 65 (105) (zzzl) of the Finance Act, 1994, from 01.05.2006. The firm had failed to pay the appropriate service tax for the period 01.05.2006 to 31.03.2010, leading to an investigation by the department and initiation of recovery proceedings.

2. During the adjudication, an amount of Rs.1,34,35,194/- was confirmed against the applicant firm, along with interest and penalties under sections 76, 77, and 78. Additionally, penalties were also imposed separately on the proprietor of the firm. The applicants challenged this order by filing appeals along with stay petitions.

3. The arguments presented by the applicants' advocate focused on discrepancies in the calculation of the value of services rendered, highlighting that figures were taken from the Financial Institutions' books, leading to an inflated demand for service tax. The advocate requested cross-examination of representatives from other financial institutions to address these discrepancies but was denied, resulting in the confirmation of a significant amount.

4. On the other hand, the Revenue's representative opposed the waiver of pre-deposit, emphasizing that the demand was based solely on payments made to the applicant firm and not to any other entity. The Revenue also pointed out that the applicant had admitted to providing services of a certain value and collecting service tax from specific clients but failing to deposit it with the government.

5. The judgment concluded that the applicants had not fully disclosed the details of the services provided and the amounts collected as service tax. Considering the admitted figures, a substantial tax liability was evident. Consequently, the first appellant was directed to pre-deposit Rs. 60 lakhs within 8 weeks, while the pre-deposit of the remaining dues was waived, and the collection stayed during the appeal process.

6. The decision highlighted the importance of full disclosure of service details and tax collections, emphasizing the seriousness of non-depositing collected service tax with the government. The judgment balanced the interests of the parties by requiring a partial pre-deposit while granting relief on the remaining dues during the appeal period.

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