2014 (7) TMI 1047 - AT - Service Tax

Sub-contractor - consultancy services provided to Main architect - Till 15-10-1998, the appellants were paying service tax for the total consideration received by them for such services. With effect from 16-10-1998, services rendered by architects were brought under service tax levy and since then the appellant stopped paying service tax. - Invocation of extended period of limitation - Held that - The main contention of the assessee is that, the Architects paid service tax on value of services rendered by the appellants. This is a highly unlikely scenario. The burden to prove such payment was on the appellants who were claiming relief from tax liability. No such evidence has been produced - there is nothing on record to show that the architects paid service tax for value of services rendered by the appellants. Further the Ministry s clarification is with reference to service rendered by one consulting engineer to another consulting engineer. When the levy on consulting engineers were introduced the stand of the architects were that they were not consulting engineers. In the next Financial Year levy was imposed separately on the service of architects. So there is no reason to consider the impugned services as services rendered through architects as claimed by the appellants. - appellant was registered with service tax authorities and paying tax appropriately upto a particular point of time and thereafter they discontinued disclosure of receipt of consideration from architects without any reason. So the extended period of time is rightly invoked in this case. Demand to be raised on Partnership firm or Pvt. Ltd. company - Modification of order - Penalty u/s 78 - Held that - documents showing the conversion of the partnership firm to the Private Ltd. company has not been produced at any stage of this proceeding below the lower authorities - Commissioner (Appeals) has passed orders giving certain reliefs in quantum of tax to be paid. However no specific order for corresponding reduction of penalty imposed under Section 78 is passed. So we direct that the adjudicating authority may determine differential tax liability as per directions of Commissioner (Appeals) and also re-determine the penalty under Section 78 in accordance with law - Decided against assessee.

Issues:
1. Service tax liability of a partnership firm converted into a private limited company.
2. Applicability of service tax on services rendered through architects.
3. Burden of proof on the taxpayer regarding payment of service tax by architects.
4. Invocation of extended period for tax liability.
5. Liability of a private limited company for tax demand during the conversion period.
6. Reduction of penalty in accordance with the Commissioner (Appeals) directions.

Analysis:
1. The case involved the transition of a partnership firm, M/s. Geo Structural, into a private limited company, Geo Structural (P) Ltd., and the subsequent service tax demands for different periods. The appellants argued that the private limited company should not be held liable for the service tax liability of the partnership firm. However, the Tribunal rejected this argument due to the lack of evidence supporting this claim.

2. The issue of service tax applicability on services rendered through architects was raised. The appellants claimed that architects had paid service tax on the services provided by the appellants. However, the Tribunal found no evidence to support this claim. The Ministry's clarification was specific to consulting engineers and did not cover services through architects, leading to the dismissal of the appellants' argument.

3. The burden of proof regarding the payment of service tax by architects rested on the appellants. As they failed to provide any evidence supporting their claim, the Tribunal ruled against them. The lack of documentation or proof of architects paying service tax on the appellants' services weakened their case.

4. The Revenue invoked the extended period for tax liability due to the appellants discontinuing disclosure of consideration received from architects without any valid reason. The Tribunal upheld the invocation of the extended period based on the appellants' actions.

5. The Tribunal addressed the issue of tax liability during the conversion period from a partnership firm to a private limited company. The appellants raised this argument for the first time before the Tribunal, but without producing relevant documents showing the conversion process. As a result, the Tribunal rejected this plea due to the lack of supporting evidence.

6. Regarding the reduction of penalty, the Commissioner (Appeals) had provided relief in the quantum of tax to be paid but did not specifically address the penalty imposed under Section 78. The Tribunal directed the adjudicating authority to determine the differential tax liability as per the Commissioner (Appeals) directions and to re-determine the penalty under Section 78 in accordance with the law.

In conclusion, the Tribunal rejected the appeal except for a partial modification in the matter of penalty. The decision highlighted the importance of providing evidence to support claims, the burden of proof on taxpayers, and the implications of failing to disclose relevant information to tax authorities.

← Previous Next →