2014 (10) TMI 731 - AT - Service Tax

Successor s liability - Imposition of penalty - Difference in the services provided by the appellant in the balance sheet as compared to their service tax returns - Held that - during the impugned period the service tax could not have been taken from the successor of a person who is dead. In these circumstances, I set aside the impugned order qua confirming the demand of service tax along with interest - Decided in favour of assessee.

Summary

Issues:
1. Demand of service tax along with interest confirmed for the period 1995-96 to 1996-97 against a proprietorship concern.
2. Applicability of penalty on the successor of the deceased proprietor.
3. Interpretation of Section 11 of the Central Excise Act, 1944 regarding recovery of service tax from a deceased person's successor.

Analysis:

1. The appellant challenged the demand of service tax and interest confirmed for the period 1995-96 to 1996-97 against the proprietorship concern. It was revealed during an audit that there were discrepancies in the services provided by the appellant as per the balance sheet compared to their service tax returns. The appellant claimed that the differences were related to Vyaj Badla transactions, assuming they were not liable for service tax on such transactions. Despite explanations, proceedings were initiated resulting in the confirmation of the demands by the adjudicating authority. However, the penalty imposed was set aside by the learned Commissioner (Appeals) based on the fact that the proprietor of the firm during the impugned period had passed away, making the penalty inapplicable to the successor.

2. The primary contention raised by the appellant was based on the provisions of Section 11 of the Central Excise Act, 1944, arguing that a demand cannot be enforced against the successor of a deceased individual who had not paid the service tax during the relevant period. The appellant maintained that due to the death of the person liable for the service tax, the demand against the successor was not sustainable. Upon reviewing the provisions of Section 11, the appellate tribunal agreed with the appellant's contentions. Consequently, the tribunal set aside the impugned order confirming the demand of service tax along with interest, thereby allowing the appeal and providing for any consequential relief.

In conclusion, the judgment focused on the issue of recovering service tax from the successor of a deceased person who had not paid the tax during the relevant period. The tribunal, after considering the provisions of the Central Excise Act, 1944, ruled in favor of the appellant, emphasizing that the demand could not be enforced against the successor in such circumstances. This decision highlights the importance of legal provisions governing the recovery of taxes in cases involving the death of the original taxpayer.