2014 (12) TMI 830 - AT - Service Tax

Waiver of predeposit of tax, interest and penalty - Management Consultancy Service and Commercial Training or Coaching Service - Held that - demand of tax on management consultancy is based on the balance sheet figure. It is seen that the adjudicating authority had given detailed finding that the applicant had not placed any evidence in support of their contention that no amount was collected and no service was rendered by them. It is seen that the applicant had not placed any evidence to substantiate their claim either from the service recipient or any contra or reverse accounting entries or explained the circumstances as to how the business transactions collapsed in both the cases. Hence, we find that the applicant failed to make out a prima facie for waiver of predeposit of entire amount of dues in this issue. - Partial stay granted.

Summary

Issues:
1. Waiver of predeposit of tax for Management Consultancy Service and Commercial Training or Coaching Service.
2. Demand of tax based on Profit & Loss Account.
3. Refund of money to trainees for cancelled training program.
4. Financial hardship due to business closure during recession.

Analysis:

Issue 1: Waiver of predeposit of tax
The applicant sought waiver of predeposit of tax amounting to Rs. 1,41,21,499/- along with interest and penalty for the period from April 2006 to March 2009 for services falling under 'Management Consultancy Service' and 'Commercial Training or Coaching Service'. The applicant argued that certain tax demands were unjustified due to non-materialization of software development contracts and cancellation of training programs, leading to no collection of money or service rendered. The adjudicating authority had not considered these submissions properly. The applicant also claimed financial hardship due to business closure during the recession period. The Revenue, however, contended that the demands were valid based on the Profit & Loss Account and that the applicant had not provided sufficient evidence to support their claims.

Issue 2: Demand of tax based on Profit & Loss Account
The demand of tax on Management Consultancy Service was based on the balance sheet figure, with the adjudicating authority finding that the applicant failed to provide evidence to substantiate their claim of no collection of money or service rendered. The applicant did not present any evidence from service recipients or any contra accounting entries to explain the collapse of business transactions. Consequently, the Tribunal found that the applicant did not establish a prima facie case for the waiver of predeposit of the entire tax amount due.

Issue 3: Refund of money to trainees
Regarding the tax demand on Commercial Training and Coaching Service, the applicant claimed to have refunded money to trainees due to cancelled training programs. The Revenue disputed this claim, stating that the applicant had collected more money than refunded, and failed to prove that the trainees were their own employees. The Tribunal considered an auditor's certificate provided by the applicant, certifying training undertaken by the company for employees/trainees and the cancellation of programs. Relying on a precedent, the Tribunal acknowledged the validity of the training provided to outsiders, except employees of the buyer concerns using purchased machines, as not constituting commercial training service.

Issue 4: Financial hardship due to business closure
Considering the financial hardship pleaded by the applicant, the Tribunal directed the applicant to predeposit a reduced sum of Rs. 20,00,000/- within six weeks, with the balance dues' predeposit waived and recovery stayed during the appeal's pendency. This decision balanced the applicant's financial constraints with the tax obligations, providing relief while ensuring compliance with tax liabilities.