2015 (12) TMI 331 - AT - Service Tax

Business Auxiliary Service, Site Formation and Mining of Mineral Service - demand has been confirmed without giving service wise breakup and based on the total amount received for the services rendered in their Ledger and Balance Sheet - Held that - Merely going by the Balance Sheet and Ledger figures to arrive at the service amount received is not correct. More so because many times we have found that Balance Sheet is prepared on accrual basis whereas Service Tax is levied on receipt basis. In any case for demand of Service Tax, first of all the nature of services rendered has to be considered, thereafter it has to be examined whether the service is covered by definition of services in the Finance Act, 1994 and classified under a particular service category, thereafter it has to be seen what is rate of tax and consideration received and the tax has to be calculated. This is the process to be followed for assessment of tax and in the absence of any assessment by the assessee when the Commissioner proceeds for adjudication this process has to be followed. In the absence of such a process it would not be possible to apply any law and decide the matter. - Matter remanded back - Decided in favour of assessee.

Summary

Issues:
Demand of service tax without service wise breakup and based on total amount received. Validity of the demand and penalty imposed.

Analysis:
The judgment addresses the issue of a demand of service tax amounting to Rs. 4,25,86,869 from the appellant, along with an imposed penalty, for allegedly rendering Business Auxiliary Service, Site Formation, and Mining of Mineral Service. The appellant raised a preliminary objection regarding the lack of a service-wise breakup in the demand confirmation process. The learned counsel highlighted that the demand was based solely on the total amount received for services rendered as per the Ledger and Balance Sheet, without proper quantification. The report presented by the Commissioner acknowledged the absence of quantification service wise and party wise, relying instead on Balance Sheet and Ledger abstract on a year-wise basis for the demand calculation.

The Tribunal emphasized the importance of accurately determining the nature of services rendered, assessing if they fall under the defined services in the Finance Act, 1994, categorizing them under specific service categories, determining applicable tax rates, and calculating the tax due based on consideration received. The Tribunal noted the disparity between accrual basis accounting in Balance Sheets and receipt basis taxation for Service Tax. It stressed that without a proper assessment by the assessee, the adjudicating authority must follow a structured process to apply the law and make informed decisions. As a result, the Tribunal found the preliminary objection raised by the appellant's counsel valid and set aside the impugned order, remanding the matter to the original adjudicating authority for a reassessment in compliance with the law. The Commissioner was directed to provide detailed service-wise and party-wise information, including consideration received and tax payable, before proceeding further.

In conclusion, the Tribunal's judgment emphasizes the necessity of a meticulous assessment process in determining Service Tax liabilities, highlighting the significance of accurate quantification and proper categorization of services rendered. The decision underscores the procedural requirements for tax assessment and the need for a structured approach in applying tax laws to ensure fairness and compliance.