2019 (7) TMI 1661 - AT - Service Tax

Banking and other Financial Services - allegation that the branch did not pay full amount of service tax on its income on the impugned service - period from October 2004 to September 2008 - levy of penalty - HELD THAT - Appellant have not discharged their liability of Service Tax on various incomes during the impugned period over which they have realized the Service Tax in some cases and have not realized the Service Tax in some other cases. The cum-tax value benefit may be allowed in those cases where Service Tax has not been collected by the appellant - This has also been clarified vide Para 5.7 of CBEC instruction No.341/18/2004-TRU (PT) dated 17.12.2014. Levy of Penalty - Suppression of facts or not - HELD THAT - There are no ingredient of suppression of facts misstatement etc. with intent to evade payment of Service Tax. Hence the penalty imposed under Section 78 of the Finance Act 1994 is set aside. The matter is remanded for the limited purpose of re-computation of cum-tax value and verification of the related documents - Penalty is set aside - appeal allowed in part.

Issues:
1. Denial of CENVAT credit on the ground of failure to produce relevant documents.
2. Disallowance of appeal by Commissioner of Central Excise (Appeals).
3. Dispute regarding payment of service tax on banking services.
4. Alleged double taxation on service tax liability.
5. Imposition of penalty under Section 78 of the Finance Act, 1994.

Analysis:
1. The appellant contested the denial of CENVAT credit amounting to ?2,07,151, arguing that this issue was not raised in the show cause notice. The Tribunal observed that until the bank was fully computerized, there were discrepancies in collecting service tax on services like locker rent and agency commission. The tribunal noted that the bank had deposited the service tax it collected. It was also contended that the head office had already paid service tax on agency commission, and demanding payment again from the branch would lead to double taxation. The tribunal directed the re-computation of cum-tax value and verification of related documents, setting aside the denial of CENVAT credit.

2. The appeal was disallowed by the Commissioner of Central Excise (Appeals), leading to the filing of the present appeal. The appellant argued that service tax was paid on the collected amount from customers and that any unpaid service tax should be considered as cum-tax value. The tribunal referred to relevant judgments and instructed the re-computation of unpaid service tax. The tribunal set aside the penalty imposed under Section 78, finding no suppression of facts or intent to evade payment of service tax.

3. The dispute centered around the payment of service tax on banking services provided by the bank branch. The tribunal noted that service tax collection was not proper until the bank was fully computerized, especially regarding locker rent and agency commission. The appellant contended that all earnings were recorded and available for scrutiny, denying any suppression or misstatement warranting penalty under Section 78. The tribunal directed the re-computation of cum-tax value in cases where service tax was not collected, citing relevant CBEC instructions.

4. The appellant argued against double taxation, stating that the head office had already paid service tax on certain incomes. Citing case laws and CBEC instructions, the tribunal agreed that demanding service tax again from the branch would amount to double taxation. The tribunal set aside the penalty and remanded the matter for re-computation of cum-tax value and document verification.

5. The tribunal found no evidence of suppression of facts or intent to evade service tax payment, leading to the setting aside of the penalty imposed under Section 78. The matter was remanded for re-computation of cum-tax value and document verification, ultimately partly allowing the appeal in the specified terms.

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