2008 (4) TMI 103 - AT - Service Tax

Non-furnishing complete & true details of the amounts realized from their clients dept. unable to verify the correctness of the tax assessed by appellants - appellants have failed to disclose wholly or truly all material facts required for verification of the assessment u/s 71 - value of taxable service has escaped assessment so, larger period is invocable as per Sec. 73(1)(a) since demand related to period when new levy was introduced on Security agency service, penalty is not justifiable

Issues Involved:
1. Service Tax Liability
2. Limitation Period for Demand
3. Disclosure of Material Facts
4. Imposition of Penalties

Detailed Analysis:

1. Service Tax Liability:
The appellants, M/s. Magnum International and M/s. Magnum Environment Managements Pvt. Ltd., did not dispute the Service Tax liability on merits. They acknowledged the obligation to pay Service Tax on the gross amounts received for the services provided. The Assistant Commissioner assessed the Service Tax for the period from 16-10-1998 to March 2002, determining the short-paid amounts for both companies and ordered the recovery of these amounts along with interest under Section 75 of the Finance Act, 1994.

2. Limitation Period for Demand:
The appellants contended that the demand was barred by limitation as the show cause notices were issued on 24-2-2003 and 7-3-2003 for the period from 16-10-1998 to 31-3-2002. They argued that they had disclosed all primary material facts required under Section 73 of the Finance Act, 1994, and relied on various judicial rulings to support their claim that non-disclosure of inferential facts does not warrant an extended limitation period. However, the Tribunal found that the appellants had not furnished complete and true details of the amounts realized from their clients, which handicapped the Superintendent from verifying the correctness of the tax assessed. Consequently, the Tribunal upheld the invocation of the extended period of limitation under Section 73(1)(a) of the Act.

3. Disclosure of Material Facts:
The appellants claimed that they had honestly disclosed their service charges and believed that only these charges were liable to Service Tax. They argued that they were not required to disclose inferential facts. However, the Tribunal found that the appellants had failed to disclose wholly or truly all material facts required for verification of the assessment under Section 71 of the Act. The Tribunal noted that the appellants submitted scanty information and abstracts of service charges, which were insufficient for the Superintendent to determine the gross value of taxable services. Therefore, the Tribunal concluded that the appellants had not disclosed primary material facts, leading to the escape of taxable service assessment.

4. Imposition of Penalties:
The Assistant Commissioner imposed penalties under Sections 76, 78, and 79 of the Finance Act, 1994, on the appellants. However, the Tribunal observed that the appellants had paid some amount of service tax as per their understanding of the law and noted that the issue of valuation of taxable services was debatable. The Tribunal also considered the nascent stage of the service tax on Security Agencies during the relevant period and the appellants' correspondence with the Department. Therefore, the Tribunal found that there was reasonable cause for the appellants' failure to comply with the provisions and, in terms of Section 80 of the Finance Act, 1994, set aside the penalties imposed under Sections 76, 78, and 79.

Conclusion:
The Tribunal upheld the demand for service tax and interest but set aside the penalties imposed on the appellants. The appeals were disposed of by modifying the impugned orders to the extent indicated.

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