2016 (6) TMI 445 - AT - Service Tax

Tax liability - Security service - Substantial reduction on reconciliation of accounts - Held that - even the delay in receipt of payment advice may cause difference in determination of liability of the relevant taxing period. Therefore, it may not cause prejudice to the interest of Revenue, if the appellant gets an opportunity for reconciliation of its figures and satisfy the adjudicating authority for determination of proper tax liability. Accordingly, the appellant is directed to make an application within a month of receipt of this order to the adjudicating authority to fix date of hearing. Proper application of law and proper re-adjudication on such count - Imposition of penalty - Appellant pleaded that when huge demand was discharged, the law requires that penalty if any imposable, should only be confined to the unpaid amount - Held that - appellant s pleading deserves consideration for the reason that when the tax liability is discharged partially to that extent of liability is discharged, penalty may not be exigible. However, saying so, we do not prevail over the mind of the adjudicating authority since there is no estoppel against law and what that is law shall apply on the facts and circumstances of the case that may reach to his record. The appellant shall be heard on both facts and law and a reasoned and speaking order shall also be passed. Ld. Adjudicating authority has extended the concessional penalty of 25% of the tax demand. He may also extend such concession on the facts and circumstances of the case in all fairness. - Appeal remanded back

Summary

Issues:
1. Reconciliation of accounts for determining tax liability.
2. Proper application of law regarding penalty imposition.
3. Need for remand to adjudicating authority for further proceedings.

Analysis:
1. The appellant, providing security services nationwide with accounts in Mumbai, faced a service tax demand of ?52,54,860 during a period where returns were not filed. The adjudicating authority acknowledged the potential reduction in tax liability to around ?45,70,281 upon reconciliation. The Tribunal emphasized the importance of reconciliation due to centralized accounts and delayed payment advice affecting liability determination. Thus, the appellant was directed to apply for a hearing within a month for the adjudicating authority to determine the accurate tax liability in compliance with the law.

2. Regarding penalty imposition, the appellant contended that penalties should only apply to the unpaid amount after a substantial deposit was made before investigation. The Tribunal recognized the legal principle that penalties should align with the outstanding balance. It emphasized the necessity for proper application of law and re-adjudication to ensure penalties are imposed correctly. The adjudicating authority was instructed to consider the appellant's arguments on both factual and legal grounds before passing a reasoned order.

3. The Revenue opposed the remand, stating that the appellant had opportunities to present their case during the initial adjudication. However, the Tribunal emphasized the appellant's right to reconciliation and proper consideration of penalty imposition based on the amount paid. The adjudicating authority was directed to extend a concessional penalty of 25% if deemed appropriate based on the case's circumstances. The Tribunal remanded the appeal to the adjudicating authority for further proceedings, emphasizing the need for a prompt and reasoned decision within three months of the order receipt.