2016 (12) TMI 1391 - AT - Service Tax

Commercial coaching services - Discrepancy in Fee receipts - Whether the books of accounts maintained by the appellants and their Service Tax Returns filed time to time have been rightly rejected and the demand raised on the basis of statements under Section 14 of the Central Excise Act, 1994, whether the same is proper and/or whether the appellant have properly disclosed their turnover and maintained proper records which could not have been rejected on account of some variation noticed with the statement recorded by the partners of the appellant, their employees and students? Held that - there is no proper basis adopted by the revenue for rejecting the books of account and the Returns filed, and resorting to best judgment assessment - no discrepancy has been found out by the Revenue during investigation and or at the time of adjudication in the Books of Accounts and records maintained by the appellant, in the ordinary course of business - The approximate figures, as found in the statements, cannot form basis of rejection of the Books of Accounts and estimation of turnover by way of wild guess work. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Rejection of Books of Accounts and Service Tax Returns.
2. Discrepancies in Fee Receipts and Maintenance of Records.
3. Estimation of Turnover and Demand for Short Payment of Service Tax.
4. Basis for Best Judgment Assessment.
5. Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Rejection of Books of Accounts and Service Tax Returns:
The primary issue was whether the books of accounts maintained by the appellant, a coaching institute, and their Service Tax Returns could be rejected. The Revenue alleged discrepancies based on statements recorded under Section 14 of the Central Excise Act, 1994. The appellant contended that their books were properly audited and consistent with returns filed under various laws, including the Income Tax Act.

2. Discrepancies in Fee Receipts and Maintenance of Records:
During an inspection on 09-09-2010, the Revenue found discrepancies in fee receipts, such as missing registration numbers, incomplete taxable service values, and lack of details on Service Tax paid. The appellant argued that they maintained proper records, including Attendance Registers, Salary Registers, and Identity Cards for students. They explained that free classes and installment payments led to variations in fee receipts.

3. Estimation of Turnover and Demand for Short Payment of Service Tax:
The Revenue estimated the turnover based on statements from the appellant's partners and employees, finding a short payment of ?55,51,706/- in Service Tax. The appellant contested this, stating that their gross receipts were consistent with their books and returns. They argued that the Revenue's estimation was based on approximations and not actual records.

4. Basis for Best Judgment Assessment:
The Tribunal observed that the statements were recorded without informing the individuals that their approximations would be used for assessment. The Tribunal found no evidence of unrecorded receipts or discrepancies in the appellant's books. The Revenue's reliance on oral statements without corroborative evidence was deemed insufficient for a best judgment assessment.

5. Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
The Show Cause Notice proposed penalties for short payment of Service Tax. However, the Tribunal found that the Revenue's basis for rejecting the books and estimating turnover was flawed. Consequently, the penalties imposed under Sections 76, 77, and 78 were set aside.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order. It concluded that the appellant's books of accounts and returns could not be rejected based on approximations and uncorroborated statements. The appellant was entitled to consequential benefits in accordance with the law.

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