2017 (1) TMI 35 - AT - Service Tax

Cable operator services - evasion of tax - time limitation - arbitrary quantification - Held that - the statement of the proprietor relied upon by the Revenue, can at best raise suspicion to suggest that the taxable value declared by the appellant is not correct or suppressed. However, before fastening the service tax demand and the connected penalties under various sections, it was incumbent on the revenue to come up with tangible evidence to prove the suppression of facts and to quantify the demand on the basis of documentary evidence. On the other hand, what we notice is rather arbitrary quantification on the basis of a ball park figure indicated by the proprietor. Accordingly, we find it difficult to uphold the demands imposed upon the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal challenging service tax demand on cable operator services based on search operation, quantification of taxable value, limitation period for demand, and evidentiary requirements.

Analysis:
1. Quantification of Taxable Value: The appellant, a cable operator, faced a service tax demand following a search operation. The demand was based on the proprietor's statement suggesting the taxable value could be higher than declared. The Original Authority and Appellate Authority used different percentages to estimate the suppressed taxable services. The appellant contested the arbitrary determination of tax demand without a proper basis. The issue revolved around whether the service tax demand based on such estimation was valid.

2. Limitation Period for Demand: The appellant argued that the entire demand was time-barred as the revenue failed to provide substantial reasons for invoking an extended limitation period. The appellant contended that no serious grounds were disclosed for exceeding the normal limitation period. The revenue, however, relied on the proprietor's admission regarding the taxable value to justify the demand. The challenge was to determine if the demand was valid within the prescribed time limit.

3. Evidentiary Requirements: The Revenue initiated proceedings against the appellant for allegedly evading service tax without recovering incriminating documents during the search operation. The demand was solely based on the proprietor's statement estimating the evaded tax amount. The appellant argued that the demand lacked a proper basis and evidence, questioning the validity of imposing penalties and invoking an extended limitation period. The central issue was whether the demand could be sustained without concrete evidence of suppression of facts.

4. Decision: The Tribunal found the reliance on the proprietor's statement insufficient to prove tax evasion and suppression of facts. The demand was deemed arbitrary, lacking tangible evidence to support the quantification of taxable value. The Tribunal held that before imposing demands and penalties, the revenue must provide concrete evidence rather than relying on rough estimates. Consequently, the impugned order was set aside, and the appeal was allowed, highlighting the importance of substantial evidence in such tax matters.