2017 (7) TMI 168 - AT - Service Tax

Validity of show cause notice (SCN) - Erection, Commissioning & Installation service - mis-declaration of value of goods - it was alleged that on the basis of TDS Certificate issue by the clients of M/s Sharma, the taxable amount that M/s Sharma received was ₹ 25,20,59,862/- but they have declared less value and short paid Service Tax - Held that - there is no whisper of examination of books of account maintained by M/s Sharma to arrive at the value of consideration received by them - It may be worth mentioning here that the purpose of audit report is to point out any discrepancy to the notice for examination by the executive and it is the duty of executive to examine the records and examine the objection raised with reference to the records and facts of the case and take a view whether there is a sustainable case for issue of Show Cause Notice. Such vital aspects of framing of charges have been missing in the present case. The charges in the Show Cause Notice have to be on the basis of books of account and records maintained by the assessee and other admissible evidence. The books of account maintained by M/s Sharma were not looked into for issue of above stated two Show Cause Notices. Therefore, the transactions recorded in the books of account cannot be held to be contrary to the facts. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Allegation of short payment of Service Tax by the Assessee.
2. Validity of Show Cause Notices issued to the Assessee.
3. Examination of books of account for determining consideration received by the Assessee.
4. Sustainability of the charges in the Show Cause Notices.
5. Appeal filed by the Assessee and Revenue.

Analysis:

1. The case involved allegations of short payment of Service Tax by the Assessee, M/s Sharma Fabricators & Erectors Pvt. Ltd. The audit team noticed a significant difference between the amounts received by M/s Sharma and the taxable value declared in their returns, leading to the issuance of Show Cause Notices for recovery of the alleged short payment.

2. Two Show Cause Notices were issued to M/s Sharma, challenging the declared taxable values and alleging short payment of Service Tax. The Assessee contested the Notices, arguing that they were based on presumptions and third-party information without proper examination of their books of account.

3. The Tribunal observed that the Show Cause Notices lacked examination of M/s Sharma's books of account to determine the actual consideration received by them. The reliance on a draft audit report without verifying the Assessee's records was deemed insufficient for framing charges related to Service Tax payment discrepancies.

4. Emphasizing the importance of basing charges on the Assessee's books of account and admissible evidence, the Tribunal concluded that the Show Cause Notices were not sustainable due to the lack of proper examination of records. As a result, the Appeals filed by M/s Sharma were allowed, and the Appeal filed by Revenue was dismissed.

5. The Assessee's appeal was allowed as the Show Cause Notices were deemed unsustainable, while the Revenue's appeal was dismissed. The Tribunal highlighted the necessity of examining books of account for issuing valid Show Cause Notices in cases involving Service Tax discrepancies, ensuring charges are based on factual evidence rather than presumptions.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT ALLAHABAD highlights the key issues, arguments presented, and the Tribunal's decision regarding the validity of the Show Cause Notices and the sustainability of the charges related to alleged short payment of Service Tax by the Assessee.