2017 (8) TMI 1176 - AT - Service Tax

VCES Scheme - Department took the view that appellants were liable to pay the short paid service tax liability of ₹ 34,11,119/- in adjudication proceedings - Held that - it appears that the appellant declared a turnover in their Income Statement which has been accepted by the department under the VCES scheme. When that is accepted by the department now the plea of inflated turnover cannot be taken up. Two wrongs cannot make a right. Hence, we uphold the demand along with interest. Penalty - Held that - appellant, presumably, as per wrong advice, has inflated the turnover for getting tender or other benefit which was taken into account by department and this was a new subject for the appellant who is based in rural area - penalty set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
- Condoning delay in filing appeal
- Liability under Voluntary Compliance Encouragement Scheme (VCES)
- Determination of service tax liability
- Imposition of penalties under Sections 77 and 78 of the Finance Act, 1944

Analysis:
1. The Tribunal condoned a five-day delay in filing the appeal after considering the reasons provided in the application, admitting the appeal for further proceedings.

2. The appeal was filed against the Order-in-Original related to the period from April 2008 to December 2012, concerning the liability declared under the Voluntary Compliance Encouragement Scheme (VCES).

3. The appellant, a society providing manpower on outsourcing basis to Government offices, declared a liability under VCES, which was scrutinized by the Department. The Department observed an inflated turnover in the income statement, leading to a demand for short-paid service tax liability of a significant amount.

4. The Commissioner confirmed the tax liability, interest thereon, and imposed penalties under Sections 77 and 78 of the Finance Act, 1944. The appellant, dissatisfied with the decision, filed the appeal challenging the penalties imposed.

5. During the hearing, both sides presented their arguments, with the appellant contending that the inflated turnover was possibly due to wrong advice, especially considering the rural background of the appellant.

6. The Tribunal upheld the tax demand along with interest, reasoning that once the turnover was accepted under the VCES scheme, the plea of inflated turnover could not be entertained. However, the penalties imposed were set aside based on the appellant's circumstances and the possibility of wrong advice leading to the inflated turnover.

7. Ultimately, the Tribunal partially allowed the appeal by upholding the tax demand with interest while canceling the imposed penalties. The decision was based on the acceptance of turnover under VCES and the unique circumstances of the appellant, leading to the cancellation of penalties under Sections 77 and 78 of the Finance Act, 1944.

This comprehensive analysis of the judgment highlights the key issues addressed by the Appellate Tribunal CESTAT HYDERABAD, providing a detailed overview of the decision-making process and the rationale behind the final outcome.