2009 (6) TMI 104 - AT - Service Tax

Quantum of demand - records are not produced on account of destruction - fixation of the tax amount by the department has been solely done on the basis of annual report - it cannot be disputed that the authorities have not taken into consideration the deductions available there from before fixing of the tax liability. - the authorities have imposed the demand of Service Tax to the tune of Rs. 32 lakhs, while service tax liability is around 12 lakhs - prima facie case has been made out for grant of waiver in relation to the demand under the impugned order. Accordingly, bearing in mind, the financial difficulties which could be faced by the appellant as well as revenue interest, we direct the appellant to deposit a sum of Rs. 12,00,000/-

Summary

Issues:
1. Imposition of Service Tax demand and penalty due to destruction of records for the financial year 2001-2002.
2. Consideration of deductions in fixing tax liability.
3. Grant of waiver for the demand under the impugned order.

Analysis:
1. The Appellate Tribunal considered the contention of the applicants regarding the imposition of Service Tax demand and penalty amounting to Rs. 32,52,842/- and Rs. 33 lakhs respectively due to the destruction of records for the financial year 2001-2002. The authorities had based the tax amount solely on the annual report showing income of Rs. 5,99,00,000/- from 'Engineering Service'. The appellant's advocate referred to a Trade Circular explaining assessment finalization in such cases, emphasizing that the destruction of records should be considered. However, the authorities argued that the appellant could have obtained contemporaneous records from service recipients. The Tribunal acknowledged the income disclosure but noted that deductions were not considered before fixing the tax liability. Considering the past tax payments and financial difficulties, the Tribunal directed the appellant to deposit Rs. 12,00,000/- within 8 weeks, indicating a prima facie case for waiver.

2. The Tribunal observed that the tax amount was determined based on the income disclosed in the annual report without considering available deductions. While previous years' tax payments were below Rs. 12 lakhs, no objections were raised. This lack of consideration for deductions and past tax payments indicated a need for a waiver in the current demand. The Tribunal balanced the appellant's financial challenges with revenue interests, directing a partial deposit of Rs. 12,00,000/- within a specified timeframe.

3. In conclusion, the Tribunal addressed the issues of Service Tax demand and penalty imposition due to record destruction, the necessity of considering deductions in tax liability fixation, and the grant of waiver under the impugned order. By analyzing the financial circumstances of the appellant and previous tax payments, the Tribunal provided a balanced decision by directing a partial deposit while considering the need for waiver. The judgment highlighted the importance of fair assessment practices and balancing revenue interests with the appellant's financial constraints, ensuring a just outcome.