2018 (7) TMI 1006 - AT - Service Tax

Short Levy of Service Tax - Consulting Engineering Service - the entire case of the Department is based on the balance sheets recovered during search operations showing the inflated income - the sole basis of the Department is the third party evidence which has no where been got corroborated from the appellants - proper appreciation of facts not made - principles of Natural Justice. Held that - The allegation of short levy are as serious as that of the allegations of the clandestine removal - In the case of Hilton Tobacco Ltd. vs. CCE Hyderabad 2004 (12) TMI 214 - CESTAT BANGALORE it was held that demand of duty cannot be made simply on assumptions and presumptions. The Commissioner (Appeals) has miserably ignored the settled principle of the law of evidence and the settled principle of jurisprudence by merely relying upon the data of the balance sheet / profit and loss account of the appellant and by completely ignoring the justification of the appellant and the fact that nothing from appellant could be recovered which may corroborate those balance sheets - Commissioner has committed a grave mistake while confirming the entire levy including the one which was dropped by the original authority. The impugned order lacks proper appreciation of the facts and circumstances and also the proper application of the principles of law and is set aside - appeal allowed - decided in favor of appellant.

Issues:
1. Assessment of Service Tax liability based on recovered balance sheets.
2. Application of amended Sections 97 and 98 of the Act.
3. Reliance on third-party evidence without corroboration.
4. Burden of proof on authorities.
5. Proper appreciation of facts and principles of law.

Analysis:

Assessment of Service Tax liability based on recovered balance sheets:
The case involved a challenge to the levy of Service Tax based on recovered balance sheets during a search operation. The appellant argued that the balance sheets were prepared for a different purpose of bidding a tender and not for tax assessment. The Department and the Commissioner relied on these balance sheets to prove the alleged short levy of Service Tax. However, the Tribunal noted that the balance sheets were submitted to satisfy tender requirements, not for tax assessment purposes. The authorities failed to consider this crucial distinction, leading to an incorrect assessment of Service Tax liability.

Application of amended Sections 97 and 98 of the Act:
The appellant contended that the authorities did not apply the amended Sections 97 and 98 of the Act introduced via a notification with retrospective effect. The Tribunal observed that the authorities failed to consider these amended sections in their decision-making process, highlighting a lapse in the application of relevant legal provisions.

Reliance on third-party evidence without corroboration:
The Department's case heavily relied on third-party evidence, specifically the recovered balance sheets, to establish the alleged short levy of Service Tax. However, the Tribunal noted that no corroborative evidence was obtained from the appellant directly. The reliance on third-party evidence without corroborating it with evidence from the appellant raised doubts about the validity of the assessment.

Burden of proof on authorities:
The Tribunal emphasized the principle that the burden of proof lies on the authorities to substantiate their claims against the appellant. Citing legal precedents, the Tribunal highlighted that demands cannot be based solely on assumptions or presumptions. In this case, the authorities failed to provide sufficient evidence to support the levy of Service Tax, leading to a flawed decision.

Proper appreciation of facts and principles of law:
The Tribunal concluded that the Commissioner erred in confirming the entire levy without proper appreciation of the facts and application of legal principles. By ignoring the appellant's justifications and failing to consider the lack of direct evidence against the appellant, the Commissioner's decision was deemed flawed. The Tribunal set aside the impugned order, emphasizing the importance of proper evaluation of facts and adherence to legal principles in tax assessments.

In conclusion, the Tribunal allowed the appeal, highlighting the deficiencies in the assessment process and the need for a more thorough and legally sound approach in determining tax liabilities.

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