2018 (12) TMI 342 - AT - Service Tax

Advance insurance commission received - demand of service tax - case of appellant is that they are not required to pay service tax on said income as service tax was already remitted at the time of receipt of advance on 31.03.2014 - Held that - In view of the certificates furnished by the Chartered Accountant certifying that they had already remitted the tax on ₹ 6,50,000/- received from ICICI insurance company as advance commission and subsequently reduced the taxable insurance income to the extent of ₹ 2,29,544/- in 2014-15 and ₹ 4,20,456/- in 2015-16. In view of the certificate of Chartered Accountant, the confirmation of demand of ₹ 27,842/- is not sustainable and therefore the same is set aside - appeal allowed - decided in favor of appellant.

Issues:
1. Confirmation of demand of service tax payable by the appellant for the period 2014-15 under Section 73(2) of the Finance Act.
2. Rejection of appellant's claim for deduction in taxable income by the Commissioner.
3. Imposition of interest and penalty under Section 76 of the Finance Act, 1994.
4. Allegation of the Commissioner rejecting the claim on the ground of it relating to a previous period.

Analysis:
1. The appeal challenged the order confirming the demand of service tax amounting to ?27,842 for the period 2014-15 under Section 73(2) of the Finance Act. The appellant, engaged in sales and services of Maruti Vehicles, contested the rejection of their claim for deduction in taxable income by ?2,29,544. They asserted that they had already paid service tax on an advance insurance commission received in the previous year and utilized a portion against their claim in the relevant period. The Chartered Accountant's certificate confirmed the remittance of service tax on the advance commission, which the Commissioner had overlooked. The Tribunal, after considering the evidence, set aside the demand, deeming it unsustainable based on the Chartered Accountant's certification.

2. The Commissioner's rejection of the appellant's claim for deduction in taxable income was a crucial issue in the appeal. The appellant argued that the deduction was legitimate as they had already paid service tax on the advance insurance commission received in the previous year. The Chartered Accountant's certificate supported this claim, stating that the tax was remitted at the time of receiving the advance. Despite this evidence, the Commissioner disregarded the appellant's position. The Tribunal, upon reviewing the Chartered Accountant's certification and the appellant's submissions, found in favor of the appellant, highlighting the Commissioner's oversight and setting aside the demand.

3. In addition to confirming the demand for service tax, the Commissioner had imposed a penalty of ?2,784 under Section 76 of the Finance Act, 1994, along with interest. However, the Tribunal, upon considering the evidence provided by the Chartered Accountant regarding the service tax remittance on the advance commission, concluded that the imposition of the penalty and interest was unwarranted. The Tribunal's decision to set aside the demand also led to the consequential relief of overturning the penalty and interest, providing complete relief to the appellant.

4. The appellant's allegation that the Commissioner rejected their claim solely based on the ground that it pertained to a previous period was a significant contention. The appellant maintained that the deduction in taxable income was valid as they had already paid service tax on the advance commission received in the prior year. The Chartered Accountant's certification explicitly stated the remittance of service tax on the advance commission, which the Commissioner failed to consider. The Tribunal, recognizing this oversight, sided with the appellant, emphasizing the relevance of the tax remittance in the previous period and consequently nullifying the Commissioner's decision based on this ground.

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