2018 (12) TMI 383 - AT - Service Tax

Undervaluation - security agency service - manpower supply service - suppression of taxable value - it was alleged that value of taxable service declared by them under ST 3 returns was much less than what was declared in the balance sheet and books of accounts of the appellant firm for various financial years - demand of service tax alongwith Interest and penalties. The appellant has mainly contested that their liability is to be determined on receipt basis and not on the basis of gross figures reflected in the balance sheet - whether the service tax is correctly been calculated on receipt basis before 30.06.2011? - Held that - This fact can only be checked at the level of original adjudicating authority and therefore, we are of the view that for the purpose of determining the financial year wise receipt of Service tax value prior to 1.7.2011 and even upto 30.06.2011, the adjudicating authority need to examine the balance sheet and other statement of accounts to re-determine the financial year wise receipts as claimed by the learned advocate and to re-determine, the demand of service tax for particular financial year - matter on remand. Cum-duty-benefit - Held that - This fact also needs to be rejected at the level of original adjudicating authority. As found from the show cause notice that assessee have been collecting service tax on the value which is given by them on the invoices and which have been taken in the balance sheet However, since all the details are not available before us, we direct the adjudicating authority to examine the appellants claim in this regard - matter on remand. Appellant also claim that they have paid an excess service tax of ₹ 3,00,221/- in the ST-3 return for 2009-10 - Held that - There is no reason why the same should not be adjusted against their demand for the years 2009-10 to 2011-12, if the same is correct. If the claim of the appellant is correct, the same should be appropriated and adjusted against their present demand. Extended period of limitation - Held that - This is clear cut case of intentional evasion of service tax by manipulating and forging the figures of the taxable value for levy of service tax by the appellant and therefore, it is held that the demand for extended time period is rightly invoked. Appeal allowed by way of remand.

Summary

Issues:
- Discrepancy in Service Tax liability declaration
- Applicability of Service Tax on receipt basis
- Transitional provisions under Point of Taxation Rules, 2011
- Cum-duty benefit claim
- Vagueness in Show Cause Notice
- Period of limitation for demand
- Reimbursability of expenses
- Allegations of evasion and manipulation
- Liability determination on gross amount received
- Adjustment of excess service tax paid
- Invocation of extended period proviso

Detailed Analysis:

1. Discrepancy in Service Tax liability declaration: The case involves discrepancies in the declaration of Service Tax liability by the appellants, leading to a search operation by the department. The investigation revealed that the declared value of taxable services in ST 3 returns was significantly less than the amounts in the balance sheet for multiple financial years. Consequently, a Show Cause Notice was issued, confirming a substantial Service Tax amount along with penalties.

2. Applicability of Service Tax on receipt basis: The appellants argued that before July 1, 2011, Service Tax was payable on a receipt basis, not on accrual basis. They contended that the figures in the balance sheet were on accrual basis and should not be the basis for demanding Service Tax. They claimed that the demand should be calculated on a receipt basis, which would reduce the liability amount significantly.

3. Transitional provisions under Point of Taxation Rules, 2011: The appellants invoked the transitional provisions of the Point of Taxation Rules, 2011, stating that the liability should be computed based on the payment received before July 1, 2011. They argued that discontinuation of services post-July 1, 2011, should impact the calculation of their Service Tax liability.

4. Cum-duty benefit claim: The appellants claimed that they were entitled to cum-duty benefit while calculating the Service Tax demand, which the adjudicating authority allegedly failed to consider. They sought an adjustment based on this claim, emphasizing the need for a detailed examination at the original adjudicating authority level.

5. Vagueness in Show Cause Notice: The appellants raised concerns about the vague nature of the Show Cause Notice, as it did not specify the category of service for which Service Tax was demanded. They argued that certain expenses reimbursed by clients should be excluded from the gross value of services provided.

6. Period of limitation for demand: The appellants contended that the demand was beyond the period of limitation, highlighting their regular discharge of Service Tax liability and filing of ST 3 returns. They relied on legal precedents to support their stance on the reimbursability of expenses.

7. Allegations of evasion and manipulation: The department accused the appellants of evading Service Tax by manipulating balance sheet figures and misdeclaring taxable values in ST 3 returns. Statements by the CMD of the appellant firm supported these allegations, indicating fabrication and forgery of taxable service values.

8. Liability determination on gross amount received: The Tribunal rejected the appellants' claim of working as a pure agent regarding certain expenses, emphasizing that the liability should be based on the gross amount received from clients. Legal precedents and judgments were cited to support this position.

9. Adjustment of excess service tax paid: The appellants asserted that they had overpaid Service Tax in a specific financial year and requested an adjustment against the current demand. The Tribunal agreed that if the overpayment was verified, it should be adjusted accordingly.

10. Invocation of extended period proviso: The Tribunal upheld the invocation of the extended period proviso due to intentional evasion of Service Tax by the appellants. It deemed the demand for the extended period as justified based on the manipulation and forgery of taxable values.

In conclusion, the Tribunal found the order-in-original legally sound but directed a reevaluation of the Service Tax amount, consideration of cum-duty benefits, and examination of taxable values based on receipt basis for specific periods. The appeal was decided with directions for denovo adjudication on the mentioned points.