2019 (2) TMI 1569 - AT - Service Tax

Demand of service tax - denial of CENVAT Credit - demand of Service Tax in respect of advances received mostly by cheque and the Service Tax totally amounting thereon Rs. ₹ 1,01,25,528/- - It is the case of the Appellant that they in general paid Service Tax as and when advance was received for providing construction services. However, in cases where the Appellant had shown such amount as other creditors account / refund account since bookings were cancelled, and no service was effectively provided, and no tax was paid to such extent. The revenue authorities have raised demand of Service Tax on such count - Held that - As regards any amount initially received, however, later on returned to the customers, no Service Tax can be demanded and/or retained by revenue authorities thereon, since it cannot be said that service was actually provided to such persons. In fact, there is a specific provision under Rule 6(3) of the Service Tax Rules, 1994 for this purpose - to the extent of any amount which is considered as loans and advances and which was eventually even returned back, no Service Tax thereon can be demanded from the Appellant - matter remanded back to the original authority, to re-examine this issue and then determine actual taxable component on such transaction, after taking into consideration amounts already returned to customers as well as Service Tax already paid, though belatedly, by the Appellant. Demand of Service Tax of Rs.Rs.2,64,357/- raised on presumed receipt of money to the extent of ₹ 82,70,000/- presumably received by the Appellant as per certain scribbling made by the Accountant noticed at the premises of the appellant - Held that - It is trite law that the onus is on revenue to prove their case beyond mere scribbling. In absence of any proof regarding receipt of such consideration, demand on this count also must fail. Demand of Service Tax of ₹ 67,10,232/- on certain Cash income, purportedly received by the Appellant and not taken in books of accounts - Held that - We agree with the Appellant that no independent corroborative evidence, except some loose entries in the computer of the Accountant has been adduced by the revenue authorities to substantiate such serious charge. No statement of any buyer is also recorded to corroborate such facts. Affidavits filed by Shri. Mehul Pandya, being Affidavit dated 28.03.2014 and dated 28.03.2014 as well as Shri. Minesh Patel, being affidavit dated 20.02.2014 to the effect that actually no such cash was received is also placed on record by the Appellant. Demand of Service Tax of ₹ 12,71,428/-, on the presumption that the Appellant had collected but not paid Service Tax - it is the case of the Appellant that the overall Tax liability eventually found payable, as compared to the tax already paid by the Appellant, will result in a situation where such tax is not payable anymore - Held that - Since we have already remanded portion of the issue qua Service Tax liability on Loans, even this issue may be re-examined by Original authority whether appropriate Service Tax on actual income stands discharged by the Appellant or otherwise. CENVAT Credit of ₹ 40,33,832/- - denied on the ground that the Appellant had paid Service Tax under Works Contract (Composition Scheme), 2007 upto 30.06.2012 - Held that - We find merit in the contention of the Appellant that if the revenue authorities feel that correct rate of tax is under Notification 01/2006-ST and the Appellant did not fulfil conditions therefore (by availing credit on input services), the correct manner to deal with the issue is to demand differential Service Tax under Section 73 whereas the revenue authorities instead seek to recover Cenvat Credit availed which is legally not correct - For the period after 01.07.2012, the Revenue Authorities have considered Service Tax with appropriate abatement (25% of value tax 75% abated) by including the land value in the value of taxable service and then granted abatement. Whereas the Appellant chose to exclude land value and on the balance works contract value service tax paid at appropriate abated rate (40%) under Rule 2A of Service Tax valuation rules. That the Rule 2A of the Service Tax Valuation Rules, 2006 was not clear and properly drafted insofar as the aspect of including value of the land therein is concerned. - Issue on hand is squarely covered vide decision in the case of M/s Alliance Franchaise DE Delhi 2012 (8) TMI 1075 - CESTAT NEW DELHI - The demand on this count therefore also must be dropped. Credit of ₹ 2,793/- Held that - The Appellant during the course of the hearing conceded to the same considering smallness of the amount - The said demand is therefore confirmed. Cenvat Credit of ₹ 6,18,478/-, - sought to be denied on the ground that it pertained to cancellation of certain bookings where tax was also refunded to prospective customers. At the same time, the revenue authorities allege that since tax was not paid originally, there is no question of allowing credit thereof (under Rule 6(3) of the STR, 1994) to the Appellant - Held that - That inasmuch as the SCN at ANNEXURE A, B & C has already demanded Service Tax on whole of bookings, denying credit simultaneously on the ground that while upon cancellation refunds were made to customers, but Tax was not paid earlier, is not proper. That since such tax is demanded with interest, there is no need to deny credit simultaneously on cancelled bookings. In the given set of facts and circumstances, penalty on Director is also uncalled for and we set aside the same. As regards the plea that since the Appellant was under financial distress and hence there was delay in payment of Service Tax and reliance on the decision in the case of Onward E-Services Ltd 2018 (5) TMI 323 - CESTAT MUMBAI , we direct the original authority to consider the same in the course of re-adjudication of the specific issues stated above. Appeal allowed by way of remand.

Summary

Issues:
Service Tax on advances received, Service Tax liability on loans and advances, Cenvat Credit denial, Service Tax on presumed receipts, Service Tax on cash income, Service Tax on collected but unpaid amounts, Denial of Cenvat Credit on cancelled bookings, Penalty imposition, Delay in payment due to financial distress.

Analysis:

1. Service Tax on Advances Received:
The Appellant received advances for property sales, paying Service Tax when received for construction services. However, for cancelled bookings with no service provided, the revenue demanded Service Tax. The Tribunal held that no Service Tax can be demanded on amounts returned to customers, citing Rule 6(3) of Service Tax Rules, 1994. The matter was remanded to re-examine the taxable component, considering returned amounts and Service Tax paid. The burden was on revenue to prove the nature of received amounts.

2. Service Tax Liability on Loans and Advances:
The Tribunal noted that genuine advances, not loans, reflected in the books attracted Service Tax. The Appellant's contention on Cenvat Credit was accepted, supported by legal precedents. The demand based on presumed receipts without substantial proof was rejected. Similarly, the demand on cash income lacked corroborative evidence and buyer statements. Affidavits denying cash receipt further weakened the revenue's case.

3. Cenvat Credit Denial:
The denial of Cenvat Credit on cancelled bookings due to unpaid tax was deemed improper. The Tribunal held that demanding Service Tax with interest on bookings negated the need to simultaneously deny credit. Any penalty on the Director was set aside, considering the circumstances. The Appellant's financial distress causing Service Tax payment delays was directed to be considered during re-adjudication.

4. Conclusion:
The Tribunal remanded various issues to the original authority for re-examination, emphasizing the need for proper evidence and legal basis for demanding Service Tax. Legal precedents and specific rules were cited to support the Appellant's contentions, highlighting the importance of accurate tax calculations and clear valuation rules. The judgment aimed at ensuring a fair and just resolution of the Service Tax disputes raised in the case.