2020 (2) TMI 1068 - AT - Service Tax

Levy of service tax - legal services - reverse charge mechanism - legal expenses incurred by them during the period 2013-2014 - HELD THAT - The demand of service tax has been demanded only on ₹ 5,45,689/- by no stretch of means an amount of ₹ 1,29,448/- is payable on ₹ 5,45,689/- which shows that completely non-application of mind while passing the impugned order. The said act is not appreciable. Further it has been observed by the learned Commissioner (Appeals) that the appellant has paid a sum of ₹ 10,444/- towards service tax on legal expenses. No consideration has been given for the said deposit. At least the learned Commissioner (Appeals) was required to reduce the demand to the extent of the appellant paid by the appellant. This shows gross negligence of the officers while adjudicating the cases. There is gross negligence of the officers while adjudicating the cases. The said situation can be avoided and the litigation work before this Tribunal can be reduced by proper application of mind by the officers, as the appellant by way of written synopsis has shown that there was no consideration of the invoices found during the course of audit, therefore, the matter is required consideration at the end of the Adjudicating Authority to examine how much a service tax payable by the appellant and how much service tax has already been discharged towards legal expenses by the appellant - Appeal allowed by way of remand.

Summary

Issues involved:
- Demand of service tax on legal services under reverse charge mechanism
- Proper application of mind by the adjudicating authority
- Consideration of invoices found during audit
- Reduction of demand based on tax already paid by the appellant

Analysis:
1. Demand of service tax on legal services under reverse charge mechanism: The appellant appealed against an order demanding service tax amounting to ?1,29,448 on legal expenses incurred during 2013-2014, totaling ?10,47,302. The audit revealed that the appellant had not paid service tax on these expenses, leading to the issuance of a show cause notice. The appellant contended that they had paid service tax on professional charges under reverse charge mechanism but the demand was confirmed solely based on ledger entries of legal expenses. The Tribunal directed a reevaluation by the Adjudicating Authority to determine the correct service tax liability.

2. Proper application of mind by the adjudicating authority: The impugned order was criticized for lack of proper consideration and application of mind. The Commissioner (Appeals) noted discrepancies in the demand calculation, highlighting that the appellant had already paid a portion of the service tax. The Tribunal emphasized the need for a thorough review by the Adjudicating Authority to reconcile the tax already paid by the appellant with the total demand, ensuring a fair and accurate assessment of the service tax liability.

3. Consideration of invoices found during audit: The appellant provided a detailed breakdown of legal expenses, including payments made to consultants and various charges like court fees and stamp papers. However, the audit team's assessment did not fully account for these details, leading to an erroneous demand calculation. The Tribunal stressed the importance of considering all relevant invoices and expenses during the adjudication process to avoid discrepancies and ensure a comprehensive evaluation of the service tax liability.

4. Reduction of demand based on tax already paid by the appellant: The Tribunal noted that the appellant had already paid a portion of the service tax on legal expenses, which was not adequately considered in the impugned order. The Adjudicating Authority was directed to review the appellant's payments and adjust the demand accordingly, taking into account the tax already deposited. This directive aimed to rectify the oversight and promote a fair and transparent resolution of the service tax dispute.

In conclusion, the Tribunal disposed of the appeal by remanding the case for a reevaluation by the Adjudicating Authority, emphasizing the importance of a meticulous assessment considering all relevant factors and ensuring a just determination of the service tax liability.