2021 (4) TMI 515 - AT - Service Tax

Demand of Service Tax - Works Contract Service - reverse charge mechanism - ST-3 returns not considered before passing the orders - violation of principles of natural justice - HELD THAT - The appellant has deposited service tax in time which has been reflected in ST-3 return and the impugned order has been passed without considering the ST-3 returns, therefore, there is gross violation of principle of natural justice. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of service tax under reverse charge mechanism for the period April 2015 to March 2015.
Reduction of demand and penalty by the Commissioner (Appeals).
Consideration of facts by lower authorities.
Violation of principle of natural justice.

Analysis:
The appellant appealed against an order confirming the demand of service tax under reverse charge mechanism for the period April 2015 to March 2015. The show cause notice alleged non-payment of service tax liability. Initially, the demand was &8377; 22,71,069/- with penalties on the appellant and the director. The Commissioner (Appeals) reduced the demand to &8377; 9,68,676/-, imposed penalties on the appellant, but not on the director. The appellant contended that they had paid the service tax under reverse charge mechanism on time, reflected in their ST-3 returns, which both authorities below had ignored. The appellant challenged the order before the Tribunal.

The appellant's counsel argued that the appellant had timely paid the service tax under reverse charge mechanism, as evidenced by their ST-3 returns, which the lower authorities overlooked. On the contrary, the respondent's representative contended that a remand was necessary as the lower authorities failed to consider the facts presented.

After hearing both parties, the Tribunal found that the lower authorities had unjustly ignored the appellant's timely payment of service tax, leading to unnecessary litigation. The Tribunal noted that the Commissioner (Appeals) acknowledged the lack of documentary evidence supporting the demand for service tax on Works Contract Service under RCM. Consequently, the Tribunal held that the impugned order violated the principle of natural justice by not considering the ST-3 returns. Therefore, the Tribunal set aside the impugned order, allowing the appeal with any consequential relief.

In conclusion, the appeal was disposed of with a decision in favor of the appellant, emphasizing the importance of adhering to natural justice principles in tax matters.