2021 (7) TMI 402 - Commissioner - Service Tax

Sabka Vishvas (Legacy Dispute Resolution) Scheme 2019 - non-filing of the statutory returns with intent to evade payment of service tax - non-speaking order - circular No. 1072/05/2019- CX dated 25th September 2019 - HELD THAT - The appellant company filed an application on 31.12.2019 under SVLDRS under voluntary disclosure category by declaring their total service tax liability for the impugned period. The appellant company field the said application after their premises was searched on 20.12.2019 by DGGI Hyderabad Zonal Unit for alleged evasion of service tax. Therefore the application filed by the appellant company under SVLDRS was alleged to be in contravention of the provisions of Section 125(1)(f)(i) of the Finance (No 2) Act 2019 which bars a person from making voluntary disclosure under the Scheme after being subjected to any enquiry or investigation or audit. The appellant company however contended that in all cases where enquiry / investigation / audit is not pending as on 30.06.2019 and where tax liability is not quantified the designated committee is empowered to verify the eligibility in the light of facts of the case. In the instant case the premises of the appellant company was searched by DGGI HZU for alleged evasion of service tax on 20.12.2019 i.e. much after the relevant date i.e. 30.06.2019. Therefore the appellant company s case does not fall under the category of cases who have been barred from filing a declaration in terms of Section 125(1)(f)(i) of the Finance (No 2) Act 2019. It is not the case of the appellant company that they have been barred from filing such declaration under SVLDRS by the department. Indeed they have filed such declaration and the designated committee as per evidence available on record has also determined t e amount to be paid under the Scheme in the prescribed form called SVLDRS-3. Such Form SVLDRS-3 was issued by the Designated Committee concerned on 09.01.2020. However since the appellant company failed to pay the tax dues indicated in From SVLDRS-3 within 30 days after its issue as per the Scheme announced by the Government the discharge certificate SVLDRS-4 was not issued by the designated committee. The grievance of the appellant company that when the original authority has taken up the show cause notice for adjudication as an adjudicating authority he should have considered all their arguments while arriving at the correct tax liability including their eligibility for Cenvat Credit to be legally tenable - Matter remanded to the original authority with a direction to allow CENVAT credit to the appellant company subject to the conditions laid in the Cenvat Credit Rules 2004 including production of invoices on which credit was claimed by the appellant company; work out their net service tax liability for the impugned period and pass an appropriate order accordingly. Extended period of limitation - Penalty - HELD THAT - The appellant company during the impugned period provided taxable services and also collected service tax. However they failed to pay the service tax so collected to the Government Exchequer. The appellant company also failed to file ST-3 returns for the impugned period. As rightly held by the original authority the appellant company s claim that they did not pay the tax on account of financial crisis is not acceptable in the light of the fact that they had collected the service tax from their customers over and above the service consideration - there are no justifiable reason to differ with the findings of the original authority to the extent of invoking proviso to Section 73(1) of the Finance Act 1994 for recovery of service tax payable by the appellant company and imposing consequential penalty on them. When the appellant company collected service consideration along with service tax on the taxable services provided by them during the impugned period there are no justifiable reason for retaining the service tax so collected without paying it to the Exchequer. Such action of the appellant company clearly reveals culpable mind of the said three persons to evade payment of service tax as they were at the helm of affairs of the appellant company and directly responsible for the activities of the appellant company. As per appellant company s own admission itself such net service tax evaded is quite huge i.e. more than Rs. 70 lakhs. The appeal filed by the appellant company is remanded to the original authority - appeal allowed by way of remand.

Summary

Issues Involved:
1. Taxability of services provided by the appellant company.
2. Eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS).
3. Entitlement to CENVAT credit.
4. Invocation of extended period of limitation.
5. Imposition of penalties under Section 78 and Section 78A of the Finance Act, 1994.

Detailed Analysis:

1. Taxability of Services Provided by the Appellant Company:
The appellant company, engaged in TV broadcasting, advertising, and operation of studios, provided taxable services such as sale of time for advertisements and supply of content for YouTube. It was alleged that they collected service tax but failed to remit it to the government from October 2014 to June 2017. The appellant company did not dispute the taxability or the quantification of the service tax liability.

2. Eligibility Under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS):
The appellant company filed an application under SVLDRS on 31.12.2019, declaring their total service tax liability. However, their premises were searched by DGGI on 20.12.2019, which was after the relevant date of 30.06.2019. As per Section 125(1)(f)(i) of the Finance (No 2) Act, 2019, a person cannot make a voluntary disclosure after being subjected to any enquiry or investigation. The designated committee issued Form SVLDRS-3 on 09.01.2020, but the appellant failed to pay the dues within 30 days, leading to the non-issuance of Form SVLDRS-4. The original authority took up the show cause notice for adjudication and found no infirmity in these findings.

3. Entitlement to CENVAT Credit:
The appellant company contended that they should be allowed CENVAT credit claimed in their books of accounts. The original authority rejected this claim on the ground that ST-3 returns were not filed. However, the appellate authority found merit in the appellant's contention, citing various case laws, including Target Corporation India Private Limited, which held that non-disclosure of CENVAT credit in ST-3 returns does not disentitle the assessee from claiming it. The matter was remanded to the original authority to allow CENVAT credit subject to the conditions laid in the Cenvat Credit Rules, 2004.

4. Invocation of Extended Period of Limitation:
The appellant company failed to pay the collected service tax and did not file ST-3 returns for the impugned period. The original authority invoked the proviso to Section 73(1) of the Finance Act, 1994, for recovery of service tax and imposing penalties. The appellate authority upheld this decision, noting that the appellant's claim of financial crisis was not acceptable since they had collected the service tax from their customers.

5. Imposition of Penalties Under Section 78 and Section 78A of the Finance Act, 1994:
Penalties were imposed on the appellant company and its directors under Section 78 and Section 78A for failure to remit the collected service tax. The appellate authority found that the directors were in charge of the company during the impugned period and knowingly retained the collected service tax, indicating an intent to evade payment. The appeals by the directors contesting the penalties were dismissed.

Conclusion:
The appeal by the appellant company was remanded to the original authority to re-compute the tax liability after considering the CENVAT credit. The appeals by the directors contesting the penalties were dismissed.