2022 (7) TMI 656 - AT - Service Tax

Evasion of Service Tax - Presumption of documents - none of the alleged invoices / documents was produced by the Appellant or seized from the Appellant s premises or control. - commission services - it is also alleged that Appellant have availed the cenvat credit without having any corroborative evidence - when the appellant had not submitted any reply before the adjudicating authority and not submitted documents / records and additional evidences before the adjudicating authority, can it do so before the appellate tribunal in their support? - HELD THAT - The Law/Rules has not precluded CESTAT from considering new grounds/ evidence. In the present matter it is on record that during the search at the premises of the Appellants, no invoices/ debit notes etc., raised to their customers were found. In the present matter, transactions records were called from the various customers of Appellant. The said alleged debit notes/ invoices were provided by the customers to department. Further it is on record that during the search at the premises of M/s Forward Resources Pvt. Ltd., department seized the records/documents containing Income tax TDS statements of Appellant. It is mandate of law that presumption of documents in certain cases under Section 36A of the Central Excise Act is available only when the documents are produced by or seized from the custody or control of the person concerned. In view of Section 36A of Central Excise Act, 1944 it is only when such document is tendered in evidence against the person who produced the same or from whose custody or control it was seized that the presumption under Section 36A is available - In the present case admittedly none of the alleged invoices / documents was produced by the Appellant or seized from the Appellant s premises or control. When the presumption under Section 36A is not available, the burden of proof is squarely on the Department to prove that the source documents are related to the Appellants and that any taxable services under the source documents were actually provided by the Appellant. This burden has not at all been discharged in the present case. The department could not have simply accepted the customers documents provided by them on its face value and the same needed strict corroboration which is completely absent in the present case. It is settled law that though the admission is extremely important piece of evidence but it cannot be said to be conclusive and it is open to the person who has made the admission to show that this is incorrect. It is also noted that there are numerous decisions of the Tribunal laying down the principle that such admission of persons, cannot be considered to be conclusive evidence to establish the case against the assessee. Burden of proof is on the Revenue and same is required to be discharged effectively. The details contained in records of service recipient are actually not acceptable as evidence that the Appellant has provided the taxable services, therefore, it cannot be accepted as admissible piece of evidence. Moreover, none of the persons, on whose statements reliance was placed by the department, were cross-examined. The Hon ble P H High Court in case of M/S G-TECH INDUSTRIES VERSUS UNION OF INDIA AND ANOTHER 2016 (6) TMI 957 - PUNJAB HARYANA HIGH COURT has held that Section 9D of the Act has to be construed strictly, as mandatory and not merely directory - In the present matter the Adjudicating Authority had failed to follow the requirement of Section9D of the Act regarding examination in chief of witness, therefore demand of service tax on the basis of statements of persons cannot be sustainable. When the Service tax is demanded on alleged services, it is the responsibility of the department to show that the appellant had rendered these services to customers with positive evidences. In the present case department failed to do so. The Appellant produced the copies of Debit Notes/ Consignment notes and copies of invoices raised by the transporters to the appellant along with Affidavit. The said documents clearly established that the nature of the service provided by the Appellant to their above customers are in the nature of Goods Transport Agency service - Further on the basis of documents/ records received from customers of Appellant, revenue alleged that the they have collected the service tax payment. However on the basis of records of other persons it cannot be concluded that Appellant have collected the service tax from their customers. In the present matter revenue in support of their contentions nowhere produced any corroborative evidence in the form of Bank Details or any documents recovered from the business premises of the Appellant by which it can be concluded that Appellant have collected the Service tax. In the present matter department clearly failed to prove the case that Appellant have collected the service tax from their customers. The show cause notice alleged that Appellant have provided business auxiliary services, whereas appellant have provided the GTA services as discussed above. Even if it is assumed that appellant have provided the business auxiliary service the impugned show cause notice has not specified under which clause of the definition of Business Auxiliary Service the activity of the Appellant falls. For determining the taxability of services, it very important to specify the activity of the assessee. In the absence of the specification of the exact sub-heading under which the service falls, taxability of service cannot be decided. CENVAT Credit - HELD THAT - The charges against the Appellant are that they have not produced the input service documents on which they have taken cenvat Credit. It is contrary to this fact, the appellant has recorded the receipt of the input services in their cenvat account and along with affidavit produced the cenvat credit account, copies of input service invoices on the basis of which Cenvat credit has been availed by them - there are no reason to deny the Cenvat Credit. Other issues such as Limitation, demand to be made under Section 73 or 73A, omission of Chapter V the Finance Act, 1994 vide Section 173 of CGST Act etc. are not dealt upon and the same are kept open. The demand of service tax (except the amount of service tax payable as per the appellant, admitted by the appellant and deposited as stated in the appellant s submission) interest and penalty is not sustainable and the same is accordingly set aside - Appeal allowed.

Issues Involved:
1. Jurisdiction and constitutionality of the proceedings.
2. Payment and refund of service tax.
3. Applicability of reverse charge mechanism.
4. Invocation of incorrect provisions of the Finance Act, 1994.
5. Evidence and supporting documents for service tax demand.
6. Definition and classification of services.
7. Cenvat credit entitlement.
8. Validity of statements recorded during investigation.
9. Limitation and suppression of facts.

Detailed Analysis:

Jurisdiction and Constitutionality of the Proceedings:
The appellant argued that the proceedings are without jurisdiction, unconstitutional, and erroneous due to the omission of Chapter V of the Finance Act, 1994 by Section 173 of the CGST Act, 2017. They contended that no liability can be fastened for any alleged violation of the omitted provisions, citing the Supreme Court judgment in Rayala Corporation Vs. Directorate of Enforcement.

Payment and Refund of Service Tax:
The appellant claimed to have paid Rs. 86,18,689/- before the initiation of investigation and asserted that the correct liability was Rs. 59,83,681/-. They sought a refund of Rs. 1,41,35,008/-, arguing that they paid an excess amount under protest due to pressure from revenue authorities.

Applicability of Reverse Charge Mechanism:
The appellant contended that services provided to several clients, including M/s Lupin Ltd. and M/s Alkem Laboratories Ltd., were chargeable under the reverse charge mechanism, making the service recipient liable for service tax, not the appellant.

Invocation of Incorrect Provisions of the Finance Act, 1994:
The appellant argued that the show cause notice wrongly invoked Section 73 instead of Section 73A of the Finance Act, 1994, and thus, the demand was unsustainable. They cited various judgments to support their claim.

Evidence and Supporting Documents for Service Tax Demand:
The appellant emphasized that no documents like invoices or debit notes were found during the search, and the revenue authorities failed to provide corroborative evidence that the appellant collected service tax from their customers. They argued that the documents used by the department were not authenticated and lacked evidentiary value.

Definition and Classification of Services:
The appellant argued that the show cause notice did not analyze the activities allegedly carried out by them to determine if they fell within the definition of taxable services. They cited multiple judgments to support that demand of service tax cannot be confirmed without a clear analysis of the activities.

Cenvat Credit Entitlement:
The appellant contended that they were denied Cenvat Credit due to the non-submission of documents. They produced copies of invoices and CENVAT registers to substantiate their claim for entitlement to Cenvat Credit.

Validity of Statements Recorded During Investigation:
The appellant argued that the statements of their directors were recorded under duress and pressure, and such statements cannot be the sole basis for confirming service tax demand. They cited legal precedents to support that corroborative evidence is required to substantiate the statements.

Limitation and Suppression of Facts:
The appellant argued that the demand was barred by limitation and there was no suppression of facts. They contended that mere failure to disclose information does not amount to suppression unless it is deliberate with an intention to evade tax. They cited several Supreme Court judgments to support their argument.

Tribunal's Findings:
1. Jurisdiction and Constitutionality: The Tribunal did not address the issue of jurisdiction and constitutionality directly but kept it open for further consideration.
2. Payment and Refund: The Tribunal noted that the appellant had paid the service tax under protest and was entitled to a refund of the excess amount paid.
3. Reverse Charge Mechanism: The Tribunal agreed that the services provided under the reverse charge mechanism made the service recipient liable for service tax, not the appellant.
4. Incorrect Provisions: The Tribunal found merit in the appellant's argument that the show cause notice invoked the wrong provision and thus, the demand was unsustainable.
5. Evidence and Supporting Documents: The Tribunal held that the department failed to provide corroborative evidence and could not rely solely on the documents provided by the customers.
6. Definition and Classification: The Tribunal agreed that the show cause notice failed to specify the exact sub-heading under which the services fell, making the demand unsustainable.
7. Cenvat Credit: The Tribunal found that the appellant had provided sufficient documents to substantiate their claim for Cenvat Credit.
8. Statements During Investigation: The Tribunal held that the statements recorded under duress could not be the sole basis for confirming the demand and required corroborative evidence.
9. Limitation and Suppression: The Tribunal did not address the issue of limitation directly but kept it open for further consideration.

Conclusion:
The Tribunal set aside the demand of service tax, interest, and penalty (except the amount admitted and paid by the appellant) and allowed the appeal with consequential relief. The Tribunal emphasized the need for corroborative evidence and proper invocation of legal provisions for sustaining a service tax demand.

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