2022 (7) TMI 768 - AT - Service Tax

Evasion of Service tax - Presumption with regards to documents and records - collection of Service tax from their customers but the documents like debit notes which are so called supplied by the recipients is not authenticated - whether the appellant can submit additional documents / records and additional evidences before the appellate tribunal in their support? - HELD THAT - This Tribunal being a final fact finding authority can very well admit fresh evidence and argument. This issue has been considered by the Hon ble Supreme Court (Three Judges Bench), in the case of NATIONAL THERMAL POWER COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX 1996 (12) TMI 7 - SUPREME COURT , which is to the effect that the Tribunal has jurisdiction to examine the question of law which arises on facts, as found by the authorities below, and having bearing on tax liability of assessee, even though said question was neither raised before the lower authorities nor in appeal memorandum before the Tribunal, but sought to be added later as an additional ground by a separate letter. 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 documents was produced by the Appellant or seized from the Appellant s premises or control. In view of the above, when the presumption under Section 36A is not available, the burden of proof is squarely on the Department to prove that the source documents related to the Appellants and that any taxable services under the source documents were actually provided by the Appellant. This burden has not been discharged by the revenue in the present case. In terms of Rule 2(1)(d) of Service tax Rules, 1994 and Circular No. 96/7/2007-ST dtd. 23.08.2007 and in terms of Circular No. 96/7/2007 -ST dtd. 23.08.2007 the service tax was liable to be paid by the Service recipient. Therefore, on the said activity of Appellant demand of service tax is not sustainable. 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. Classification of services provided by the appellant.
2. Liability to pay service tax on mutual fund distribution services.
3. Taxability of services related to export, electricity distribution, and insurance brokerage.
4. Admissibility of additional evidence.
5. Presumption and burden of proof under Section 36A of the Central Excise Act.
6. Reliance on TDS/26AS statements for service tax demand.
7. Applicability of Section 73 vs. Section 73A of the Finance Act, 1994.
8. Procedural irregularities in search and seizure.
9. Limitation and suppression of facts.

Detailed Analysis:

1. Classification of Services Provided by the Appellant:
The appellant argued that the services provided were incorrectly classified as "Business Auxiliary Service" and "Management or Business Consultancy Services." The appellant provided diverse services such as wholesale and retail financing, maintenance services related to electricity distribution, and intermediary services for mutual funds, which should not fall under the aforementioned categories. The Tribunal agreed that the classification by the department was legally incorrect and emphasized the necessity for the department to specify the activity and nature of service to be taxed.

2. Liability to Pay Service Tax on Mutual Fund Distribution Services:
The appellant contended that the liability to pay service tax on mutual fund distribution services was on the service recipient (mutual fund or asset management company) as per Rule 2(1)(d)(vi) of the Service Tax Rules, 1994, applicable until 30.06.2012. Post-July 2012, these services were exempted under Notification No. 25/2012-ST. The Tribunal upheld this argument, stating that the demand for service tax on the appellant for these services was legally incorrect.

3. Taxability of Services Related to Export, Electricity Distribution, and Insurance Brokerage:
The appellant provided services related to packing credit for exports, maintenance services for electricity distribution, and insurance brokerage. These services were argued to be non-taxable or exempt. The Tribunal agreed, citing relevant case laws and notifications that supported the non-taxability of these services.

4. Admissibility of Additional Evidence:
The Tribunal held that it could admit fresh evidence and arguments, referencing the Supreme Court's decision in National Thermal Power Co. Ltd. v. Commissioner of Income Tax and other precedents. The Tribunal found no merit in the department's objection to the admission of new evidence.

5. Presumption and Burden of Proof under Section 36A of the Central Excise Act:
The Tribunal noted that the presumption under Section 36A applies only when documents are produced by or seized from the person concerned. In this case, the documents were not seized from the appellant's premises. Therefore, the burden of proof was on the department to establish that the documents related to the appellant and that taxable services were provided. The department failed to discharge this burden.

6. Reliance on TDS/26AS Statements for Service Tax Demand:
The Tribunal found that relying on TDS/26AS statements and financial statements to compute service tax demand was inappropriate. It cited several decisions, including M/s Ved Security Vs. CCE, Ranchi -III, which held that value of taxable services cannot be determined merely based on TDS statements.

7. Applicability of Section 73 vs. Section 73A of the Finance Act, 1994:
The appellant argued that the demand should have been raised under Section 73A, not Section 73. The Tribunal did not delve deeply into this issue, as it already found the demand unsustainable on other grounds.

8. Procedural Irregularities in Search and Seizure:
The appellant claimed procedural irregularities during the search, such as the involvement of Panchas from a different locality. The Tribunal did not make a specific finding on this issue but noted the appellant's arguments.

9. Limitation and Suppression of Facts:
The appellant argued that the demand was barred by limitation and that there was no suppression of facts. The Tribunal did not address this issue in detail, as the demand was already found unsustainable on other grounds.

Conclusion:
The Tribunal set aside the demand of service tax, interest, and penalty (except for the amount admitted and deposited by the appellant) and allowed the appeal with consequential relief. The Tribunal emphasized the need for the department to correctly classify services and provide substantial evidence to support its claims.

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