2023 (7) TMI 433 - AT - Service Tax

Mismatch between Service Tax returns and financial statements of the Appellant company - demand of duty alongwith interest and penalties - HELD THAT - As could be noticed from the miscellaneous application and its annexed documents, reconciliation statements were submitted vide letter dated 26.12.2014 and 17.05.2015 alongwith several documents and internal audit report was also submitted by the Assistant Commissioner of Service Tax, Division-II, Mumbai on dated 04.11.2016 to the Commissioner who passed the order on dated 15.11.2016 i.e. almost 12 days after receipt of the said report but neither he considered the reports nor given a chance of hearing to the Appellant to examine the reports received by him through an internal enquiry. There is also a comparative analysis made in a tabular form by the Appellant and produced here that speaks about the gist of findings available in the internal report and the observations made by the Commissioner in his impugned order on each and every disputed points. Prima facie it appears that there is substance in the contention made by the Appellant that internal examination report, called for and received by the Commissioner, was favouring the stand taken by the Appellant but without delving into detail of each aspects dealt in the report and attempting to compare the same, that would mount to conducting further enquiry at the Appellate stage, it is considered appropriate to remand the matter back for re-adjudication as Appellant was not provided with an opportunity to defend its case - appeal allowed by way of remand.

Summary

Issues involved:
The legality of the order passed by the Commissioner of Service Tax, Mumbai confirming duty demand under Section 73, interest under Section 75, and penalties under Sections 76, 77 & 78 of the Finance Act, 1994 based on a mismatch between Service Tax returns and financial statements.

Details of the judgment:

Issue 1: Legality of the order

The Appellant, engaged in construction projects, contested duty demand, interest, and penalties imposed by the Commissioner based on audit reports alleging a significant short payment of Service Tax. The Appellant's contentions regarding the reconciliation data and internal audit report were disregarded by the Commissioner, leading to the confirmation of the demands.

Issue 2: Additional evidence

During the hearing, it was revealed that additional documentary evidence obtained through RTI applications was accepted as public documents, which were initially sought by the Commissioner but not relied upon in the order under challenge.

Issue 3: Consideration of internal audit reports

The Appellant highlighted that the internal audit report submitted by the Assistant Commissioner favored their stand, but the Commissioner did not consider it while passing the order. The Appellant was not given an opportunity to examine the report or defend their case, leading to a lack of fair adjudication.

Decision:

Upon reviewing the case record and submissions, the Tribunal found merit in the Appellant's contention that the internal examination report was not adequately considered by the Commissioner. Therefore, the matter was remanded back for re-adjudication to provide the Appellant with a fair opportunity to defend their case and examine the internal audit report.

Conclusion:

The appeal was allowed by way of remand for a de novo adjudication based on the additional documentary evidence obtained through RTI. The Commissioner's order was set aside, and the Commissioner was directed to complete the adjudication process within 4 months. The Appellant was instructed to participate in the proceedings, and the miscellaneous applications were disposed of.

(Order pronounced in the open court on 05.07.2023)