2023 (9) TMI 72 - AT - Service Tax

Levy of Service tax - Discrepancies between credit balance of subscriber service charges shown in the Trial Balance and the value of taxable services during the financial years 2004 2005, 2005 2006 and 2006 2007 as noticed in the ST-3 Returns - International inbound roaming Service - markup outroamer charges which are also in the nature of interconnection usage charges - Activation deposit - interest on delayed payment and penalty - extended period of limitation. Discrepancies between credit balance of subscriber service charges shown in the Trial Balance and the value of taxable services - HELD THAT - Whether the figures shown in the Trial Balance was prepared on accrual basis or on receipt basis, is a question of fact. We have found it was non-disclosure of facts that was within their exclusive knowledge, that has led to an adverse inference and to the issue of the SCN. If it was the appellants apprehension that the question of taxability had not being addressed correctly in the Show Cause Notice, they had an opportunity to put forward the facts and evidences, including the relevant ledger entries, available with them when asked to reconcile data during the dispute resolution process - While the question of taxability is to be decided according to the principles of law, what was the factual accountancy practice followed must be disclosed with evidence so as to examine the applicability of the principles of law involved to those facts. International inbound roaming Service is not liable to Service tax - HELD THAT - Once the FTO is identified as the service recipient, it becomes evident that the international inbound roaming services are rendered to the FTO outside the territory of India and the transaction becomes an export of services as per Rule 3(iii) of the EoS Rules - It is seen that the Original Authority has held that the appellant has not furnished the required breakup for the financial year 2004-05 and 2005-06 for the Head 4027 General Roaming which includes National and International Inbound Revenue. The appellant has again not refuted the same, except for putting up a legal argument of non-taxability of the service for the period after 14/01/2007 also. What cannot be factually distinguished cannot be legally determined. Their reluctance to disclose factual evidence, which if true, may have given a different perspective to the Original Authority in accordance with their legal view, is perplexing and also fatal to their stand in this era of self-assessment. Out-roamer charges which are also in the nature of interconnection usage charges are not taxable prior to 01.06.2007 - HELD THAT - The appellant has made an inference without presenting any fact that the deposits were actually refunded. Merely labelling a payment receipt as security deposits and making inferences about their treatment in law will not suffice - The Apex Court in SURESH BUDHARMAL KALANI ALIAS PAPPU KALANI VERSUS. STATE OF MAHARASHTRA 1998 (9) TMI 656 - SUPREME COURT has held that A presumption can be drawn only from facts and not from other presumptions by a process of probable and logical reasoning . It is a well-accepted legal proposition that the nomenclature of any activity or document etc, is not decisive of its nature - the appellant has not produced any evidence to show that security deposits were indeed refunded and not retained by them. Further whether they were refunded in full or partially, whether interest was paid to the customers for the deposit etc. The appellant, despite ample opportunity, has not pleaded or demonstrated through documents that the service would have been operationalized even if these charges were not paid. Hence the gross consideration that is shown to contribute in rendering the service will form a part of the gross value of the taxable service - The impugned Order has accepted that no service tax is payable on interest on delayed payment (Rs.19,86,353/-), and thus, the Appellant is not liable to pay service tax on the same. The appellant has not disclosed any facts on which the inference was made by them. It is not disclosed whether the delay, if any, was on the part of the Adjudicating Authority or caused by the appellant themselves. This is even more relevant as it was pointed out in the impugned order that the appellant was not diligent in responding to the queries of the Department in reconciling the Trial Balance with the ST 3 Return - the order does not disclose the precise provision in law which permits statutory authorities to set aside the impugned order based on delay, if any. In fact, the Act at the relevant time did not provide any period within which the adjudication proceedings should be completed. The following issues raised by the appellant remain to be examined - (A) The entire demand is barred by limitation. The extended period of limitation ought not to be invoked as none of the conditions in Proviso of Section 73(1) are invocable in the instant case - (B) No interest is payable. No penalty is imposable. Matter remanded back to the Original Authority for de novo adjudication - appeal disposed off.

Summary

Issues Involved:
1. Basis of demand on Trial Balance vs. ST-3 Returns.
2. Onus of establishing taxability.
3. Accounting basis for service tax liability.
4. Taxability of International inbound roaming services.
5. Taxability of interconnection usage charges.
6. Taxability of activation deposits.
7. Taxability of interest on delayed payments.
8. Delay in adjudication.
9. Limitation period and penalties.

Summary:

1. Basis of Demand on Trial Balance vs. ST-3 Returns:
The appellant argued that the demand was based on differences between the Trial Balance and ST-3 Returns, asserting that no demand can be raised solely on financial statements. The Tribunal disagreed, stating that the Trial Balance provides crucial information for compliance verification and can be relied upon if authenticated by the company.

2. Onus of Establishing Taxability:
The Tribunal held that the initial burden of proving the correctness of self-assessed returns lies with the assessee. The department can draw adverse inferences if the assessee fails to provide satisfactory explanations for discrepancies.

3. Accounting Basis for Service Tax Liability:
The Tribunal noted that before 01/04/2011, service tax was payable on a receipt basis. The appellant failed to reconcile differences between the Trial Balance and ST-3 Returns, leading to an adverse inference against them.

4. Taxability of International Inbound Roaming Services:
The appellant argued that these services are not taxable, citing various case laws. The Tribunal found that the appellant did not provide necessary break-ups for the amounts in dispute, making it difficult to apply the legal arguments without factual evidence.

5. Taxability of Interconnection Usage Charges:
The appellant contended that the demand for markup out-roamer charges should be dropped as they are similar to interconnection usage charges, which are not taxable before 01/06/2007. The Tribunal noted the Original Authority did not discuss this matter, suggesting an omission due to lack of explanation from the appellant.

6. Taxability of Activation Deposits:
The appellant claimed that activation deposits are refundable and should not be taxed. The Tribunal found no evidence that these deposits were refunded, thus supporting the Original Authority's decision to include them in the taxable value.

7. Taxability of Interest on Delayed Payments:
The appellant argued that interest on delayed payments is not taxable. The Tribunal found that the appellant did not provide evidence to show that such interest was not included in the taxable value, thus upholding the Original Authority's decision.

8. Delay in Adjudication:
The appellant cited various cases to argue that the delay in adjudication merits setting aside the order. The Tribunal found no evidence that the delay was solely on the part of the Adjudicating Authority and noted that the Act did not provide a specific period for adjudication at the relevant time.

9. Limitation Period and Penalties:
The Tribunal decided not to examine these issues at this stage and remanded the matter back to the Original Authority for de novo adjudication, ensuring that the appellant is given a fair opportunity to present their case.

Conclusion:
The matter is remanded back to the Original Authority for de novo adjudication, with instructions to follow principles of natural justice and complete the process within ninety days. The appeal is disposed of accordingly.