2024 (2) TMI 14 - AT - Service Tax

Demand of service tax based on difference between the Balance Sheet and ST-3 return - Appellant was aware that service tax was short paid but still chose not to pay - suppression of facts for invoking extended period - HELD THAT - The Revised Balance Sheet for F.Y 2009-10 has been duly audited. Thus, there was no reason for the Adjudicating Authority and the Department to not take its figures into consideration. On taking the Revised balance Sheet into consideration, it can be seen that the receipts decrease by Rs.81,15,826/-, which even otherwise leads to reduction in Tax demand of Rs.8,35,930/- at the rate of 10.30%, thereby wiping out any alleged service tax difference of Rs.7,72,960/- for F.Y 2009-10. It has been held in a catena of decisions that without any evidence, only the amount received by the Appellant was liable to Service Tax, amounts reflected in Balance Sheet cannot be used to determine the Service Tax liability. The Hon ble Madras High Court in FIRM FOUNDATIONS HOUSING PVT. LTD. VERSUS PRINCIPAL COMMISSIONER, OFFICE OF THE PRINCIPAL COMMISSIONER OF SERVICE TAX 2018 (4) TMI 613 - MADRAS HIGH COURT held that the reporting of income in the P and L is irrelevant for the purposes of determination of service tax payable and thus the basis of the impugned assessment is erroneous. Moreover, income reflected in the Balance Sheet is for Income Tax purposes, which cannot be used for the purpose of service tax without any corroboratory evidence. The Hon ble Punjab Haryana High Court in COMMISSIONER OF CENTRAL EXCISE COMMISSIONERATE, LUDHIANA VERSUS M/S MAYFAIR RESORTS, NHI, JALANDHAR 2011 (3) TMI 175 - PUNJAB AND HARYANA HIGH COURT held that the Department had to show evasion of Service Tax and that the money found with the assessee represented proceeds of services provided by it, which has admittedly not been done in the present case by the Department. Extended period of limitation - HELD THAT - Mere non-payment of tax will not sustain the allegation of suppression of facts for invoking extended period as nothing has been shown which points towards any omission or commission by the Appellant which shows the intention to evade tax as held by M/S. MP. LAGHU UDHYOG NIGAM LTD. VERSUS CCE, BHOPAL 2014 (8) TMI 707 - CESTAT NEW DELHI . It is found that the Department has not adduced any positive evidence to show malafide intention for evasion of service tax and therefore extended period is erroneously invoked as held in PUSHPAM PHARMACEUTICALS COMPANY VERSUS COLLECTOR OF C. EX., BOMBAY 1995 (3) TMI 100 - SUPREME COURT and M/S CONTINENTAL FOUNDATION JOINT VENTURE SHOLDING, NATHPA HP VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-I 2007 (8) TMI 11 - SUPREME COURT . There can be no demand of Service tax of Rs.56,39,991/- and interest under Section 75 and penalty imposed under Section 78 of the Act is set aside - As far as interest demanded to the tune of Rs.30,585/- for the period F.Y 2009-2013 on late payment of the Appellants declared service tax liability, it is upheld only for normal period of limitation, i.e. for the period from October, 2012 to March, 2013 and rest is set aside - The demand of Rs.1,100/- for late filing of ST-3 Returns pertains to the period April, 2012-June, 2012, which falls in the extended period and is therefore set aside. The appeal is partly allowed.

Summary

Issues Involved:
- Challenge to the order confirming Service Tax demand, interest, and penalty
- Discrepancy between ST-3 Returns and Balance Sheets for multiple financial years

The Appellant, a Security Agency Services provider, challenged the order confirming a Service Tax demand of Rs.56,39,991/-, interest, and penalty imposed by the Adjudicating Authority. The Department noticed a discrepancy in the value of taxable services between ST-3 Returns and Revenue from Operations in Balance Sheets for F.Y 2009-10, 2011-12, and 2012-13. The Appellant submitted a duly audited Revised Balance Sheet for F.Y 2009-10, explaining the reduced Service Charge due to an oversight caused by loss of records. The Department issued a Show Cause Notice proposing the Service Tax demand, interest, and penalty, invoking the extended period of limitation for the abovementioned financial years.

The Appellant argued that the Revised Balance Sheet should have been considered, as it rectified the alleged service tax evasion. They contended that the income shown to the Income Tax authorities cannot be the sole basis for determining Service Tax liability. The Appellant relied on various judicial precedents to support their arguments.

The Appellant further contended that the extended period of limitation cannot be invoked as they were regularly filing ST-3 Returns, and the Department should have effectively scrutinized the returns as per CBEC Circulars. They also argued that audit objections alone cannot justify invoking the extended period.

The Tribunal observed that the Revised Balance Sheet for F.Y 2009-10, duly audited, should have been considered, as it led to a reduction in the alleged service tax difference. The Tribunal held that without evidence, Balance Sheet figures cannot be used to determine Service Tax liability. It also noted that the Department failed to show evasion of Service Tax or provide evidence of malafide intent by the Appellant.

Ultimately, the Tribunal set aside the Service Tax demand, interest, and penalty imposed, upholding only a portion of the interest for late payment and setting aside the penalty for late filing of ST-3 Returns. The appeal was partly allowed based on the above considerations.