2006 (2) TMI 40 - AT - Service Tax

Service Tax - Appellant failed to discharge tax liability properly because of misunderstanding that he was not to pay tax as receipts for services rendered to registered dealers

Summary

Issues:
Challenge against demand of service tax and penalty imposition based on limitation under Section 73 of Finance Act, 1994.

Analysis:
The appeal in this case was against the demand of service tax and penalty imposition amounting to about Rs.24,000, invoked under the extended period provided by Section 73 of the Finance Act, 1994. The appellant contested the demand solely on the ground of limitation, arguing that no mis-statement was involved. The appellant maintained that they regularly filed returns which clearly showed the amounts collected from registered dealers, indicating that no service tax was being paid on services rendered to them. The appellant's counsel argued that since there was no wilful mis-statement, the demand and penalty should be set aside due to the limitation issue.

The lower authority contended that the appellant made mis-statements to the Revenue by declaring the receipts from registered dealers under Column 5 of the return, which is meant for "amount of service tax adjusted." However, upon examination of the records, it was found that the entries under Column 5 did not relate to tax adjustment as claimed by the Revenue. The appellant had stated the value of services rendered to registered dealers under Column 5, under the impression that the registered dealers would be liable to pay tax on those amounts. This misunderstanding led to a failure to discharge the tax liability correctly, rather than a deliberate mis-statement. The Tribunal noted that the Revenue's view was incorrect, as a comparison of the particulars under Columns 4 and 7 with Column 5 revealed that no mis-statement was made. Therefore, the Tribunal found merit in the appellant's argument that the extended period under Section 73 was not applicable in this case due to the absence of mis-statement.

In conclusion, the Tribunal allowed the appeal on the ground of limitation, with any consequential relief to the appellants. The judgment was pronounced on 20.2.2006 in open court.