2024 (3) TMI 1103 - AT - Service Tax

Recovery of service tax alongwith interest and penalties - Sundry Debtors/ amounts realizable appearing in Balance Sheet - reverse charge mechanism - extended period of limitation - HELD THAT - The proposed demand of Service Tax of Rs. 1,64,78,600/- has been reduced by Commissioner (Appeals) to an amount of Rs. 1,37,96,613/-, which has been confirmed alleging it to be the non-released receivables (sundry) from various Government debtors and private debtors (sundry debtors). Sundry debtors has been defined under Finance Act, 1994. As per normal terms sundry debtors refer to businesses, individuals or companies receiving services or products from another company or business without making the payment immediately. The payment occurs on a credit basis, where the debtors are liable to pay the money in future, i.e. the money lent to the sundry debtors is expected to return in the business financials within a short period of time. Payments on some future date to the sundry accounts are considered as fixed assets in the business. The show cause notice is based upon the scrutiny of profit and loss account for the financial year 2014-15, wherein the amounts were found recorded to be recoverable from the Government as well as from the private debtors - the amounts mentioned in the balance sheet as profit and loss amounts as unrealized receivable from the sundry debtors cannot be considered as value of service. Apparently, there is no provision in the Act or the Rules to be disclosed as sundry debtors in the ST 3 Returns. Hence, demand cannot be confirmed by merely appreciating the difference between the profit and loss account / balance sheet and ST 3 returns. The other ground for confirming demands is that the appellants had shown certain amounts du from the parties in their Income Tax returns and Revenue has proceeded to demand Service Tax on this amount shown in the Balance Sheet - HELD THAT - In the present case, it is observed that the Show Cause Notice as well as orders of the adjudicating authority have just appreciated the difference noticed between the amount mentioned in the profit and loss account and are mentioned in ST 3 returns of the appellant. Without appreciating the amount out of the impugned invoices to have been actually received by the appellant and without verifying as to whether the requisite services were finally being provided. Resultantly, order confirming such a demand is not sustainable. Invocation of the extended period - HELD THAT - It is already observed that the matter has originated based upon the latest audit of the appellants own record. The order merely state that had audit not been conducted the liability as confirmed qua the appellant could not have been ascertained, cannot be the ground for invoking the extended period of limitation. The primary responsibility for ensuring that the credit amount of service tax is paid, rests on the officers even in the regime of self-assessment as clarified by the CBEC in its manual for scrutiny of ST return - There is no evidence found on record proving such intent / mens rea with the appellant to evade payment of service tax. The appellant have already been held not liable to pay the amount confirmed. Resultantly the department has wrongly invoked the extended period of limitation while issuing Show Cause Notice. The impugned order is set aside - appeal allowed.

Summary

Issues:
The issues involved in the judgment are non-inclusion of taxable services in the gross value, non-payment of service tax, liability of service tax, invocation of the extended period, and suppression of facts.

Non-Inclusion of Taxable Services in Gross Value:
The appellant, registered for various taxable services, was found to have issued invoices for services provided but did not include them in the gross taxable value nor paid service tax. The department proposed recovery of service tax, interest, and penalties. The appellant contested that the sundry debtors in their balance sheet cannot be treated as the value of service, citing legal precedents. The Tribunal held that unrealized receivables from sundry debtors cannot be considered as the value of service and set aside the demand.

Invocation of the Extended Period:
The department invoked the extended period based on an audit revealing non-payment of service tax. The Tribunal ruled that the mere fact that the liability was uncovered due to an audit cannot be the sole reason for invoking the extended period. The responsibility for ensuring payment of service tax rests on the officers, even in the self-assessment regime.

Suppression of Facts:
The department alleged suppression of facts by the appellant, but the Tribunal found no evidence of intent to evade payment of service tax. Citing legal precedents, the Tribunal held that without establishing intent to evade duty, the extended period of limitation cannot be invoked. As such, the department wrongly invoked the extended period, and the order was set aside.

Final Decision:
The Tribunal set aside the order under challenge, allowing the appeal based on the lack of evidence of intent to evade payment of service tax and the incorrect invocation of the extended period of limitation. The judgment was pronounced on 19/03/2024 by the Tribunal.