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2024 (4) TMI 823 - AT - Service TaxLevy of service tax - Amounts received by the appellant from Priyadarshini Gas Seva PGS - Legal Consultancy service (Reverse Charge Mechanism RCM ) - Renting of immovable property service (from 2009-2010 to 2011-2012) - Miscellaneous income (other than negative list service) - Director s remuneration under reverse charge - Extended period of limitation and penalty under section 78. Amounts received by the appellant from Priyadarshini Gas Seva PGS - HELD THAT - There are no essential requirements for levying service tax in this demand, viz., a service recipient, a service provider, a service (or which is not in the negative list) and a consideration for such service. Indisputably, PGS is a unit of the appellant. There is nothing unusual about a unit transferring profits to its parent company. Merely because an amount has been transferred, it does not prove that it was a consideration, for a service (not under negative list) rendered by the parent company to its unit. The Commissioner s finding is that when PGS was established, the appellant had negotiated with IOC to get PGS distributorship of gas. Therefore, according to the Commissioner, the appellant had rendered a service and what was paid was a consideration for it. There is nothing unusual about a parent company negotiating on behalf of one of its units. Such negotiation does not become a taxable service. Even according to the Commissioner, the negotiation had taken place in 1984-1986 at a time when there was no levy of service tax at all. The demand under this head needs to be set aside and is set aside. Legal Consultancy service - Reverse Charge Mechanism RCM - HELD THAT - Service tax is to be paid on the consideration paid for a service which was a taxable service (up to 2012) or for service not under negative list (after 2012). It is not, as wrongly held by the Commissioner, on the expenditure booked by the assessee. Under the head Legal Consultancy Service, the appellant had booked some amounts of which to the extent they represented payments made for the legal services, it had paid service tax. Rest of the amounts booked under this head in the appellant s books of accounts were also paid to the lawyers either for the court fee or towards reimbursements of travel expenses. Reimbursements are clearly not a consideration for a service but a compensation for what was incurred by one which was to be borne by another. In this case, they are the court fee and travel expenses. No service tax can be levied on such amounts. The demand of Rs. 1,26,820/- on the amounts paid towards court fees and reimbursements of travel expenses cannot be sustained and needs to be set aside. Renting of immovable property service (from 2009-2010 to 2011-2012) - HELD THAT - The taxable service in dispute is the renting of immovable property which clearly did not include renting of residential accommodation. The appellant agrees to have received the amounts and submits that some part of the income was towards rent on residences provided to its employees. The Commissioner, unable to ascertain the facts from the records, confirmed the demand on the entire income. Unless the Commissioner could establish that what was received was a consideration for rendering a taxable service, he should not have confirmed the demand. The demand of Rs. 4,26,217/- under this head needs to be set aside. Miscellaneous income (other than negative list service) - HELD THAT - The Commissioner appears to have lost sight of the fact that service tax is not a tax on income but is tax on the provision of taxable service (before 2012) and provision of a service which is not under negative list (after 2012). Neither before 2012 nor after this date was service tax a tax on income. If an income is received which was not accounted for in the service tax returns, it is open to the department to investigate if that income was a consideration for rendering a taxable service or, as the case may be, for rendering a service which is not in the negative list. Neither before nor after 2012 was service tax payable on income. If the investigation by the department shows that the income was a consideration on which service tax was payable, it can be levied. If the department cannot find any evidence to this effect, as is the case here, no service tax can be charged. The Commissioner s logic that, since the appellant is not a manufacturer but a service provider and has earned an income, it must be for rendering a service not under negative list, is fallacious - The demand of Rs. 13,55,398/- on this head needs to be set aside and is set aside. Director s remuneration under reverse charge - HELD THAT - The case of the appellant is that it paid the amounts to its full time Directors who are its employees. Unless any contrary evidence can be brought on record by the Revenue, this must be accepted and if so, any service rendered by the Directors to the appellant and amounts which the appellant paid as compensation are clearly excluded from the scope of service tax by section 65 (44) (b) of the Act - The demand on this head needs to be set aside and is set aside. Extended period of limitation - penalty under section 78 - HELD THAT - The Central Excise officer has, evidently, not done his job of scrutinising the returns, calling for records and ascertaining if the service tax was correctly paid and later, the audit discovered the incorrect self-assessment by the appellant. This does not prove that the appellant had an intention to evade but only proves that the Central Excise officer under the Commissioner had not done scrutinised the returns as he was required to. Nothing in the entire impugned order establishes intent or adduces any evidence to establish intent - It is held in favour of the appellant and against the Revenue on the questions of extended period of limitation and the penalty under section 78. Appeal allowed in part.
Issues Involved:
1. Amounts received from Priyadarshini Gas Seva (PGS) 2. Legal Consultancy service (Reverse Charge Mechanism [RCM]) 3. Renting of immovable property service 4. Miscellaneous income (other than negative list service) 5. Director's remuneration under reverse charge 6. Extended period of limitation and penalty u/s 78 Summary: 1. Amounts received from Priyadarshini Gas Seva (PGS): The Commissioner confirmed a service tax of Rs. 10,746/-. The appellant argued that PGS is a unit of the appellant and the transferred profits were not remuneration for services. The Tribunal found no essential requirements for levying service tax and set aside the demand. 2. Legal Consultancy service (Reverse Charge Mechanism [RCM]): The appellant paid Rs. 3,14,920/- but disputed Rs. 1,26,820/- for reimbursements of court fees and travel expenses. The Tribunal held that reimbursements are not consideration for services and set aside the demand of Rs. 1,26,820/-. 3. Renting of immovable property service: The appellant paid Rs. 2,04,569/- but disputed Rs. 4,26,217/- received as rent from employees. The Tribunal found that the Commissioner did not ascertain if the income pertained to taxable services and set aside the demand of Rs. 4,26,217/-. 4. Miscellaneous income (other than negative list service): The Commissioner demanded service tax of Rs. 13,55,398/- on miscellaneous receipts. The Tribunal noted that service tax is not a tax on income and set aside the demand, stating that the department failed to prove the income was for taxable services. 5. Director's remuneration under reverse charge: A demand of Rs. 1,22,92,615/- was confirmed for payments to Directors. The appellant argued that payments to full-time Directors, who are employees, are not taxable. The Tribunal agreed, noting that services by employees to employers are excluded from service tax u/s 65 (44) (b), and set aside the demand. 6. Extended period of limitation and penalty u/s 78: The appellant contended that the extended period of limitation and penalty u/s 78 were wrongly invoked. The Tribunal found no evidence of intent to evade tax and held in favor of the appellant, setting aside the extended period of limitation and penalty. Conclusion: The appeal was partly allowed, and the impugned order was modified as follows: - Demands on Director's remuneration, miscellaneous income, and amounts from PGS are set aside. - Service tax on legal consultancy service and renting of immovable property service are upheld only to the extent paid by the appellant. - Demands on Sponsorship Service and GTA service are upheld. - Extended period of limitation and penalty u/s 78 are set aside.
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