2009 (5) TMI 242 - AT - Service Tax

Health club and Fitness centre SCN issued and adjudication order passed based on best judgment assessment - in the absence of any information coming forth from the appellants as regards exact amount collected by them for the services rendered, the lower authorities have resorted to the next possible way for arriving at the amount of service tax payable by the appellant. We find that the adjudicating authority in his OIO has clearly brought out the lacunae and the mis-match of the amounts collected by the appellant and the bill books shown by them as regards the service charges collected. We find that these particular findings of the adjudicating authority has not been contested by the appellant before the first appellant authority. - Hence, we hold that the calculation of the service tax payable under the provisions of Section 72 seems to be correct as it is understood that there is a escapement of the service tax. - In our considered view, in the absence of any proper records being maintained by the assessee, the service tax liability has to be fastened upon them relying upon the factual reports as regards the persons to whom such services are given. Since there is an escapement of service tax, we find that the service tax liability has to be re-worked out by the lower authorities accordingly based upon the evidences - As regards the submissions made by the ld. Counsel that the show cause notice is invoking the provisions of Section 72 mid which was subsequently repealed by the Finance Act, 2004, we find that provisions were rightly invoked

Summary

Issues:
Service tax liability calculation based on best judgment assessment under Section 72 of the Finance Act, 1994; Appellant's contention against the assessment methodology and findings of lower authorities; Lack of accurate accounts and documents submitted by the appellant; Discrepancies in the assessment of the number of persons accommodated for exercises; Appellant's argument regarding the invocation of repealed Section 72 of the Finance Act, 1994.

Analysis:
The appeal challenged the Order-in-Original (OIO) confirming a demand for service tax, interest, and penalties against the appellant for non-registration and non-payment of service tax related to their health club services. The appellant contended that the assessment under Section 72 of the Finance Act, 1994 was erroneous due to its repeal, and the authorities exceeded the scope of the show cause notice. They argued that the assessment lacked proper verification and quantification, and penalties were unjustified. The respondent emphasized the appellant's failure to maintain accurate accounts or provide sufficient documentation, justifying the assessment based on best judgment. The Tribunal examined the contentions and records.

The Tribunal found the appellant's objection to the application of Section 72 misplaced, noting that the show cause notice explicitly mentioned the best judgment method due to lack of evidence on the amount collected. As the notice was issued when Section 72 was in force, the calculation method was deemed appropriate. The Tribunal highlighted the appellant's failure to provide accurate collection details, leading to reliance on alternative methods for determining service tax liability. The adjudicating authority's findings on discrepancies in the number of persons accommodated were upheld, indicating an escapement of service tax.

Regarding the appellant's admission of inadequate record-keeping, the Tribunal stressed the importance of maintaining proper accounts for determining tax liability. As the appellant failed to provide sufficient evidence, the liability was upheld based on factual reports. The Tribunal acknowledged the need for re-quantification based on the identified issues and discrepancies, remanding the matter to the adjudicating authority for a fresh assessment after granting the appellant a personal hearing. The Tribunal set aside the impugned orders for reconsideration.

In conclusion, the Tribunal addressed the appellant's challenges to the assessment methodology, discrepancies in calculations, and the invocation of repealed provisions. The decision emphasized the significance of accurate record-keeping and proper evidence for determining service tax liability, necessitating a re-evaluation by the adjudicating authority.