2024 (5) TMI 377 - AT - Service Tax

Levy of service tax on purported receipt of service charges - Erection, Commissioning and Installation Service - period from 01.04.2010 to 31.03.2011 - HELD THAT - The appellant had not received the consideration for the services rendered to M/s. JSW Steels Ltd., for an amount of Rs.14,10,405/- as the Cheque was never encashed by the appellant. As no amount was received by the appellant, the liability of Service Tax cannot be fastened to them. The impugned order is set aside - appeal allowed.

Summary

Issues Involved:
The issues involved in this case include the demand of Service Tax against the appellant for alleged non-payment, the verification of service charges and Cheque encashment, and the legal implications of Rule 6(1) of Service Tax Rules, 1994.

Issue 1: Demand of Service Tax
The appellant, engaged in providing 'Erection, Commissioning and Installation Service,' was alleged to have not paid Service Tax amounting to Rs.1,45,294/- for the period from 01.04.2010 to 31.03.2011. The Assistant Commissioner confirmed the demand and imposed penalties under Section 76 and 77(2) of the Finance Act, 1994. The Commissioner (Appeals) later set aside the Order-in-Original and reinstated the demand, citing lack of evidence regarding the Cheque issued to the appellant.

Issue 2: Verification of Service Charges and Cheque Encashment
After a remand, it was found that the Cheque in question was not encashed by the appellant, leading to doubts regarding the demanded amount's relation to the period in question. The Department raised concerns about the verification process and the lack of confirmation from the service recipient or the bank branch regarding Cheque encashment. The appellant argued that the Cheque was never handed over to them and that the demanded amount pertained to earlier periods.

Issue 3: Legal Implications of Rule 6(1) of Service Tax Rules, 1994
The appellant highlighted Rule 6(1) of Service Tax Rules, 1994, stating that Service Tax is payable only when the payment for the service is received. They emphasized that since the Cheque was not encashed, no consideration was received during the period in question, making the Service Tax demand invalid. The appellant's contention was supported by the fact that the Cheque was not encashed, as confirmed by the service recipient.

Conclusion:
The Tribunal ruled in favor of the appellant, stating that since the Cheque for the service charges was not encashed, no consideration was received, and therefore, the liability of Service Tax cannot be imposed. The impugned Order-in-Appeal was set aside, and the appeal was allowed with consequential relief, if any, as per the law.