2024 (8) TMI 90 - AT - Service Tax

Non-payment of service tax - taxable value reflected in the ST-3 returns was less than what was shown in the Income tax returns - discrepancy on the basis of third party data - HELD THAT - It is found that the Original authority has wrongly computed the amounts of service tax by taking the figures of Rs. 49,64,538/- as the value of services but the Original authority has not considered the payment of service tax of Rs. 5,41,582/- which is shown as an expense in the financial statement produced on record. Further, as per the reconciliation statement which is in annexure I produced, showing wrong computation of the service tax @ 14.05% whereas the effective rate of service tax during the said Finance year was 12.36% for the months of April, 2015 and May, 2015, 14% for the period of June, 2015 till November, 2015 and 14.5% till March. But, the Original authority has calculated the service tax @ 14.5% which is wrong. It is found that both the authorities have not examined the nature of service whether the same falls under works contract service or not In view of these discrepancies in the impugned order, the matter needs to be remanded back to the Original authority with the direction to examine various issues raised by the appellant in their appeal, namely, correct valuation of service tax, service tax rate as applicable during the relevant period, the nature of service rendered by the appellant and thereafter pass a fresh order, after following the principles of natural justice and pass a reasoned order. Appeal allowed by way of remand.

Summary

Issues:
1. Discrepancy in service tax payment based on third-party data.
2. Rejection of appeal by Commissioner (Appeals) and confirmation of Order-in-Original.
3. Incorrect computation of service tax amount and penalties.
4. Applicability of the extended period of limitation.
5. Determination of the nature of service provided by the appellant.

Analysis:
1. The case involved a dispute arising from a variance in gross receipts from services as per Income Tax data compared to the ST-3 returns filed by the appellant for the years 2015-16. A Show Cause Notice was issued for the recovery of Service Tax along with interest and penalties under relevant sections of the Act due to the alleged underpayment of Service Tax by the appellant.

2. The Order-in-Original confirmed the demand for Service Tax, interest, and penalties. The appellant filed an appeal before the Commissioner (Appeals), which was rejected, leading to the present appeal before the Appellate Tribunal CESTAT CHANDIGARH.

3. During the hearing, the appellant's consultant argued that the impugned order was not legally sustainable as the authorities did not adequately consider the submissions made in response to the Show Cause Notice. The consultant provided detailed explanations regarding the computation of service tax, including the inclusion of service tax in the total service receipts as per financial statements and the applicable service tax rates during the relevant period.

4. The appellant contended that the proceedings against them were time-barred, as the extended period of limitation could not be invoked without evidence of fraud, collusion, willful misstatement, or intent to evade payment of duty. The consultant also highlighted the nature of photography services provided by the appellant and the relevant valuation rules applicable.

5. The Appellate Tribunal observed discrepancies in the computation of service tax amounts and the failure to determine whether the services provided by the appellant fell under works contract services. Consequently, the Tribunal decided to remand the matter back to the Original authority for a reevaluation. The Original authority was directed to consider the issues raised by the appellant, including correct valuation, applicable service tax rates, and the nature of services provided, ensuring a reasoned order within three months.

This detailed analysis of the judgment highlights the key legal issues, arguments presented by the parties, and the Tribunal's decision to remand the case for further examination, emphasizing the importance of proper consideration and adherence to legal principles in tax matters.