2024 (8) TMI 586 - AT - Service Tax

Short payment of service tax - difference of the taxable value in their S.T.3 Returns and the balance sheeet figures shown during the period 2007-08 till 2010- 2011 - HELD THAT - The appellant has explained that the figure shown as income in the balance sheet includes the amount recovered on account of sale of Diesel cost recovered from with M/s Reliance Infocomm Engineering Private Limited and to such effect, the appellant has produced the Work Order. On the sale of Diesel, VAT has also been paid. In that circumstances, on the value of Diesel, which has been supplied by the appellant, the same cannot be included in the taxable value of service provided by the appellant and if the said amount for supply of Diesel is taken into consideration, the demand on account of differential figure in the balance sheet and the ST-3 Returns, is not sustainable - It is further noted that the sale amount of Rs.85,674/- is also found short paid by the appellant, which relates to Renting Immovable Property Service, which the appellant has admitted and paid. Therefore, the said demand of Rs.85,674/- is confirmed against the appellant. Service tax on composite work order at the rate of 12.36% or 4% or 2%? - HELD THAT - The service tax is payable under the composite work order, which has been paid, no demand is sustainable against the appellant. No penalty is imposable on the appellant in the facts and circumstances of the case. The impugned order is set aside - appeal allowed.

Summary

Issues:
- Appeal against demand of service tax
- Discrepancy in taxable value in balance sheet and ST-3 Returns
- Allegations of short payment of service tax
- Demand on account of difference in values
- Taxability of services provided
- Payment for supply of Diesel
- Composite work contract and service tax liability
- Refund claim filed
- Bar on limitation for demand
- Impugned order confirmation

Analysis:
The case involved an appeal against the demand of service tax amounting to Rs.1,20,01,760/- along with interest and penalty under Sections 77(1)(a) and 78 of the Finance Act, 1994. The appellant, a private limited company, provided services under the categories of "Manpower Recruitment Agency Service" and "Business Auxiliary Service" and had been paying service tax regularly. The Department raised the demand based on a difference in taxable values between the balance sheet and ST-3 Returns for the period 2007-08 to 2010-11. Additionally, an amount received as rent was also found to be short paid, leading to a total demand of Rs.85,674/- related to Renting Immovable Property Service.

Regarding the discrepancy in values, the appellant explained that the amount shown as income in the balance sheet included the cost recovered from the sale of Diesel to M/s Reliance Infocomm Engineering Private Limited. The Tribunal found that the sale of Diesel, on which VAT had been paid, should not be included in the taxable value of services provided by the appellant. As a result, the demand based on the difference in values was deemed unsustainable.

Moreover, the appellant had entered into a composite work contract with M/s Reliance Infocomm Engineering Private Limited, involving various services like site formation work, civil construction work, and electrical work, among others. The appellant contended that they had paid service tax at a higher rate due to a lack of knowledge, leading to a refund claim being filed. The Tribunal held that since the service tax had been paid under the composite work order, no further demand was sustainable.

The Tribunal also noted that the demand solely relied on the records of the appellant like the Balance Sheet and ST-3 Return, which raised a question of limitation. Ultimately, the impugned order confirming the demand was set aside, and the appeal was allowed. The Tribunal ruled that no penalty was imposable on the appellant in the given circumstances, as pronounced on 08.08.2024.