2024 (8) TMI 1052 - AT - Service Tax

Benefit of input service tax credit - short payment of Service Tax by arriving at the demand on the net receipt basis - Extended period of limitation - whether there is any infirmity in the Order of the Commissioner (Appeals) who has partly upheld the Order of the Original Authority or otherwise? Benefit of input service tax credit for the year 2015-16, which was to be adjusted against the demand for the same period - HELD THAT - It is found that when the Commissioner (Appeals) has allowed the deduction to the extent of Service Tax paid by their vendor from the gross value for working out differential demand, which has not been disputed by the Revenue nor appealed against, the same principle will have to be applied for the remaining years i.e., 2014-15, 2016-17 2017-18 (up to June, 2017). Commissioner (Appeals) has only stated that as the Appellant failed to submit any Cenvat Credit account showing that they had taken the credit in their books of accounts, credit cannot be allowed particularly in view of the restriction that Cenvat Credit has to be taken within one year from the date of issue of invoice - Commissioner (Appeals) should have given a detailed speaking order as regards denying the Appellant s claim for said deductions also. Therefore, this issue needs to be re-determined by the Commissioner (Appeals) where the Appellants will be at liberty to produce all supporting documents for seeking such adjustment/deduction. Short payment of Service Tax by arriving at the demand on the net receipt basis, without giving them the benefit of cum-tax value - HELD THAT - The Commissioner (Appeals) has already extended this benefit to the Appellant and recalculated the Service Tax paid as Rs.6,71,569/- (Para 14). Therefore, there is also no reason to interfere with this finding of the Commissioner (Appeals) on this ground. With regard to Service Tax of Rs.47,683/- confirmed after abatement of 67% as against applicable 60%, the Commissioner (Appeals) has in terms of Rule 2A(ii)(a) of the Service Tax (Determination of Value) Rules, 2006 held that abatement admissible will be 60% and not 67% and therefore, upheld the demand of Rs.47,683/-. However, with regard to Service Tax demand of Rs.77,002/- confirmed on account of short payment of Service Tax for the period 2017-18 (up to June, 2017), since there was no dispute about the short payment nor Appellant has made any specific submission, confirmed demand was upheld as such. Therefore, on this issue also there appears no infirmity in Impugned Order - barring the issue of confirmation of demand of Rs.47,683/- by resorting to Rule 2A(ii)(a) of Service Tax Rules and not allowing certain adjustments against Service Tax paid to vendors/sub-contractors for remaining years, the rest of the Order does not need any interference as there is no ground substantiated by the learned Advocate to suggest that there was any gross error in arriving at such calculation or in denying any legal rights of the Appellant in the facts of the case or evidence on record. The rules relied upon by the Commissioner (Appeals), was not invoked in the SCN, as admitted by the Adjudicating Authority also and therefore, the same could not become the basis for confirming the demand when the grounds on which demand is proposed to be confirmed was not disclosed in the SCN, in view of settled legal position in this regard - the demand upheld by the Commissioner (Appeals) is not tenable and requires to be set aside. Similarly, the contention of the Appellant regarding eligibility for adjustment for remaining years also needs to be reexamined in view of lack of detailed reasons given for denial. Extended period of limitation - HELD THAT - In the facts of the case, it is obvious that the Appellants were following certain method of calculation for discharge of Service Tax which was not proper or in accordance with the applicable laws, Rules, etc. The whole discrepancy was noticed only on detailed verification and plausible submissions made by the Appellants. Some of the submissions like deduction of Service Tax paid to the vendors, though accepted by the Commissioner (Appeals), and not disputed by Revenue, are debatable on the fair reading of applicable legal provisions which require service provider to discharge Service Tax and the service recipient is required to pay the Service Tax. The recipient of service on which service tax has been paid is also entitled to take credit and utilize against his further liability subject to provisions of Cenvat Credit Rules - Since the Commissioner (Appeals) has already given the benefit in this regard and this aspect is not being disputed by the Revenue, this issue is not being examined. However, the fact remains that though the Appellants have claimed bonafide belief of the practice that was being followed by them regarding deductions from the gross value, it could not be said that following wrong practice or inconsistent practice which is not permissible under the law, would tantamount to their disclosure of facts to the Department and in turn prevent the Department from invoking the extended period. In the facts of the case, the grounds on which the Commissioner (Appeals) has upheld the decision of the Adjudicating Authority for invoking extended period are correct and therefore, there is no need to interfere with the findings of the Commissioner (Appeals) on this issue. In other words, the extended period will be applicable in the facts of the case. The Order of the Commissioner (Appeals) does not need any interference, except to the extent of its confirming the demand of Rs.47,683/- which cannot be sustained and denial of adjustment for the years 2014-15, 2016-17 2017-18 (up to June, 2017) without giving adequate reasons for its denial. This issue therefore requires to be re-determined by the Appellant Authority on the basis of documents submitted including any other relevant documents which Appellants may adduce in support of their claim. Penalty proposed under Section 78 will also has to be re-determined in view of final confirmed demand liable to be paid by the Appellants. The Appeal is therefore partly allowed by way of setting aside the Order of confirmation of Rs.47,683/- by Commissioner (Appeals) and remanding the issue of eligibility and extent for adjustment against demand for the years 2014-15, 2016-17 2017-18 (up to June, 2017).

Summary

Issues Involved:
1. Difference between turnover shown in the Profit & Loss (P&L) account and ST3 Returns.
2. Availing incorrect rate of abatement (67% instead of 60%).
3. Short payment of Service Tax for the year 2017-18.
4. Invocation of extended period for demand.

Issue-wise Detailed Analysis:

1. Difference between turnover shown in the P&L account and ST3 Returns:
The Department observed discrepancies between the turnovers reflected in the Appellant's P&L account and the ST3 Returns. The Appellant attributed this to the split of their Erection, Commissioning & Installation Services (ECIS) contracts into material and service values, paying Service Tax only on the service portion. Despite this explanation, the Department found a short declaration of Rs.52,88,505/- leading to a short payment of Service Tax amounting to Rs.7,69,476/- for 2014-15 to 2016-17. The Commissioner (Appeals) upheld this demand but allowed input service credit of Rs.3,10,073/- for 2015-16 against the demand of Rs.3,67,771/-. The remaining years' claims were denied due to lack of evidence. The Tribunal remanded this issue for re-examination, requiring detailed reasoning for any denial of credit.

2. Availing incorrect rate of abatement (67% instead of 60%):
The Appellant availed an abatement of 67% instead of the eligible 60% as per Notification No.26/2012-ST. The Adjudicating Authority and Commissioner (Appeals) held that the correct abatement should be 60% under Rule 2A(ii)(a) of the Service Tax (Determination of Value) Rules, 2006. The Tribunal found this demand of Rs.47,683/- unsustainable as the rule relied upon was not invoked in the SCN, thus setting aside this part of the order.

3. Short payment of Service Tax for the year 2017-18:
The Department identified a short payment of Service Tax amounting to Rs.77,002/- for 2017-18. The Appellant did not dispute this, and the Commissioner (Appeals) upheld the demand. The Tribunal found no reason to interfere with this finding.

4. Invocation of extended period for demand:
The Department invoked the extended period for demand, arguing that the discrepancies were only discovered upon detailed verification. The Appellant contended that the extended period should not apply as the Department was aware of the facts. However, the Commissioner (Appeals) upheld the invocation of the extended period, noting that the Appellant's method of calculation was improper and not disclosed to the Department. The Tribunal agreed, finding no reason to interfere with this decision.

Summary:
The Tribunal upheld the majority of the Commissioner (Appeals)'s order, except for the demand of Rs.47,683/- related to the incorrect abatement rate, which was set aside. The issue of eligibility for input service credit for the years 2014-15, 2016-17, and 2017-18 was remanded for re-examination with detailed reasoning required for any denial. The penalty under Section 78 will be re-determined based on the final confirmed demand. The appeal was partly allowed with these modifications.