2024 (9) TMI 1547 - AT - Service Tax

Failure to discharge due Service Tax liability - Late payment fees - penalties - extended period of limitation. HELD THAT - Undisputedly appellant has paid service tax on the entire value of the service provided under the category of cleaning services. In respect of the remaining services they have paid service tax on the margin money i.e the value of the service provided after deducting the expenses made by them towards the provision of such service. This fact has been reflected in the profit and loss account of the appellant. Commissioner (Appeal) has siught to disallow the expenses incurred for provision of this service by stating that the appellant has not produced any documentary evidence to the effect that they have not received any amount over and above the value shown as receipt for provision of this service. During the period of dispute appellant has incurred the expenditure towards the provision of services other than the cleaning services. However these expenses could not be called as amounts received as Pure Agent . The value of the taxable service as has been rightly held by the first appellate authority shall be the gross amount received for the provision of service as per Section 67 of the Finance Act, 1994. Hence claiming deduction of these amounts from the gross amount received could not be a permissible deduction as per the Section 67 or Rules made there under. These cannot be said to be reimbursable expense also as claimed by the appellant. Hence on merits there are not much force in the submissions made by the appellant. Time Limitation - HELD THAT - In the impugned order or order in original/ show cause notice, nothing has been stated as to how the mere fact of not disclosure of certain amounts in the ST-3 return would have constituted suppression with the intention to evade payment of service tax - no reason put forth in the show cause notice or the orders of lower authorities for holding that the appellant has suppressed the facts with intent to evade payment of service tax - there are no merits in the impugned order to the extent it uphold the demand by invoking extended period of limitation. As entire demand has been made by invoking the extended period of limitation, the same cannot be upheld. Late payment fees - HELD THAT - It is found that appellant had filed the ST-3 return after delay of about 65 days for which late payment fees has been imposed. The fact of delay in filing the ST-3 return has not be countered by the appellant. Imposition of late payment fees is a legal obligation and has no relation with the evasion of tax - the demand made towards the late payment fees as prescribed by statute is upheld. The appeal is partly allowed to the extent of setting aside the demand of service tax, interest and penalties imposed under Section 78 on the ground of limitation. However, the penalty imposed for late filing of return is upheld.

Issues Involved:
1. Demand of Service Tax
2. Interest on Service Tax
3. Imposition of Penalty under Section 78
4. Imposition of Late Fee for delayed filing of ST-3 returns
5. Invocation of Extended Period of Limitation

Issue-wise Detailed Analysis:

1. Demand of Service Tax:
The appellant, registered under Service Tax, provided manpower supply and recruitment services. The Income Tax Department revealed that the appellant received Rs.2,44,74,682/- for the period 2014-15 but declared only Rs.90,72,862/- as assessable value, paying service tax of Rs.11,21,389/-. Consequently, a shortfall of Rs.19,03,682/- was identified. The appellant argued that the amount received as reimbursement should not be treated as taxable service. However, the tribunal found no documentary evidence supporting the appellant's claim that they acted as a pure agent. The tribunal upheld that the entire amount received for manpower supply services forms part of the taxable value under Section 67 of the Finance Act, 1994.

2. Interest on Service Tax:
The adjudicating authority confirmed the demand for interest on the unpaid service tax under Section 75 of the Finance Act, 1994. The tribunal agreed with this, stating that interest is mandatory for delayed payment of service tax.

3. Imposition of Penalty under Section 78:
A penalty equal to the service tax shortfall was imposed under Section 78 of the Finance Act, 1994 for suppressing facts with intent to evade tax. The tribunal, however, found no evidence of suppression with intent to evade payment of service tax. The show cause notice and orders did not substantiate how the non-disclosure of certain amounts in the ST-3 return constituted suppression. Consequently, the tribunal set aside the penalty imposed under Section 78.

4. Imposition of Late Fee for delayed filing of ST-3 returns:
The appellant delayed filing their ST-3 return by about 65 days, resulting in a late fee of Rs.4,500/- under Section 70 of the Finance Act, 1994 read with Rule 7C of the Service Tax Rules, 1994. The tribunal upheld this late fee, noting that the delay in filing was not contested by the appellant and that the imposition of late fees is a statutory obligation unrelated to tax evasion.

5. Invocation of Extended Period of Limitation:
The extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994 was invoked due to the non-disclosure of actual taxable value. The tribunal, however, found that the appellant had declared all relevant facts in their Balance Sheet/Profit and Loss Account. Citing similar cases where demands based on Form-26AS from the Income Tax Department were not upheld, the tribunal concluded that the invocation of the extended period of limitation was unjustified. Consequently, the demand for service tax, interest, and penalties was set aside on the grounds of limitation.

Conclusion:
The appeal was partly allowed. The tribunal set aside the demand for service tax, interest, and penalties imposed under Section 78 due to the unjustified invocation of the extended period of limitation. However, the late fee for delayed filing of the ST-3 return was upheld.

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