2024 (11) TMI 1133 - AT - Service Tax

Service Tax demand - Demand confirmed on the basis of the figures which are taken from the financial statement - assessee has claimed that they have paid before issue of the Notice - HELD THAT - Assessee has claimed that they have paid before issue of the Notice and to this effect, they have submitted evidence in respect of the payment made. As perused the said documents and found that this amount has been paid by the assessee before issuance of the Show Cause Notice. Annexures to the Show Cause Notice confirm this payment by the assessee before issue of the Show Cause Notice. We find that the ld. adjudicating authority has not taken cognizance of the same and not appropriated the same in the impugned order. Since the amount has already been paid along with interest before issue of the Notice, the same may be appropriated against the demand confirmed. Also, no penalty imposable on this amount confirmed, as this amount has been paid by the assessee before issuance of the Show Cause Notice. Assessee has imported services on which Service Tax has been demanded and confirmed on reverse charge basis - We observe that this issue has been raised by the audit during the course of audit conducted on the assessee by the Audit Branch of the Service Tax Commissionerate. A perusal of the Audit Report raised by the audit, reveals that the audit team has perused the foreign remittances made by the appellant during the Financial Years 2008-09, 2009-10, 2010-11, 2011-12 and 2012-13 and after perusal, has arrived at a conclusion that the Service Tax liability in respect of the Financial Years 2008-09, 2009-10, 2010-11 and 2011-12 are not liable to be taxed at the hands of the assessee. Audit team has raised the Service Tax demand on these foreign remittances only in respect of the Financial Year 2012-13 - We observe that the Show Cause Notice was issued to the assessee for the Financial Years 2008-09 to 2012-13, ignoring the findings of the audit team. In view of the findings of the audit team as well as the submission made by the assessee before us, we find that the demand of Service Tax for the period from 2008-09 to 2011-12 is not sustainable on merits. We also observe that the demand has been confirmed on the basis of the figures which are taken from the financial statement of Asian Hotels Ltd and not from the assessee. Also, we observe that the assessee has not suppressed any information from the department. Accordingly, we hold that the demand for the Financial Years 2008-09, 2009-10, 2010-11 and 2011-12 are barred by limitation. Demand of Service Tax for the Financial Years 2009-10, 2010-11 and 2011 -12 - As we find that the assessee has contended that all the figures were taken from the financial statement which were related to the taxable services on which tax is not payable on the basis of mercantile system of taxation; the RCM is applicable on the payment basis. We observe that this claim of the assessee needs to be verified by the adjudicating authority as there is no finding on this aspect by the adjudicating authority in the impugned order. Accordingly, we remand this issue back to the adjudicating authority for the purpose of ascertaining the correctness of the claim made by the assessee in this regard and for passing an appropriate order in respect of the demand. Reversal of irregularly availed credit - As we observe that the assessee has already reversed the Service Tax credit amounting to Rs.17,00,404/- even before issuance of the Show Cause Notice, along with interest. The assessee submitted evidence with respect to this payment. we find that the ld. adjudicating authority has not taken cognizance of the same and not appropriated the same in the impugned order. Since the amount of Rs.17,00,404/- has already been paid along with interest before issue of the Notice, which is evident from the Annexure to the Show Cause Notice. Accordingly, we observe that the said payment may be appropriated against the demand confirmed. Also, no penalty imposable on this amount confirmed, as this amount has been paid by the assessee before issuance of the Show Cause Notice. Balance irregular credit availed amount - The assessee have submitted that this is related to Service Tax credit availed in respect of transportation of their employees after office hours and hence it falls within the ambit of 'input service', which they are entitled to avail. The assessee submitted the invoices raised by the transporter and submitted that it is categorically mentioned in the invoices that the service is related to transportation of some of their employees after office hours, which is related to their business activity of running the hotel. On a perusal of the documents submitted by the assessee, we find that the assessee have provided vehicles to the employees for dropping them after office work. Thus, the transportation service was used in connection with the rendering of the taxable services by the assessee. Accordingly, we hold that this service is eligible as an input service to the assessee and the assessee are eligible to avail CENVAT Credit in respect of these transportation services availed by them. Accordingly, the demand of irregular credit is not sustainable and hence we set aside the same. We pass the following order in respect of the appeal filed by the assessee (i) In respect of the demand of Rs.50,19,379/-, the demands pertaining to the Financial Years 2008-09, 2009-10, 2010-11 and 2011-12 are set aside, on the ground of limitation. Regarding the demand of Rs.11,57,196/- out of the above demand pertaining to the Financial Year 2012-13, the issue is remanded back to the adjudicating authority for verification of the claim made by the assessee as discussed. (ii) Regarding the irregularly availed credit of Rs.18,17,206/-, we hold that the assessee is eligible for the credit of Rs.1,16,802/- pertaining to the transportation of their employees. As the remaining amount of Rs.17,00,404/-, along with interest amounting to Rs.6,16,725/-, was paid before issue of the Show Cause Notice, we appropriate this amount. No penalty is imposable on the appellant on this amount as this was paid before issue of the Show Cause Notice. Appeal filed by the Revenue, since the amount involved in the said appeal is Rs.59,94,305/- which is below the threshold limit prescribed for filing appeal before the CESTAT as per the revised National Litigation Policy Circular for monetary limits dated 06.08.2024, the same is dismissed as withdrawn as per the National Litigation Policy.

Issues Involved:

1. Demand of Service Tax and CENVAT Credit.
2. Appropriation of pre-paid Service Tax and penalty.
3. Bar of limitation on Service Tax demands.
4. Eligibility of CENVAT Credit on transportation services.
5. Compliance with National Litigation Policy for Revenue's appeal.

Issue-wise Detailed Analysis:

1. Demand of Service Tax and CENVAT Credit:

The assessee was issued a Show Cause Notice demanding Service Tax of Rs.1,12,00,470/- for the period from April 2008 to March 2013 and proposed recovery of irregularly availed CENVAT Credit amounting to Rs.18,28,529/-. The adjudicating authority confirmed a demand of Rs.50,19,379/- and dropped the remaining demand. The assessee contended that the demand of Rs.46,82,053/- was wrongly calculated based on financial statements not related to them and argued that the figures used were related to reimbursements or salary, not taxable services. The assessee also claimed that the demand for certain years was barred by limitation.

2. Appropriation of Pre-paid Service Tax and Penalty:

The assessee claimed to have paid Rs.3,37,326/- before the issuance of the Show Cause Notice, which was not appropriated in the impugned order. The tribunal acknowledged this payment and directed its appropriation against the confirmed demand, stating no penalty was imposable on this amount as it was paid before the Notice.

3. Bar of Limitation on Service Tax Demands:

The assessee argued that the demands for the Financial Years 2009-10, 2010-11, and 2011-12 were barred by limitation since the audit objection was raised only for 2012-13. The tribunal found the demand for these years unsustainable on merits and barred by limitation, as the audit team had not raised objections for these years.

4. Eligibility of CENVAT Credit on Transportation Services:

The assessee reversed Rs.17,00,404/- of irregularly availed credit before the Notice, which was not appropriated in the order. The tribunal directed its appropriation and held no penalty was imposable. Regarding Rs.1,16,802/-, the tribunal found the credit related to transportation of employees after office hours qualified as 'input service,' allowing the assessee to avail the credit, thus setting aside the demand.

5. Compliance with National Litigation Policy for Revenue's Appeal:

The Revenue's appeal against the dropping of Rs.59,94,305/- was dismissed as withdrawn due to the amount being below the threshold prescribed by the National Litigation Policy, which fixed the limit at Rs.60,00,000/-.

Conclusion:

The tribunal set aside the demands for the Financial Years 2008-09 to 2011-12 on the ground of limitation. The demand for 2012-13 was remanded for verification. The assessee's entitlement to CENVAT Credit on transportation services was upheld. The Revenue's appeal was dismissed as per the National Litigation Policy. The appeals were disposed of accordingly, with the cross-objection by the assessee also disposed of.

← Previous Next →