2025 (2) TMI 1058 - AT - Service Tax

Non-payment of service tax - appellant had collected amount as service tax but did not deposit the same with the exchequer - failure to properly verify the facts - violation of principles of natural justice - HELD THAT - The entire demand is based on the information available in profit and loss account and receipts as per Form 26AS. The nature of service rendered by the appellant and the quantum of amount received for rendering a particular service are absent in the proceedings. The value of service is to be determined in accordance with Section 67 and Service Tax (Determination of Value) Rules 2006 and the same is absent in the entire proceedings. The charging Section 66B of Finance Act 1994 provides for levy of service tax at specific rate on the value of service. Section 67 of Finance Act 1994 provides that where service tax is chargeable on any taxable service with reference to its value then such value shall be the consideration in money charged by the service provider. Therefore it is primarily important to determine the value on which service tax shall be levied on a specific percentage and such value should be value of taxable service. Clause (44) of Section 65B of Finance Act 1994 has provided for definition of service and it has elaborately dealt with a list of activities which shall not be included in such definition. Further Section 66D of Finance Act 1994 has provided for negative list of services where activities covered by such negative list do not qualify to be taxable service. Therefore it is clear that while determining the value of taxable service under Section 67 ibid such aspect as to the activities which are covered by negative list and activities which are mentioned in the definition of service as those which are not covered by the said definition become important. Therefore for arriving at the amount of service tax not paid or not levied arriving at correct value of taxable service which has not suffered service tax needs to be determined - Further there are services where entire or part of service tax is to be paid by service recipient. Further there is a mega notification which provided conditional exemptions to various activities from payment of service tax. In addition there are Service Tax (Determination of Value) Rules 2006 which provide abatement to services such as works contract service. Unless all these aspects of Service Tax law are taken into consideration the allegations of service tax not paid or not levied are not sustainable - No such exercise was done in this case. Conclusion - The allegations of service tax non-payment or underpayment were not sustainable due to the lack of a comprehensive assessment of these factors. The matter requires detailed verification on all aspects. The impugned order set aside - appeal allowed.

Summary

The case involves an appeal before the Appellate Tribunal regarding a service tax demand raised against the appellant for the period from July 2012 to March 2016, along with additional demands for the period from 2011-12 to 2012-13. The appellant, engaged in works contract service and security service, contested the demand on various grounds, including the lack of identification of services rendered, absence of documentary evidence, improper assessment based on Form 26AS and balance sheet figures, denial of abatement under Service Tax (Determination of Value) Rules, 2006, and refusal to allow cenvat credit. The original authority confirmed the demand and imposed penalties, leading to the appeal.Issues Presented and Considered:1. Whether the service tax demand was justified based on the information available in Form 26AS and balance sheet figures.2. Whether the appellant was denied procedural fairness and natural justice in the proceedings.3. Whether the denial of cenvat credit was in accordance with the law.Issue-Wise Detailed Analysis:- The Tribunal emphasized the importance of determining the value of taxable services in accordance with Section 67 of the Finance Act, 1994, and the Service Tax (Determination of Value) Rules, 2006. It noted the absence of proper identification of services rendered and the quantum of amounts received, rendering the demand unsustainable.- The Tribunal referred to precedents such as Toshika International Ltd. and Deltax Enterprises cases to support its reasoning that the burden of proving taxability rests with the authority issuing the show cause notice, and the demand cannot be solely based on income tax assessments or balance sheet figures without proper evidence of taxable services.- The Tribunal highlighted the need to consider various aspects of the Service Tax law, such as the negative list of services, exemptions, abatements, and the role of service recipients in paying service tax. It concluded that the allegations of service tax non-payment or underpayment were not sustainable due to the lack of a comprehensive assessment of these factors.Significant Holdings:The Tribunal set aside the impugned order and allowed the appeal, providing consequential relief to the appellant. It emphasized the importance of correctly determining the value of taxable services and ensuring compliance with the provisions of the Finance Act, 1994 and relevant rules and notifications.Overall, the Tribunal's decision focused on the proper application of the legal framework governing service tax assessments, highlighting the necessity of thorough analysis and evidence-based determinations to support tax demands. The judgment underscored the principles of natural justice and procedural fairness in tax proceedings, ultimately leading to the favorable outcome for the appellant in this case.