2002 (12) TMI 2 - AT - Service Tax

Summary

Issues: Service tax non-payment on services provided to customers.

Analysis:
The appeal before the Appellate Tribunal CEGAT, Kolkata pertained to the alleged non-payment of service tax by the appellants on services provided to their customers. The period in dispute was from July 1994 to September 1998. The demand for service tax was based on a verification report of the Superintendent, indicating an amount of Rs. 15.51 crores, out of which approximately Rs. 8.31 crores belonged to cancelled bills and Rs. 7.20 crores was due to un-realized amounts from customers. The appellant's advocate argued that no service tax should be paid on cancelled bills as they were not realized, and tax liability only arises upon actual realization of consideration for services provided. Reference was made to Section 65(16) of the Finance Act, 1994, defining "taxable service," and Section 67 regarding the value of taxable services in relation to telephone connections provided to subscribers.

The advocate further highlighted that prior to August 1, 1998, the liability for service tax was limited to the amount "received" by the service provider, as per the Finance (No. 2) Act, 1998. Citing a Delhi-II Commissionerate's Trade Notice, it was argued that service tax is payable only on the value of taxable services relied upon during the period. Reference was also made to a Supreme Court decision emphasizing that service tax is leviable only on amounts actually received by the service provider. Regarding the tax demanded for July 1994, it was contended that no liability arose as the Finance Act, 1994 related to service tax was received after July 1, 1994, and there was no scope for levying service tax on rental in bills issued in July 1994.

Moreover, the advocate argued against the levy of service tax on surcharge collected for delayed payment on telephone bills, referring to a Board's Service Tax Circular. The imposition of personal penalty on the appellants and the confirmation of interest were also challenged. However, it was acknowledged that these issues were not raised before the Commissioner, warranting a remand of the matter to the original adjudicating authority for a fresh decision after considering the appellants' pleas. The appellants were granted an opportunity to present their case before the Commissioner and raise the aforementioned arguments. The appeal was disposed of accordingly.