2012 (6) TMI 43 - AT - Service Tax

Demands of service tax - Manpower Recruitment or Supply Agency s Service - Assistant Manager stated that they were not registered with the department under the above head and that they were going to take such registration - appellant received ₹ 9,62,98,816/- as gross amount for the taxable service rendered to the sugar factory - burden of service tax paid by the appellants was passed on to the sugar factories through Cenvatable invoices and that credit thereof was taken by the latter. The learned counsel for the appellants has admitted this fact. This factual situation would also go to establish the admitted tax liability of the appellants Extended period of limitation - it was not necessary for the department to invoke the proviso to Section 73(1) ibid for demanding service tax from the assessee for the aforesaid period, which is within the normal period of limitation prescribed under Section 73(1) Penalty under Section 78 of the Finance Act, 1994 Held that - suppression of taxable value of the service cannot be sustained. penalty imposed under Section 78 of the Finance Act set aside Penalty under Section 77 of the Finance Act - assessees misrepresented facts in the ST-3 returns filed by them Held that - Section 77 as it stood during the material period provided for a penalty for those who failed to file return. The provision did not contemplate any penalty on any person for misrepresentation of facts in the return filed by him. Therefore, the proposal raised in the relevant show-cause notices and the decision taken by the learned Commissioner under Section 77 of the Finance Act, 1994 are both unsustainable. The penalties imposed on the appellants under Section 77 set aside. appeals are disposed of

Issues Involved:
1. Demand of Service Tax and Education Cess
2. Invocation of Extended Period of Limitation
3. Admissibility of Additional Evidence
4. Liability of Interest on Service Tax
5. Imposition of Penalties under Sections 77 and 78 of the Finance Act, 1994
6. Definition and Scope of "Commercial Concern"

Detailed Analysis:

1. Demand of Service Tax and Education Cess:
The Commissioner of Central Excise, Aurangabad, confirmed demands of service tax plus education cess against the assessees under Section 73 of the Finance Act, 1994, and imposed penalties under Section 78 of the Act. The demand was under the head "Manpower Recruitment or Supply Agency's Service" as defined under Section 65(105)(k) of the Finance Act, 1994. The Assistant Manager of the appellant-company admitted that the amount received from a sugar factory was taxable and expressed willingness to pay the service tax, which was subsequently paid under protest. The appellants contended that they were not liable to pay service tax as they were not a "commercial concern" and had paid the service tax under protest before the issuance of the show-cause notice.

2. Invocation of Extended Period of Limitation:
The Commissioner invoked the extended period of limitation under the proviso to Section 73(1) of the Finance Act, 1994, for the demand of service tax in two of the three cases. In the third case, the demand was within the normal period of limitation prescribed under Section 73(1) of the Act. The appellants challenged the demand on the ground of time-bar, claiming that the statement of the Assistant Manager was taken under compulsion and was not relevant.

3. Admissibility of Additional Evidence:
The appellants moved Miscellaneous Applications under Rule 23 of the CESTAT (Procedure) Rules to bring on record additional documents, including an invoice and an authority letter. The JCDR opposed these applications, arguing that there was no effective challenge to the demand of service tax and that the appellants had admitted tax liability. The Tribunal found no serious challenge to the demand of service tax in the grounds of appeal and dismissed the Miscellaneous Applications.

4. Liability of Interest on Service Tax:
The Commissioner directed the appellants to pay interest under Section 75 of the Finance Act, 1994. The appellants argued that they were not liable to pay interest as the service tax was paid before the issuance of the show-cause notices. The Tribunal held that interest is payable on any amount of tax belatedly paid, and the Commissioner's decision on this count was sustained.

5. Imposition of Penalties under Sections 77 and 78 of the Finance Act, 1994:
The appellants contended that they had no penal liability as the service tax was paid before the issuance of the show-cause notice. The Tribunal referred to the Supreme Court's decision in Union of India v. Rajasthan Spinning & Weaving Mills and the Bombay High Court's decision in Commissioner of C. Ex. & Cus. v. Shri Ram Aluminium Pvt. Ltd., holding that payment of duty before or after the show-cause notice does not alter penal liability. The penalties under Section 78 were sustained for two appeals but set aside for one appeal where the demand was within the normal period of limitation. The penalties under Section 77 were set aside as the provision did not contemplate penalties for misrepresentation of facts in the return filed.

6. Definition and Scope of "Commercial Concern":
The appellants argued that they were not a "commercial concern" and thus not liable to pay service tax under the head "Manpower Recruitment or Supply Agency's Service" prior to 1-5-2006. The adjudicating authority found that the appellants were engaged in commercial activities and fell within the ambit of "commercial concern." This finding was based on the annual reports of the companies, which recorded profits from commercial activities. The Tribunal upheld this finding as the appellants failed to successfully rebut it.

Conclusion:
The appeals were disposed of with the Tribunal sustaining the demand of service tax and interest, upholding penalties under Section 78 for two appeals, setting aside penalties under Section 78 for one appeal, and setting aside penalties under Section 77 for all appeals.

← Previous Next →