2012 (10) TMI 637 - AT - Service Tax

Demand of service tax, interest and penalty - appellant failed to pay the service tax payable by them alleged that there was variation between the value of services as per the returns filed by the appellant company and the income reported in the balance sheets appellant contended that certain amount of service charges received by them has not been reflected in the Service Tax Returns filed from time to time and that the same was due to software crash Held that - Appellant company has not furnished correct amount of service charges in their returns to the department - claim that the failure to declare the correct amount of service charge was due to crash of the software is not convincing - order of the Commissioner in confirming the service tax demand along with interest and imposing penalty is also justified

Summary

Issues:
1. Challenge to part of the demand of service tax and imposition of penalty by the appellant company.
2. Department's grievance against the reduction of service tax demand by the Commissioner.
3. Failure to allow cenvat credit on input services by the Commissioner.

Analysis:
1. The appellant company contested the demand of service tax and penalty imposed by the Commissioner. The dispute arose when discrepancies were found between the service charges reported in returns and actual income. A show-cause notice was issued, leading to a demand of Rs. 1,98,49,417/- along with interest and penalty under section 78. The appellant admitted under-reporting but claimed the demand was inflated, submitting a detailed worksheet showing a lower liability of Rs. 18,20,057/-. The Commissioner verified the claim through a team of officers and confirmed the demand. The appellant challenged the demand and penalty, but the Tribunal upheld the Commissioner's decision, stating that the appellant failed to declare correct service charges, and the demand was justified.

2. The department appealed against the Commissioner's reduction of the service tax demand. The department argued that the verification process was inadequate, highlighting issues such as quantification of time sales, verification of receivables, and comparison of ledgers. However, the Tribunal found the department's submissions lacking substance, as the verification was conducted by a team of officers, and no evidence of improper verification was presented. Consequently, the department's appeal was rejected.

3. The appellant sought cenvat credit on input services amounting to approximately Rs. 4,00,000/-. The Tribunal noted that the burden of proof for claiming cenvat credit rested with the assessee. The Commissioner had allowed cenvat credit based on satisfactory documents verified by the team of officers. The Tribunal found the appellant's additional claim for cenvat credit unsubstantiated, especially considering the discrepancies in reporting service charges and failure to pay service tax even when collected. Therefore, the Tribunal dismissed the appellant's claim for additional cenvat credit and upheld the Commissioner's decision on service tax demand and penalty.

In conclusion, the Tribunal rejected the appeals by both the appellant company and the department, upholding the Commissioner's order on service tax demand and penalty. The cross-objection was also dismissed as withdrawn.