2013 (4) TMI 322 - AT - Service Tax

Transaction between the associated enterprises - demand confirmed constituent to amendment dt. 10/05/2008 to Section 67 of the Finance Act where it has been made mandatory that service tax in respect of transaction between associated enterprises should be paid based on debiting the amount to the account of the associated enterprises irrespective of whether the amount was received or not - Held that - Regarding the demand of Rs.49.7 cores merit in the submission that the demand should have been restricted to the amount actually realized and not on the billed amounts. The appellant has not made such a claim before the Commissioner. However for the purpose of stay this submission into account has to be taken into consideration. Regarding the demand of Rs.13 crores (approximately) in respect of transaction between the associated enterprises and the appellant appellant has a case in their favour in the light of the decision in the case of Sify Technologies Ltd. (2012 (5) TMI 376 - CESTAT CHENNAI). Thus a sum of Rs.50 lakhs stands paid and appropriated in the impugned order. Thus appellant directed to deposit a further sum of Rs.2 crores within six weeks from today and report compliance to the Assistant Registrar on 25/09/2012 and Assistant Registrar to report to the Bench on 03/10/2012.

Summary

Issues:
1. Stay petition seeking waiver of predeposit of service tax amount.
2. Classification of service tax under different categories.
3. Demand of service tax on billed amounts not realized.
4. Transaction between associated enterprises and payment of service tax.
5. Veracity of figures regarding amount received during the relevant period.

Analysis:
1. The appellant sought waiver of predeposit of service tax amounting to Rs.62,77,31,057/- along with interest and penalty under Section 78. The appellant argued that part of the work under 10 contracts commenced before 01/06/2007 was completed, and service tax was paid without availing CENVAT credit. The demand by the Department was on the total billed amount, not the realized amount, which the appellant contended was not legal. The appellant also highlighted that if the Department's contention on the classification of the service was accepted, the differential duty payable would be significantly lower.

2. The demand of Rs.12,97,38,329/- related to transactions between the appellant and associated enterprises. The appellant argued that the demand was not correct as per the amendment to Section 67 of the Finance Act, and they had since received a substantial amount from the associated firms/companies. The Tribunal found merit in the appellant's case, considering the decision in a similar case involving Sify Technologies Ltd.

3. The Commissioner raised concerns about the veracity of the figures provided by the appellant regarding the amount received during the relevant period. The Tribunal acknowledged that the appellant had not made certain claims before the Commissioner but considered them for the purpose of the stay petition. The Tribunal found merit in the submission that the demand should have been restricted to the amount actually realized, not the billed amounts.

4. The Tribunal directed the appellant to deposit a further sum of Rs.2 crores within a specified timeframe and report compliance. Subject to this deposit, there would be a waiver of pre-deposit of the balance of dues as per the impugned order, with a stay of recovery until the appeal was disposed of. Additionally, a sum of Rs.50 lakhs already paid and appropriated in the impugned order was noted.

This comprehensive analysis of the judgment addresses the issues raised in the case, the arguments presented by both sides, and the Tribunal's decision regarding the waiver of predeposit and stay of recovery of the service tax dues.