2014 (5) TMI 918 - AT - Service Tax

Security services - Demand of service tax - determination of quantum of demand - deduction on account of bad debts - Discrepancy in invoices issued - In one set, the service was mentioned as security service while in other invoice, though the amount charged, service receiver, number, amount were same, the service indicated was labour service - Held that - Respondents have not questioned any details given in respect of various invoices and details of Annexure B. We also observe that instead of explaining invoice-wise details, the respondents have chosen to give certain figures year wise or consolidated for all the years. We also observe from para 5.2 above that the quantums given before original authority and first appellate authority varies widely. Thus the figures given by the respondents do not appear to inspire any confidence. In any case, service tax is collected invoice-wise and is required to be deposited on the basis of total collection in a month/quarter. We also observe that in Annexure B to the show cause notice, total amount of security services as also the service tax collected has been shown. Both the figures are based upon the respondents own invoices issued to various clients and recovered during the visit of the Central Excise officials. In respect of the service tax amount charged and collected, we do not see any reason why the said amount should not be paid to the Government account - Commissioner (Appeals) has fallen into error in taking certain figures (year wise or consolidated for the total period) instead of examining invoice wise/transaction wise details. - Duty, interest and penalties u/s 76 & 78 are confirmed against assessee - Decided in favour of Revenue. Valuation - Deduction on account of bad debts - Held that - It is not clear how much of these bad debts were pertaining to taxable service and how much were pertaining to labour service/non-taxable service. It is also not very clear that these bad debts were pertaining to which period i.e. for the period prior to 16.10.1998 or the later. We, therefore, direct the respondents to give the details of the bad debts invoice-wise, i.e the respondents should inform the authorities invoice-wise (as detailed in Annexure B to the show cause notice) wherever recovery could not be made by them till date - matter remanded back. No hesitation in holding that extended period of limitation is applicable in this case and penalties both under Sections 76 and 78 are imposable. Penalty under Section 77 is also imposable.

Summary

Issues Involved:

1. Non-deposit of appropriate service tax by respondents for security services.
2. Issuance of parallel invoices for security and labor services.
3. Claim of exemption under Notification No. 56/98-ST.
4. Claims of providing labor services, dues collection services, and bad debts.
5. Variations in figures submitted by respondents before different authorities.
6. Extended period of limitation and imposition of penalties.

Summary of Judgment:

1. Non-deposit of Appropriate Service Tax:

The investigation revealed that the respondents were issuing invoices for security services, some of which included service tax while others did not. It was found that the service tax deposited was only a fraction of the amount collected. For instance, the first respondent deposited Rs. 3,29,513/- against Rs. 15,64,272/- collected, and the second respondent deposited Rs. 28,907/- against Rs. 7,39,696/- collected. The Tribunal directed the respondents to pay the balance amount within 30 days and provide details of bad debts invoice-wise.

2. Issuance of Parallel Invoices:

The investigation found parallel invoices where security services were mentioned in one set, and labor services in another, despite the services provided being security services. The proprietor admitted to issuing labor service invoices upon client requests. The Tribunal directed the respondents to produce agreements and confirmation letters from clients to substantiate claims of labor services.

3. Claim of Exemption under Notification No. 56/98-ST:

The respondents claimed exemption for security services related to movable properties under Notification No. 56/98-ST. The Tribunal noted that the notification applies only to safe deposit vaults and not to other movable properties. The respondents were directed to provide invoice-wise details and supporting agreements to the original authority for verification.

4. Claims of Providing Labor Services, Dues Collection Services, and Bad Debts:

The respondents claimed they provided labor services and dues collection services, which were not taxable. They also claimed bad debts, arguing that service tax is payable only on amounts received. The Tribunal found discrepancies in figures submitted before different authorities and directed the respondents to provide detailed agreements and confirmation letters from clients. The original authority was instructed to verify these claims and adjust the service tax liability accordingly.

5. Variations in Figures Submitted by Respondents:

The Tribunal observed significant variations in figures submitted by the respondents before the original and first appellate authorities. For example, labor services were reported as Rs. 29,39,754/- before the original authority and Rs. 2,08,99,109/- before the first appellate authority. The Tribunal found these figures unsubstantiated and directed the respondents to provide detailed, invoice-wise information.

6. Extended Period of Limitation and Imposition of Penalties:

The Tribunal upheld the extended period of limitation and imposed penalties under Sections 76, 77, and 78 of the Finance Act. The Commissioner (Appeals) had erred in taking consolidated figures instead of examining invoice-wise details. The Tribunal emphasized the need for detailed examination of each transaction, as highlighted in the Supreme Court case of Tata Engineering and Locomotive Co. Ltd. vs. Assistant Commissioner of Commercial Taxes.

Conclusion:

The Tribunal disposed of the appeals by directing the respondents to pay the balance service tax, provide detailed information on bad debts, and substantiate claims of labor services and exemptions with supporting documents. The original authority was instructed to verify these claims and adjust the service tax liability accordingly. Penalties under Sections 76, 77, and 78 were upheld.