2016 (2) TMI 728 - AT - Service Tax

Levy of penalty for delayed registration - requirement to seek registration starts from crossing of turnover limit as per accrual basis or receipt basis - small service provider being chartered accountant - Notification No.6/2005-Service Tax dated 01.03.2005 - Held that - receipts for the purposes of Notification, have to be taken as aggregate value of payment receipts consecutively in any financial year. In view of this admitted fact that there is no receipt during the financial year 2004-2005 and the aggregate receipt in the financial year, 2005-06, is below the threshold limit - order set aside - Decided in favor of assessee.

Summary

Issues:
- Appeal against Order-in-Appeal No. 90/ST/Alld/2010
- Taxability of services provided by a Chartered Accountant Firm
- Compliance with Service Tax Rules
- Application for registration with the Central Excise Department
- Threshold exemption limit for service tax
- Imposition of penalties under Sections 76, 77, and 78

Analysis:
1. Appeal against Order-in-Appeal No. 90/ST/Alld/2010:
The Appellant, a Chartered Accountant Firm, contested a show-cause notice regarding the taxability of services provided during the financial year 2004-2005. The Appellant raised a bill including service tax, but the payment was received after the exemption from service tax was granted. The Revenue alleged non-compliance with registration requirements and non-deposit of service tax, leading to the imposition of penalties under Sections 76, 77, and 78.

2. Taxability of services provided by a Chartered Accountant Firm:
The Appellant argued that they follow a cash system and recognize income on a receipt basis. They contended that no payments were received against the bill until after the service tax exemption came into effect. The Appellant also refunded the service tax to the service receiver and provided evidence through Ledger A/c. However, the Revenue confirmed the proposed tax and penalties, which was upheld in the Order-in-Original and the Appeal before the ld. Commissioner.

3. Compliance with Service Tax Rules:
The show-cause notice highlighted the failure of the Appellant to apply for registration with the Central Excise Department within the stipulated time frame. The Revenue pointed out that the bill raised did not contain the Service Tax Registration Number, a requirement under the Service Tax Rules, which resulted in the non-deposit of service tax collected.

4. Application for registration with the Central Excise Department:
The Appellant applied for registration after the prescribed time limit, leading to a contention by the Revenue that the Appellant did not comply with the registration requirements within the specified period as per Section 69 read with Rule 4 of the Service Tax Rules, 1994.

5. Threshold exemption limit for service tax:
The Tribunal examined Notification No.6/2005-Service Tax dated 01.03.2005, which clarified the aggregate value of payment receipts consecutively in any financial year for the purpose of exemption. As there were no receipts during the financial year 2004-2005 and the aggregate receipts in the subsequent year were below the threshold limit, the Tribunal allowed the appeal and set aside the impugned order.

6. Imposition of penalties under Sections 76, 77, and 78:
The penalties imposed under Sections 76, 77, and 78 were a result of the alleged non-compliance with registration requirements, non-deposit of service tax, and other violations. However, the Tribunal's decision to set aside the impugned order also nullified the imposition of these penalties, providing the Appellant with consequential benefits in accordance with the law.