2016 (5) TMI 449 - AT - Service Tax

Demand of Service tax - Deposits made by the appellant s customers, in anticipation of the services to be received by them throughout the year - Appellant submitted that the deposits/advances made by the customers have fully discharged the service tax on the same either in the year of deposit or in the subsequent year, thus not calling for any further service tax. Also the part of the said demand is on the account of interest and to the extent of around ₹ 28 lakhs, the said interest stands confirmed on the ground that in terms of section 67 of the Finance Act any advance received from the customers for the services to be provided are required to be discharged service tax liability at that point of time only. Held that - in respect of interest we are of the view that in terms of provision of Section 67 the service tax liability was required to be discharged at the time of the receipt of advances itself. The delayed discharged of such service tax as rightly, at this prima facie stage, accrued as interest liability against the appellant. In as much as, the appellant has not pleaded any financial hardship and we have observed against the assessee on the said legal issue for payment of interest the applicant is directed to deposit an amount of ₹ 60 lakhs towards the said liability within a period of six weeks from today. Demand of Service tax of ₹ 2.34 crores - Appellant was paying service tax as per the agreement under the category of renting of immovable property w.e.f. 01.06.2007 but the Revenue took the view that prior to 01.06.2007 the said service tax would fall under the category of franchisee services and raised the demand by invoking the longer period of limitation - Held that - the appellant was paying service tax under the said agreement in respect of the said agreement. The appellant s contention is noted in as much as the entire facts were before the revenue and the payment of service tax under the category of renting of immovable property was being accepted by the Revenue without any objection, no malafide can be attributed to the appellant. Otherwise also it is found that the appellant is a central Government undertaking in which case it cannot be said at this prima facie stage that they were indulging in evasion of duty by suppressing any facts or by misstatement, with an intention to evade payment of duty. On this ground also prima facie case is found in favour of the appellant and accordingly dispense with the condition of pre deposit of the said amount. Demand of Service tax - Manpower recruitment or support agency services - Held that - the said demands can be dealt in detail at the time of final disposal of the appeal. The appellant is directed to deposit an amount of ₹ 60 lakhs within a period of six weeks subject to such pre deposits and balance amount of duty and interest and penalty shall remain waived and its recovery stayed during the pendency of the appeal.

Summary

Issues:
1. Confirmation of service tax demand of around 5.17 crores against the applicant, along with interest and penalty.
2. Discrepancy between ST-3 return and balance sheet income, leading to a demand of 1.12 crores.
3. Demand confirmation of 1.65 crores in relation to customer deposits and interest imposition.
4. Dispute over taxing remaining customer deposits at year-end under cargo handling category.
5. Loss of interest to Revenue due to delayed service tax discharge by the appellant.
6. Direction to deposit 60 lakhs towards interest liability within six weeks.
7. Demand of 2.34 crores due to service tax category dispute pre and post 01.06.2007.
8. Prima facie case in favor of the appellant regarding evasion of duty allegations.
9. Confirmation of smaller demands related to providing employees as support agency services.

Analysis:

1. The judgment confirms a service tax demand of approximately 5.17 crores against the applicant, along with interest and penalty. Both sides were heard, and the service tax was confirmed based on various grounds, noting the applicant's registered services under different categories.

2. A demand of 1.12 crores was confirmed due to discrepancies between the ST-3 return and balance sheet income. The appellant tried to explain the differences arising from non-taxable services or exemptions, with a prima facie case found in favor of the assessee at this stage.

3. Regarding a demand of 1.65 crores related to customer deposits, the appellant explained their deposit system and disputed the revenue's taxation approach at year-end. The judgment acknowledged the interest liability due to delayed service tax discharge, directing the appellant to deposit 60 lakhs towards this liability within six weeks.

4. The dispute over taxing remaining customer deposits under the cargo handling category at year-end was addressed, with the tribunal agreeing that the deposits had discharged service tax either in the year of deposit or subsequently.

5. The judgment highlighted the loss of interest to the Revenue due to delayed service tax discharge by the appellant, emphasizing the importance of timely tax liability discharge.

6. In the case of a demand of 2.34 crores related to service tax category disputes pre and post 01.06.2007, the tribunal considered the appellant's contentions and prima facie found in favor of the appellant, dispensing with the pre-deposit condition.

7. Smaller demands related to providing employees as support agency services were confirmed, with directions for the appellant to deposit 60 lakhs within six weeks, subject to pre-deposits, while waiving the balance amount of duty, interest, and penalty during the appeal's pendency.