2017 (5) TMI 57 - AT - Service Tax

Evasion of service tax - security service and manpower recruitment and supply service - willful evasion - difference of turnover as per balance sheet and as per their ST-3 Returns - Amount shown in TDS certificates / 26AS returns - reconciliation between bank account and books of account - Held that - the books of accounts maintained by the appellant and the audited financial statements produced before the authority below have not been rejected. - The explanation(s) given at the time of investigations and averments made in reply to SCN, were not found untrue. In this view of the matter we find that the demand raised is vague, having no proper basis. In this view of the matter we hold that the SCN to be untenable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service Tax demand for the period April 2006 to September 2010.
2. Allegations of evasion and suppression of taxable services.
3. Contravention of provisions of the Act and Rules.
4. Appellant's explanation regarding turnover discrepancies.
5. Adjudication of the Show Cause Notice (SCN).
6. Confirmation of demand and penalties by the Commissioner.
7. Appellant's appeal challenging the impugned order.
8. Vagueness of the show cause notice and lack of evidence by the Revenue.
9. Failure to investigate the taxable nature of cash receipts.
10. Benefit of Cenvat credit and entitlement to claimed credits.

Analysis:
The judgment involves an appeal against a Service Tax demand of ?2,05,17,129 for the period April 2006 to September 2010. The appellant, a security services provider, was accused of evading tax by suppressing taxable services. A search operation revealed discrepancies in turnover, with the appellant justifying the differences in turnover figures. The appellant contested the Show Cause Notice (SCN) alleging vagueness and lack of correlation with their audited accounts. The appellant argued that the Revenue failed to investigate the taxable nature of cash receipts and contra transactions in bank accounts. The Tribunal found the demand vague and baseless, setting aside the impugned order. The appellant was granted the benefit of Cenvat credit and entitlement to claimed credits, allowing the appeal with consequential benefits.

The Tribunal criticized the Commissioner for not investigating the taxable nature of cash receipts and contra transactions in the appellant's bank accounts. Despite maintaining multiple bank accounts and providing explanations during investigations, the demand lacked a proper basis. The Tribunal held the show cause notice to be untenable and set aside the impugned order. The appellant was granted the benefit of Cenvat credit and entitlement to claimed credits, ensuring a fair outcome in the appeal process.

The appellant's defense centered on the vagueness of the show cause notice and lack of evidence by the Revenue regarding the taxable nature of cash receipts. The appellant's meticulous record-keeping and explanations were crucial in challenging the demand. The Tribunal emphasized the importance of proper investigation and evidence in tax-related cases, highlighting the need for a clear basis for demands and penalties. Ultimately, the Tribunal ruled in favor of the appellant, providing relief from the unjustified demand and penalties imposed by the Commissioner.

In conclusion, the judgment addressed various issues related to Service Tax demands, evasion allegations, and the importance of thorough investigations in tax matters. The Tribunal's decision to set aside the impugned order and grant the appellant the benefit of Cenvat credit demonstrates a fair and just approach to resolving tax disputes. The case underscores the significance of maintaining accurate records, providing detailed explanations, and ensuring proper scrutiny of evidence in tax-related legal proceedings.