2018 (1) TMI 1053 - AT - Service Tax

Non-payment of service tax - extended period of limitation - Architect services - It was alleged that appellant was charging and collecting service tax from the clients but had not remitted the same to the department - Held that - there definitely was lack of clarity on the taxability of the impugned services during the period of dispute - penalty cannot be imposed. In addition to the directions for reworking of the demand of Annexure-II & III, as ordered by the Commissioner (Appeals), the de novo adjudicating authority will also look into other contentions of the appellant that they have in fact not collected any tax from their clients that as per the settled law, there cannot be any service tax liability in respect of tax already discharged by the sub-contractor and also in respect of reimbursable expenses. Appeal allowed by way of remand.

Summary

Issues:
1. Applicability of service tax on Architect Services.
2. Imposition of penalties under Section 76, 77 & 78 of the Finance Act.
3. Disputed period of tax liability.
4. Lack of clarity on taxability of services.
5. Allegation of not remitting collected service tax.
6. Reconciliation of demand for service tax.
7. Discrepancies in accounting and technical aspects.
8. Non-filing of Income Tax returns.
9. Collection of service tax from clients.
10. Reimbursable expenses and tax liability.
11. Discharge of service tax by sub-contractor.
12. Imposition of penalty.

Analysis:

1. The case involved a dispute regarding the applicability of service tax on Architect Services. The appellant, a proprietor of an architectural firm, was alleged to have collected service tax from clients but failed to remit it to the department. The issue of taxability of such services was settled by the Supreme Court in 2007, creating a lack of clarity during the disputed period of 2001-2006.

2. The lower authorities imposed penalties under Section 76, 77 & 78 of the Finance Act. However, the Tribunal set aside these penalties, considering the lack of clarity on taxability during the relevant period.

3. The appellant argued that due to confusion regarding service tax, there were discrepancies in accounting and technical aspects, leading to improper record-keeping and non-filing of Income Tax returns for a specific year.

4. The appellant contended that clients initially refused to pay service tax, resulting in underpayment of professional fees. The appellant had voluntarily remitted fees received in specific bank accounts, supported by a Chartered Accountant certificate.

5. Issues related to invoices, underpayment of fees, TDS deductions, and contracts with subcontractors were raised by the appellant to dispute the service tax demand.

6. The Tribunal directed a reworking of the demand for service tax, considering the discharge of tax by subcontractors and the treatment of reimbursable expenses.

7. The Tribunal ordered a de novo adjudication to address the contentions regarding the collection of service tax from clients and the applicability of tax on amounts already paid by subcontractors and reimbursable expenses. The appellant was granted the opportunity for a personal hearing and submission of additional evidence.

8. The Tribunal partly allowed the appeal and remanded the case for further proceedings to address the unresolved issues and provide a fair opportunity for the appellant to present their case effectively.