2018 (9) TMI 1656 - AT - Service Tax

Valuation - inclusion in assessable value - Threading charges - Negative Storage charges - case of appellant is that threading charges are nothing but cost of the film on which they have discharged VAT liability and Negative Storage Charges relate to reimbursement of electricity charges and rent recovered from the clients - Held that - It is noted that right from the initial adjudication proceedings and even at this stage appellants have not been able to produce the necessary evidence in support of these claims. This being so, the demand confirmed by the original authority and upheld in the impugned order will sustain - demand upheld. Penalty u/s 78 - Held that - The entire issue is one of interpretation - It is also to be kept in mind that had the appellant been able to produce the necessary evidence, they may well have got relief in respect of service tax liability on Threading charges and Negative Storage charges - Penalty not warranted and is set aside. Appeal allowed in part.

Summary

Issues:
- Service tax liability on threading charges, negative storage charges, and lab confirmation charges
- Imposition of penalties under Sections 76 & 78 of the Finance Act
- Contesting of charges by the appellant
- Lack of necessary corroborative evidence
- Interpretation of the charges and penalty imposition

Analysis:
The case involved the appellants providing photography services and collecting additional charges like threading, negative storage, and lab confirmation charges from customers. The Department issued Show Cause Notices (SCN) proposing service tax liabilities on these charges. The original authority confirmed a total liability of Rs. 3,13,551 along with interest and penalties under Sections 76 & 78 of the Finance Act. In appeal, the Commissioner (Appeals) set aside the penalty under Section 76 but upheld the remaining liability. The appellants contested the charges during the hearing.

The appellants argued that threading charges were film costs with VAT already paid, and negative storage charges were reimbursements for rent and electricity. However, they couldn't produce documentary evidence to support these claims at that stage. The issue was deemed to be one of interpretation, with the appellant emphasizing the lack of evidence as the reason for penalty imposition. The Department supported the impugned order.

The Tribunal upheld the demand for lab confirmation charges as uncontested. For threading and negative storage charges, the appellants' failure to provide evidence led to the sustained demand. However, considering the mitigating factors and the possibility of relief with evidence, the penalty under Section 78 was set aside. A miscellaneous application for changing the respondent's jurisdiction and address was allowed. Consequently, the appeal was partly allowed as per the terms discussed, and the miscellaneous application was disposed of accordingly.