2018 (10) TMI 1207 - AT - Service Tax

Demand of differential tax - demand of ₹ 12,64,097/- - undisclosed receipts - demand of different tax is on account of reliance on rough register and rough ledger - extended period of limitation. Demand of ₹ 12,64,097/- - Held that - Such demand has been raised on the basis of some rough note books seized from the premises of the appellant and the author of said note book have not been identified - there is no enquiry made by Revenue regarding from the person who are named therein if they have paid such amounts to the appellant assessed as mentioned therein - there is no cogent basis for this demand. Further, against proposed demand of ₹ 1,28,54,902/- in the show cause notice, the demand confirmed in the impugned order is ₹ 94,57,303/-. Thus it appears that the show cause notice was issued without due diligence. Balance demand of ₹ 81,92,240/- - the appellant have before issue of SCN deposited ₹ 76,88,206/- out of the said amount and before adjudication have deposited the balance amount of ₹ 5,05,000/- - Penalty - Held that - No penalty was impossible on the appellant under Sections 70, 77 and 78 of the Act. The appellant is not liable to pay any tax over and above amount of ₹ 81,92,240/- and accordingly, appellant is entitled to refund of the amount paid over and above the said amount and also refund of the amount of penalty if any deposited. Appeal allowed.

Summary

Issues Involved:
1. Invocation of extended period of limitation for tax demand.
2. Tax demand on undisclosed receipts totaling ?12,64,097.

Analysis:
1. Invocation of Extended Period of Limitation:
The issue at hand is whether the extended period of limitation has been rightly invoked in this case. The appellant contested the demand based on rough registers and ledgers, arguing that no verification was conducted from customers or any proper investigation done. The Commissioner's observations highlighted the lack of evidence to support the demand, indicating that assumptions and presumptions cannot be the basis for such claims. The appellant cited relevant case laws to support their argument. Ultimately, the Tribunal found that the demand lacked a cogent basis, especially considering the lack of diligence in issuing the show cause notice. The demand was reduced from ?1,28,54,902 to ?94,57,303, and further to ?12,64,097, indicating a lack of proper investigation and due diligence in the initial stages.

2. Tax Demand on Undisclosed Receipts:
The second issue pertains to the tax demand of ?12,64,097 on undisclosed receipts. The appellant raised several grounds to challenge this demand, including the maintainability of demands based on rough registers, absence of machinery provision for service tax on construction services, and specific challenges to demands on various amounts received as loans or shown in rough registers. The Tribunal analyzed each ground in detail, considering the lack of evidence, absence of machinery provision for taxation, and specific challenges to individual amounts demanded. Ultimately, the Tribunal found in favor of the appellant, citing the lack of statutory mechanisms to ascertain the value of taxable services in such transactions. Referring to a Delhi High Court decision, the Tribunal held that the levy of service tax in this case was ultra vires due to the absence of a mechanism to determine the value of services in composite contracts. As a result, the appeal was allowed, and the appellant was entitled to a refund of excess amounts paid and any penalties deposited.

In conclusion, the judgment addressed the issues of invoking the extended period of limitation and tax demands on undisclosed receipts, highlighting the lack of proper investigation, absence of statutory machinery for taxation, and the ultra vires nature of the service tax levy in composite contracts. The appellant succeeded in challenging the demands and was granted relief by the Tribunal.