2018 (11) TMI 180 - AT - Service Tax

Liability of Service tax - amount of unpaid bill adjusted from the security deposit by the BSNL - extended period of limitation - demand of interest and penalty - Held that - a bland allegation of willful suppression has been raised against BSNL. The department has not brought on record any single positive act on the part of BSNL for suppressing any material fact. The show cause notice has been issued on the basis of the scrutiny of relevant documents maintained by BSNL. BSNL being a public sector company, the statutorily maintained records were open for scrutiny to the proper officer at all material times and that hence there can be no allegation of suppression of material fact by the appellant. Suo moto adjustments between the excess paid service tax in certain months with the service tax payable in subsequent months - Held that - There is no infirmity in the dropping of such demand in as much as the alleged violations of Rule 6(4)B are merely procedural infractions - this ground raised by the revenue is rejected. Extended period of limitation - Held that - The demand is to be restricted to the normal time limit - the adjudicating authority is directed to requantify the demand falling within the normal time limit and at the same time extend cum tax benefit. Penalty set aside by invoking section 80. Appeal allowed in part.

Summary

Issues:
1. Service tax liability on security deposit adjustments and PCO commissions.
2. Failure to pay service tax on due dates and interest liability.
3. Short payment of service tax and suo moto adjustments.
4. Time-bar defense, cum tax benefit, interest on delayed payment, and penalties.

Service Tax Liability on Security Deposit Adjustments and PCO Commissions:
The case involved appeals against an Order-in-Original regarding service tax liabilities of BSNL. The department alleged that BSNL did not fully discharge service tax obligations related to security deposit adjustments and PCO commission amounts. The Adjudicating Authority upheld part of the demand, ordering payment of interest and penalties but did not impose penalty under Section 76 of the Finance Act, 1994. The Revenue challenged the dropping of part of the demand and the absence of penalty under Section 76.

Time-Bar Defense, Cum Tax Benefit, Interest on Delayed Payment, and Penalties:
BSNL challenged the demand for service tax confirmed on various grounds. They argued that the proceedings were based on statutorily maintained records open for scrutiny, so there was no suppression of facts. BSNL also claimed the benefit of cum tax value and questioned the sustainability of interest on delayed payments. The adjudicating authority dropped demands related to suo moto adjustments of excess paid service tax, which the Revenue challenged. The Tribunal found the show cause notice hit by time bar due to lack of evidence of suppression by BSNL. The demand beyond the normal limitation period was set aside. The Tribunal also rejected the Revenue's challenge on the dropped demand related to adjustments. For the remaining demands, the Tribunal restricted the liability to the normal time limit, directed quantification with cum tax benefit, and set aside all penalties using Section 80 of the Finance Act, 1994.

This judgment highlights the importance of maintaining proper records, scrutiny of statutory documents, and the application of statutory provisions in assessing service tax liabilities. The Tribunal's detailed analysis of each issue provides clarity on the legal aspects involved in determining service tax obligations and defending against allegations of non-compliance.