2018 (11) TMI 847 - AT - Service Tax

Business Auxiliary Service - the proceedings were initiated on the misconception that the tax liability, to be discharged on receipt, had not been - Held that - This was one aspect of the dispute in which attempted reconciliation was reported as having failed. We are unable to comprehend any difficulty in doing so. It should be easy enough to ascertain the claim of discharge of tax liability on accrual basis from the financial records. All that was required to be produced were the invoices pertaining to the payments received from these clients in 2005-06 and the corresponding challans for deposit in the relevant year coupled with the accounting entries of transfer of those very amounts to the bad debt ledger. The second unresolved aspect of the dispute is manifested in the demand of ₹ 2,66,604 allegedly short-paid as revealed from the remittance of service tax of ₹ 15,76,659 as ascertained from the returns for the period from 2002-03 to 2004-05 and the alleged liability of ₹ 18,43,263 ascertained by tax authorities from the trial balance. Neither in the show cause notice nor in the proceedings before the lower authorities do we find any reference to the entry, or entries, in trial balance from which the higher amount had been derived. We are not certain if the said amount has been shown as such in the trial balance or if it has been computed by the application of the relevant rate of tax on the consideration reported therein - from the correspondence referred to in the orders of the lower authorities, it would appear that the show cause notice is sketchy on the nature of the allegation against the appellant. It should have been within the scope of the lower authorities, in the course of the reported correspondence, to throw light on the source of the computed figure on the basis of which the alleged deficit was formalised in show cause notice. It is but fair to expect the appellant to respond only thereafter. Alleged and unreported rendering of business auxiliary service taxable under section 65(105) (zzb) of Finance Act, 1994 on the consideration received from the various newspaper establishments in which, as accredited agency of Indian Newspaper Society - Held that - From a perusal, it would appear that it is newspaper establishment that pays the appellant for acting as its agent. If that be the indicator of recompense for provision of service, it would appear that the appellant is not the provider of the service to the other agencies which is contrary to the surmise, and conclusion, in the findings of the two lower authorities. From this factual matrix alone, we can deduce that the lower authorities have, in their findings, misdirected themselves, in the determination to fasten tax on the consideration without compliance of the pre-requisite to fit the activity within the framework of one of the taxable services. We see no reason to perpetuate this in the absence of some worthwhile reason to believe that a consummation that would stand the test of appeal exists. We set aside the demands and the attendant detriments but remand the matter back to the original authority for a second time to enable the ascertainment of validity of the contention of the appellant on the discharge of tax liability. - Appeal allowed by way of remand.

Summary

Issues:
1. Confirmation of tax liability evasion for the period from 2002-03 to 2005-06 along with interest and penalty under section 78 of Finance Act, 1994.
2. Non-compliance with Tribunal's direction to produce original invoices and reconciliation statements.
3. Dispute regarding tax liability discharge on accrual basis versus receipt basis.
4. Allegations of short payment and unreported business auxiliary service.

Analysis:

Issue 1:
The appellant, M/s Saransh Ads, appealed against the confirmation of tax liability evasion for the period from 2002-03 to 2005-06, along with interest and penalty under section 78 of Finance Act, 1994. The Tribunal had previously remanded the matter to the original authority to examine documents claimed by the appellant as evidence of tax liability discharge on accrual basis. However, both the Revenue and the appellant failed to comply with the Tribunal's directions. The lower authorities did not acknowledge the documents submitted by the appellant, leading to a lack of clarity in the proceedings.

Issue 2:
The non-compliance with the Tribunal's direction to produce original invoices and reconciliation statements was a significant point of contention. The appellant claimed to possess relevant records, but the representatives failed to produce them despite repeated reminders. The lower authorities' refusal to enumerate the documents submitted hindered compliance with the Tribunal's remand order, indicating a lack of cooperation from both sides.

Issue 3:
A key dispute revolved around the appellant's method of tax liability discharge, whether on accrual basis as claimed by the appellant or on receipt basis as contended by the tax authorities. The appellant argued that they discharged tax liability on the value of services rendered when invoices were raised, contrary to the tax authorities' belief. This discrepancy formed a central point of contention in the proceedings.

Issue 4:
Allegations of short payment and unreported business auxiliary service added complexity to the case. The appellant's failure to reconcile payments received from clients in 2005-06 and the alleged deficit in tax remittance raised concerns. Additionally, the dispute regarding unreported business auxiliary service provided to newspaper establishments highlighted misdirection by the lower authorities in determining taxable services. The relationship between the appellant, the advertiser, and the publishing house was not adequately scrutinized, leading to erroneous conclusions.

In conclusion, the Tribunal set aside the demands and detriments but remanded the matter to the original authority for further examination of the appellant's contentions on tax liability discharge. The decision was influenced by the lower authorities' lack of compliance with previous directions, necessitating a second remand to clarify the issues at hand.