2019 (4) TMI 1350 - AT - Service Tax

Extended period of limitation - short payment of service tax - it is alleged that the appellant has not paid service tax on the gross amount received by them on services rendered as the same was required to be paid - HELD THAT - It has been held by the various decisions of Hon ble Tribunal that if the demand is raised at the strength of Audit Objection and the necessary information is available in RT-12/ ST-3 return the extend of demand cannot be sustained. In this case, the appellant has submitted the ST-3 returns indicating the amount received from their clients for providing the taxable services. The taxable value has been arrived as per the sales bills for the relevant years the appellant states that in this case the main contractor has also paid service tax which was not taking into consideration by the Adjudicating Authority - the extended period of limitation is not available to the Revenue and the demand is required to be limited to the normal period only. Appeal allowed by way of remand.

Summary

Issues:
1. Demand of service tax under Section 73 (2) of the Finance Act, 1994.
2. Alleged contravention of provisions of the Finance Act and Service Tax Rules.
3. Valuation of taxable services under "Manpower Recruitment or Supply Agency services."
4. Discrepancies in payment of service tax and valuation of services.
5. Applicability of extended period of limitation for raising demands.
6. Submission of ST-3 returns and disclosure of amounts received for taxable services.

Analysis:

1. The appellant was faced with a demand of service tax amounting to ?1,18,21,995 under Section 73 (2) of the Finance Act, 1994, along with interest and penalties imposed under various provisions of the Act. The appellant had deposited ?5 lakh during the investigation, which was also appropriated. Penalties under Section 77 (1)(a) and 77(2) of the Finance Act were imposed.

2. The case revolved around the alleged contravention of provisions of the Finance Act and Service Tax Rules, specifically related to the valuation of taxable services categorized as "Manpower Recruitment or Supply Agency services." The appellant was accused of undervaluing the taxable services by not including all expenses like wage/salary, allowances, and contributions to the provident fund, resulting in the underpayment of service tax.

3. The issue of valuation was crucial, as the appellant was charged with not paying service tax on the gross value received for the services rendered. The Show Cause Notice covered the period from 2006-07 to 2010-11 and highlighted discrepancies in the amount declared in the ST-3 returns submitted by the appellant.

4. The appellant contested the impugned order, arguing that they had been diligently submitting ST-3 reports and complying with service tax provisions. They claimed to have paid service tax through the main contractor and disputed the valuation method adopted by the Adjudicating Authority. The appellant emphasized their social service role in providing employment to local youth.

5. The question of the extended period of limitation for raising demands was raised by the appellant, asserting that any liability for service tax during the disputed period was time-barred. They contended that the mode of payment through the main contractor was known to the Department, as evidenced by the regular returns filed with the Central Excise Authority.

6. The Tribunal found that the Revenue's demand was not sustainable under the extended period of limitation and directed the Adjudicating Authority to re-determine the duty liability considering the payment of service tax by the main contractor. The case was remanded back for re-evaluation in light of the Tribunal's directions.