2019 (5) TMI 1482 - AT - Service Tax

Levy of service tax - amount of discount allowed to its customers - inadvertent credit in its books of account - turnover achieved through the main contractor - demand of service tax alongwith penalty - extended period of limitation. Discount allowed to customers - HELD THAT - Revenue have not brought any evidence on record to disbelieve the books of account of the appellant. The auditor of the appellant, by certificate dated 11th November, 2014, have certified that the appellant have allowed discounts to their customers/clients and service tax will be charged on the net amount of the bill after allowing said discount - the learned Commissioner have erred in dis-regarding the said certificate, without recording any reason - demand set aside. Charge of service tax from the appellant as a subcontractor - HELD THAT - This issue is decided by Hon ble Patna High Court in the case of HINDUSTAN DORR-OLIVER LTD. AND ANOTHER VERSUS UNION OF INDIA AND OTHERS 1989 (9) TMI 355 - PATNA HIGH COURT , wherein the Hon'ble High Court in the matter of sales tax under similar facts and circumstances of works contract, were the main contractor had claimed deduction of the turnover achieved through the subcontractor, on the ground that the subcontractor is also registered with the Department and have paid tax on such turnover. The Hon'ble High Court held that in the case of works contract there is one transaction, one sale. The work may be done either by the main contractor or through the subcontractor. Service tax being the other part of the same type of transaction, there cannot be two services and/or two transfers of service - demand set aside. Credit made inadvertently in the books of account - HELD THAT - It has been demonstrated that in the service receipt account, the accountant inadvertently made two journal entries on date 31st March, 2011, for making adjustment of Cenvat credit adjustment . Thus it is evident that the said credits, which have inflated the service receipt amount, are not actually the amounts pursuant to rendering of the service and are arising from erroneous entries by the accountant - demand set aside. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Charge to service tax on discounts allowed to customers.
2. Charge of service tax on turnover achieved through the main contractor.
3. Levy of tax on the amount of credit made inadvertently in the books of account.

Analysis:

Issue 1: Charge to service tax on discounts allowed to customers
The appellant was providing advertising services and was under investigation for service tax evasion. The show cause notice demanded a significant amount as short paid service tax. However, the Tribunal found that the appellant had certified discounts given to customers and that service tax would be charged on the net amount after discounts. The Tribunal noted the absence of evidence from the Revenue to disprove the appellant's books of account. The learned Commissioner's disregard of the auditor's certificate was deemed erroneous, and the demand of &8377; 4,99,802/- was set aside.

Issue 2: Charge of service tax on turnover achieved through the main contractor
The appellant had received a sum from a principal advertiser/contractor, who had already charged and deposited service tax. The Tribunal referred to a relevant High Court judgment and held that in cases of works contracts, where subcontractors are involved, there is one transaction and one sale. Therefore, service tax cannot be charged twice on the same transaction. Consequently, the demand of service tax on the turnover achieved through the main contractor was set aside.

Issue 3: Levy of tax on the amount of credit made inadvertently in the books of account
An amount of credit was inadvertently entered in the books of account, inflating the service receipt amount. The Tribunal observed that these credits were due to erroneous entries by the accountant and did not pertain to actual service amounts. Consequently, the demand related to this inadvertent credit was also set aside.

In conclusion, the Tribunal allowed all grounds of appeal, setting aside the demands and penalties. The appellant was granted consequential relief as per the law.