2019 (6) TMI 769 - AT - Service Tax

Commercial Training and Coaching services - non/short payment of service tax - HELD THAT - It is only in response to the show cause notice the assessee took the stand that the notebook was written under duress. The first appellate authority was wrong in holding that the contents of the letter dated 18.10.2008 were retracted at the first available opportunity. In fact the retraction was made after about a year and can only be considered as afterthought. The first appellate authority confirmed part of the demand to the extent assessee agreed to pay and rejected the rest which is not correct. If he was of the opinion that the entire demand was based on no evidence whatsoever he should have set aside the entire demand. There is no rationale in confirming one part of the demand and rejecting another part of it only on the ground that the assessee agreed to pay one and not the other when the entire demand is based on the same evidence. Therefore we find that the order of the first appellate authority is liable to be set aside. The demand of the service tax interest and penalties as imposed by the lower authority stand restored - Appeal allowed - decided in favor of Revenue.

Issues Involved:
1. Whether the assessee properly discharged service tax on services rendered.
2. Validity and credibility of evidence (private notebook) recovered during the search.
3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
4. Retraction of the Director's admission and its timing.

Issue-wise Detailed Analysis:

1. Whether the assessee properly discharged service tax on services rendered:
The core issue was whether the assessee, an institute providing "Commercial Training and Coaching services," had properly discharged service tax. The revenue's case was based on a search conducted on 18.10.2008, which revealed that the assessee had not paid service tax on certain amounts. This was substantiated by a private notebook recovered from the Director's table, detailing fees collected but not accounted for in their official records. The Director admitted the discrepancy in a handwritten letter on the day of the search and provided cheques for the differential service tax, which he later requested not to present due to insufficient funds.

2. Validity and credibility of evidence (private notebook) recovered during the search:
The notebook contained detailed entries of fees collected from April 2007 to September 2008. The revenue argued that under Section 36A of the Central Excise Act, the contents of such documents are presumed to be true unless proven otherwise. The first appellate authority, however, found insufficient evidence to support the non-payment of service tax, relying heavily on the lack of a formal statement under Section 14 of the Central Excise Act. The Tribunal disagreed, noting that the Director's handwritten admission and subsequent actions (providing cheques) corroborated the notebook's entries. The Tribunal found the notebook to be credible evidence of unaccounted services.

3. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994:
The original authority imposed penalties under Sections 77 and 78, but not under Section 76, citing mutual exclusivity. The first appellate authority reduced the demand and corresponding penalties, only confirming the amount admitted by the assessee. The Tribunal, however, restored the original penalties, emphasizing that the evidence supported the full demand and that the first appellate authority's partial acceptance lacked rationale.

4. Retraction of the Director's admission and its timing:
The Director's initial admission of non-payment and submission of cheques was not retracted until nearly a year later, in response to the show cause notice. The first appellate authority accepted this retraction, but the Tribunal found it unconvincing and an afterthought. The Tribunal noted that a genuine retraction would have occurred immediately after the alleged coercion ended, not months later. The Tribunal held that the first appellate authority erred in accepting the retraction and in partially setting aside the demand.

Conclusion:
The Tribunal concluded that the first appellate authority's order was incorrect and restored the original demand, interest, and penalties imposed by the lower authority. The appeal filed by the revenue was allowed, and the appeal by the assessee was rejected. The Tribunal found that the evidence (private notebook and Director's admission) sufficiently proved the non-payment of service tax, and the penalties were justified.

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