2019 (8) TMI 1370 - AT - Service Tax

Taxability - demand of service tax - amount of discount allowed to its customers - inadvertent credit in its books of account - tax on turnover achieved through the main contractor - penalty. Discount allowed by the appellant - HELD THAT - The learned Commissioner have observed that the appellant have not submitted any evidence such as bills, etc., to indicate that these discount pertains to customers who availed services - 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. A copy of the certificate is available on appeal record - demand set aside. Charge of service tax from the appellant as a subcontractor - HELD THAT - It is an admitted fact that the appellant received ₹ 37.12 lakhs from M/s A.D. Point, who were the principal advertiser/contractor and they have certified that they have charged service tax on such activity and services which were provided by the appellant through them, from their client/principal. The service tax was further deposited with the Central Government - the issue is decided by Hon ble Patna High Court in the case of Hindustan Dorr Oliver Pvt. Ltd. vs. State of Bihar, volume 75 Sales Tax cases page 211, 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. Amount of 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. Penalty - HELD THAT - As the demand is set aside, penalty also set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the appellant is rightly charged service tax on the amount of discount allowed to customers, inadvertent credit in books of account, and turnover achieved through the main contractor.

Analysis:

1. The appellant, engaged in advertising services, faced a show cause notice proposing a service tax demand. After adjudication, a demand of &8377; 6,36,077/- was confirmed with penalties under Section 78. The issue of service tax on discounts allowed was contested. The appellant's auditor certified the practice of charging service tax on net bill amounts post-discounts, supported by a certificate. The Tribunal noted the absence of evidence from the Revenue to dispute the appellant's accounts. The Commissioner erred in disregarding the auditor's certificate without valid reasons. Consequently, the demand of &8377; 4,99,802/- was set aside.

2. Regarding service tax charged as a subcontractor, the appellant received payments from a principal advertiser who certified the tax payment on services provided. The Commissioner relied on a circular to confirm the tax demand, but the Tribunal referenced a case law where a similar issue was decided in favor of the taxpayer. The Tribunal held that in a works contract scenario, service tax is part of a single transaction, precluding double taxation. Thus, the demand of service tax on &8377; 37,12,000/- was set aside.

3. The issue of tax on an inadvertently credited amount of &8377; 17,99,839/- was also addressed. The accountant mistakenly made journal entries inflating the service receipt amount, which did not represent actual service-related income. The Tribunal recognized these erroneous entries and set aside the tax demand on this account.

4. With all grounds of appeal allowed, the Tribunal set aside the demand and consequent penalties. The appellant was entitled to any further relief as per the law. The judgment was pronounced in court, providing a comprehensive resolution to the issues raised in the appeal.