2020 (4) TMI 640 - AT - Service Tax

Demand of service tax alongwith interest and penalty - free services - service tax along with interest paid by the appellant before issue of show cause notice - HELD THAT - The entire calculation of service tax demanded from the appellants was in respect of free services and in respect of each free service Revenue had presumed that the appellant had collected ₹ 625/- which is also clear from the show cause notice that the said figure of ₹ 625 was not forthcoming out of any record in respect of free services maintained by the appellants - the amount of around ₹ 15 lakhs confirmed along with interest and penalty from the appellants being presumptive is not sustainable. Other amount confirmed and appropriated along with interest - HELD THAT - The same are not contested by the appellant and therefore, we do not interfere to the same. Penalties - HELD THAT - Since the penalties were in respect of such demand confirmed by the Original Authority where the amounts were paid with interest before issue of show cause notice, we, therefore, set aside all the penalties imposed under Section 78 of Finance Act, 1994. Penalty of ₹ 10,000/- imposed upon the appellants under Section 77 of FA - HELD THAT - The appellants were already registered and therefore, the said penalty is not sustainable. Appeal allowed in part.

Summary

Issues:
1. Confirmation of service tax on free services provided to customers.
2. Irregular availing of cenvat credit.
3. Penalties imposed under Sections 77 and 78 of the Finance Act, 1994.

Issue 1 - Confirmation of service tax on free services provided to customers:
The Appellate Tribunal noted that an amount of around ?15 lakhs was confirmed along with interest and penalty against the appellants for providing free services to customers who purchased cars. The Tribunal found that the calculation of service tax demanded was based on presumptions, as there was no evidence of the appellants collecting ?625 per free service. Consequently, the Tribunal held that the amount confirmed based on presumptions was not sustainable. However, other amounts confirmed and deposited along with interest, which were not contested by the appellant, were upheld.

Issue 2 - Irregular availing of cenvat credit:
An amount of around ?3 lakhs irregularly availed as cenvat credit was confirmed against the appellants, which was deposited along with interest before the issuance of the show cause notice. The Tribunal did not interfere with this amount as it was not contested by the appellant.

Issue 3 - Penalties imposed under Sections 77 and 78 of the Finance Act, 1994:
Regarding penalties, the Tribunal set aside all penalties imposed under Section 78 of the Finance Act, 1994, as the amounts were paid with interest before the show cause notice was issued. Additionally, a penalty of ?10,000 imposed under Section 77 for failure to take registration was deemed unsustainable since the appellants were already registered. Therefore, the Tribunal allowed the appeal, maintaining the service tax along with interest paid before the show cause notice and setting aside the remaining part of the impugned order.

In conclusion, the Appellate Tribunal CESTAT ALLAHABAD, in the judgment delivered by Members Mrs. Archana Wadhwa and Mr. Anil G. Shakkarwar, addressed issues related to the confirmation of service tax on free services, irregular availing of cenvat credit, and penalties imposed under the Finance Act, 1994. The Tribunal found the service tax amount confirmed based on presumptions unsustainable, upheld uncontested amounts, and set aside penalties imposed under Section 78, as the amounts were paid before the show cause notice. The appeal was allowed with specific actions taken on each issue raised in the case.