2023 (12) TMI 309 - AT - Service Tax

Short payment of service tax - turnover shown by them in the ST-3 Returns was lower than the turnover shown by them in their Income Tax and Balance Sheet - HELD THAT - Coming to the Appeal filed by the Revenue, a cursory glance of the Show Cause Notice would clarify that the same was issued for the period which is even beyond the extended period of five years. This shows that the proper care was not taken by the Department while issuing the Show Cause Notice. The Show Cause Notice has been issued merely on the ground that the income shown by the Appellant in their P L Account is higher than the turnover declared in the ST 3 Return - the Adjudicating Authority carried out thorough verification and has given reasoned Order for dropping the demand as well as confirming the demand. Therefore, there are no reason to interfere with his Order in respect of the dropped demand of Rs.73,07,023/-. Accordingly, the Appeal filed by the Revenue is dismissed. Demand of Rs.25,70,758/- - Adjudicating Authority has held that the services provided by the assessee can not be termed as the Services provided by the sub-contractor to the main contractor - HELD THAT - The submission of the assesse is agreed upon that till the new clarification was given on 23/08/2007, the Revenue was bound by the earlier clarification issued by the CBIC. Therefore, the demand prior to 22/08/2007 is legally not sustainable. Extended period of Limitation - HELD THAT - The Department in its over-enthusiasm has issued the Show Cause Notice even for the period prior to five years. The Show Cause Notice has been issued for Rs.98.77 Lakhs whereas after thorough verification and reconciliation, the Adjudicating Authority has dropped the demand of Rs.73.07 Lakhs. Even in respect of balance 25.7 Lakhs confirmed demand, we find that the clarification given on 23/08/2007 has been applied for the transaction carried out between April 2006 to 31/03/2008 - the demand for the extended period is legally not sustainable and confirmed demand for the extended period is set aside on account of limitation also. Thus, the Appellant is required to pay the Service Tax on sub-contract work (map making) undertaken by them for the main contractor between the period October 2007 to March 2008 only. It is noted from the OIO that the amounts paid by the assesse during the proceedings have been appropriated. The amount payable, if any, for the period October 2007 to March 2008 is required to be adjusted against such appropriation. The Appeal filed by the Assessee is disposed of.

Summary

Issues Involved:
1. Whether the demand of Rs.73,07,023/- dropped by the Adjudicating Authority was justified.
2. Whether the confirmed demand of Rs.25,70,758/- was correct, particularly in terms of the applicability of service tax to sub-contractors and the extended period provisions.

Summary:

Issue 1: Demand of Rs.73,07,023/- Dropped by the Adjudicating Authority
The Appellant provided documentary evidence including P & L Account, Balance Sheet, ST Returns, CA Certificate, and a Reconciliation Statement. The Adjudicating Authority verified these documents and concluded that the demand of Rs.73,07,023/- should be dropped. The Tribunal agreed with this conclusion, noting that the Show Cause Notice covered a period beyond the extended five-year limit and that the method used for calculating the tax liability was consistent with the law. The Tribunal dismissed the Revenue's appeal, confirming that the Adjudicating Authority's decision to drop the demand was correct.

Issue 2: Confirmed Demand of Rs.25,70,758/-
The Appellant argued that the services provided as a sub-contractor should not be taxable based on earlier circulars from 1997. The Adjudicating Authority, however, relied on a 2007 circular which stated that sub-contractors are liable for service tax. The Tribunal agreed with the Appellant that the 2007 circular should not apply retroactively to periods before its issuance. Consequently, the demand for the period prior to 23/08/2007 was deemed unsustainable. Additionally, the Tribunal found that the Show Cause Notice was issued even for periods beyond the allowable five-year limit, further invalidating the demand for the extended period.

Conclusion:
The Tribunal held that the Appellant is liable to pay service tax only for the period from October 2007 to March 2008. Any amounts already paid during the proceedings should be adjusted accordingly, with any excess refunded to the Appellant. The appeal filed by the Assessee was thus disposed of, and the order was pronounced in open court on 30/11/2023.