2024 (2) TMI 198 - AT - Service Tax

Levy of service tax - advance payment received from their clients (and accounted under the head debtors indicating negative) - invocation of extended period of limitation - suppression of facts or not - HELD THAT - The appellant maintained a current account with the network firms and by issue of debit notes they were able to make adjustments of the amount to the paid and to be received by them in respect of network firms. It is seen that the network firms have raised invoices on the appellant collecting the Service Tax from the appellant. For the payments along with Service Tax made to network firms the appellant has availed credit of such Service Tax as input service and there is no dispute in this regard. The appellant has availed Cenvat Credit of the Service Tax collected from them by network firms. This means the net work firms have collected Service Tax from appellant and discharged their liability. The department has no dispute on the Cenvat Credit availed by appellant in this regard. So also there is no dispute that appellant has not discharged Service Tax on the payments received for providing services. The allegation is that they did not discharge Service Tax on advance payments. As already stated, there is no evidence of any transactions of receiving advance payment which has escaped payment of tax. The accounting of amount under the head negative debtors is assumed by department as advance payments. The department has not been able to correctly establish the basis of demand and has raised the demand on a suspicion of the accounting done under the head Debtors with negative marking - thus the demand cannot sustain. The issue on merit is answered in favour of appellant. Extended period of limitation - Suppression of facts or not - HELD THAT - The department has failed to establish any positive act of suppression on the part of the appellant. The demand raised invoking the extended period is therefore not sustainable. The appellant succeeds on the issue of limitation also. The impugned order is set aside. The appeal is allowed.

Summary

Issues Involved:
1. Whether the demand of Service Tax alleging that appellant has received advance payment from their clients (and accounted under the head 'debtors' indicating negative) is sustainable or not.
2. Whether the extended period is invocable.

Summary:

Issue 1: Demand of Service Tax on Alleged Advance Payments
The appellant, engaged in providing 'Chartered Accountant Service,' was audited, revealing negative balances under the head "Debtors" for the period from 25.09.2007 to 31.03.2012. The department alleged these were advance payments from clients on which Service Tax was not discharged, resulting in short payment of Service Tax from October 2008 to March 2012. The appellant contended that these negative items were expenses charged by network firms and not advances. The appellant maintained current accounts with network firms, showing amounts owed by and to them under the head "Debtors." Service Tax was duly discharged on these transactions, and CENVAT Credit was availed, which was not disputed by the Department.

The Tribunal found that the Show Cause Notice (SCN) did not provide specific details of the alleged advance payments, such as dates, services, or clients involved. The appellant explained that the negative balances were due to transactions with network firms and not advances from clients. The Tribunal concluded that the department failed to provide evidence of any transactions of receiving advance payments that escaped tax. The demand was based on assumptions and not substantiated by evidence. Therefore, the demand of Service Tax on alleged advance payments was not sustainable.

Issue 2: Invocation of Extended Period of Limitation
The demand was raised invoking the extended period of limitation, alleging suppression with intent to evade tax. The Tribunal noted that the demand was based on audit findings, and the appellant had provided all necessary documents during the audit. Previous audits did not raise any objections to the appellant's accounting system. The SCN was issued much later after the audit report dated 13.02.2014, for the period from 10/2008 to 3/2012. The Tribunal found no evidence of suppression or intent to evade tax by the appellant. All transactions and figures were mentioned in the appellant's accounts and financial statements. The department failed to establish any positive act of suppression. Therefore, the invocation of the extended period of limitation was not sustainable.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential reliefs, if any. The demand of Service Tax on alleged advance payments was not sustainable, and the invocation of the extended period of limitation was not justified.