2024 (3) TMI 924 - AT - Service Tax

Bifurcation of composite service - whether the appellant have arbitrarily bifurcated the receipt of payments from M/s. JK Paper Limited under two separate service category i.e. Manpower Recruitment or Supply Agency Service and GTA service? - Extended period of limitation - HELD THAT - It is matter of record that appellant has entered into two separate agreements with M/s. JK Paper Limited on two different dates. This fact has been admitted by the department also. In such a situation, it cannot be alleged by the department that the appellant have arbitrarily bifurcated the value of services rendered by him under two types of invoices/ bills. The invoices which have been raised by the appellant are as per the legally valid work contracts/ agreements and it is accepted legal principle that for the purpose of levy of service tax, the individual contract need to be taken into account. Therefore, merely on the assumption that the appellant have entered into separate contracts intentionally to evade service tax is prima-facie, not acceptable. Extended period of limitation - HELD THAT - The appellant has regularly been filing their ST-3 returns wherein all the details of services provided by them have been mentioned. The service recipient has also been filing ST-3 returns and therefore, it cannot be alleged that there is any element of fraud, collusion, mis-declaration or suppression of facts with intent to evade service tax - there is no suppression of facts, fraud or misstatement with intent to evade payment of service tax and therefore, it was wrong on the part of the department to confirm demand of service tax under extended time period of Section 73(1) of the Finance Act, 1994. The impugned order-in-appeal is without any merits - appeal allowed.

Summary

Issues:
The issues involved in the judgment are the clubbing of two separate agreements for service tax, alleged evasion of service tax, and confirmation of service tax under extended time proviso.

Clubbing of Two Agreements:
The appellant, a proprietorship concern, provided services under two separate contracts to M/s. J K Paper Limited. The appellant issued separate invoices for Manpower Recruitment or Supply Agency Service and Goods Transport Agency service as per work order. The service tax was paid on both invoices by the appellant and the recipient, a listed Company. The department alleged that the appellant evaded service tax by bifurcating a composite service into two agreements. However, the Tribunal found that the appellant had entered into valid separate agreements for different services, and the invoices were issued in accordance with the contracts. The Tribunal relied on legal principles and previous judgments to conclude that the bifurcation was not arbitrary and did not amount to tax evasion.

Alleged Evasion of Service Tax:
The department issued a show cause notice demanding service tax from the appellant under various provisions, including extended time proviso, penal provisions, and charging interest. The appellant contended that they had complied with all service tax laws and there was no evasion. The Tribunal noted that the appellant had been filing returns regularly, and both the appellant and the recipient had paid service tax on the services provided. The Tribunal found no evidence of fraud, collusion, or intent to evade tax. The demand was based on financial records and there was no suppression of facts. Citing case laws, the Tribunal held that the demand under extended time proviso was unjustified and set aside the order confirming the service tax.

Confirmation of Service Tax under Extended Time Proviso:
The impugned order confirming the service tax under extended time proviso was set aside by the Tribunal. The Tribunal observed that the appellant had diligently filed returns and there was no evidence of fraud or suppression of facts. The demand was solely based on financial records, and there was no intent to evade payment of service tax. Therefore, the Tribunal found the confirmation of service tax under the extended time period to be without merit and allowed the appeal.