2024 (10) TMI 1545 - AT - Service Tax

Service tax demand and interest - demand of service tax on the amount towards provident fund - Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994 - Invocation of the extended period of limitation under Section 73(1) of the Finance Act, 1994 - HELD THAT - As the appellant was well aware that he was providing taxable services and short paid the service tax, even after issuing invoices indicating the services tax payable and collecting the same from the service recipient. They were not filing the ST-3 returns on time in the manner as specified in law. They have suppressed the information with intend to evade payment of taxes. Accordingly, the demand by invoking the extended period of limitation and penalty imposed cannot be disputed with. As it is evident that appellant is not even consistent in his own submissions in these proceedings. While before adjudicating authority he has specifically asserted that he do not wish to contest the show cause notice on merits but only on quantification by claiming certain deductions from the taxable value determined by the revenue in show cause notice, his stand before the appellate authority is contrary to his own submissions and is challenging the rate applicable at different period of time. He has not substantiated his claim towards the application of different rates for the different period of demand. Appellant authority having found that said claim has not been substantiated rejected those submissions. We do not find any merits in the challenge made by the appellant to the order of the First Appellate authority.

Issues Involved:

1. Demand and recovery of service tax.
2. Imposition of penalties under various sections of the Finance Act, 1994.
3. Invocation of the extended period of limitation.
4. Admissibility of deductions from the taxable value.
5. Consistency and substantiation of claims by the appellant.

Issue-wise Detailed Analysis:

1. Demand and Recovery of Service Tax:

The appellant was found liable for service tax under the category of Man Power Supply Agency Service, as they failed to discharge the service tax due. The Original Authority confirmed the demand of Rs. 16,32,644/- under Section 73(2) of the Finance Act, 1994, along with interest under Section 75. The appellant did not contest the show cause notice on merit but raised issues regarding the quantification of demand. The adjudicating authority allowed deductions for services provided prior to 16.06.2005 and the service tax paid by Hindalco, but disallowed deductions for provident fund, concluding it was part of the taxable services.

2. Imposition of Penalties:

The Original Authority imposed a penalty of Rs. 5,000/- under Section 77 for violation of Section 70 read with Rule 7, and a penalty of Rs. 16,32,644/- under Section 78 for suppression of facts. The penalty under Section 78 was justified as the appellant collected service tax but did not deposit it, indicating a deliberate suppression of facts. The penalty under Section 76 was not imposed due to the amendment in Section 78, which negates the application of Section 76 if a penalty under Section 78 is applicable.

3. Invocation of the Extended Period of Limitation:

The extended period under Section 73(1) was invoked due to the appellant's failure to disclose taxable services and payments to the department, with the intent to evade tax. The appellant did not rebut the charges of non-payment and suppression of facts, justifying the invocation of the extended period. The tribunal referred to precedents where similar actions warranted the invocation of the extended period.

4. Admissibility of Deductions from the Taxable Value:

The appellant claimed deductions for amounts related to provident fund and services provided prior to 16.06.2005. The Original Authority allowed deductions for the latter but disallowed those for provident fund, as no evidence was provided to substantiate the claim. The appellant's inconsistent submissions and failure to substantiate claims led to the rejection of their contentions regarding the applicable rates for different periods.

5. Consistency and Substantiation of Claims by the Appellant:

The appellant's submissions were inconsistent, as they initially did not contest the merits but later challenged the quantification and applicable rates. The appellant failed to provide evidence to support their claims regarding deductions and applicable rates. The First Appellate Authority found the appellant's contentions unsustainable due to lack of substantiation, leading to the dismissal of the appeal.

Conclusion:

The tribunal upheld the findings of the Original Authority and the First Appellate Authority, dismissing the appeal due to lack of merit. The appellant's failure to consistently and substantively challenge the findings led to the confirmation of the demand and penalties imposed. The appeal was dismissed, reinforcing the importance of compliance with service tax provisions and the consequences of non-disclosure and evasion.

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