2024 (12) TMI 795 - AT - Service Tax

Demand of service tax short paid - non-payment of Service Tax on advance received from customers - recovery of irregularly availed credit - difference between the taxable value recorded in S.T.-3 Return and the income shown in the Balance Sheet and Profit Loss Account - extended period of limitation - penalty. Whether the demand of Rs.80,61,111/- (including E. Cess and SHE Cess) charged on the ground of difference between the taxable value recorded in S.T.-3 Return and the income shown in the Balance Sheet and Profit Loss Account is sustainable or not? - HELD THAT - The Appellant were registered with the Department and were filing their Returns regularly; they have not suppressed any information from the Department. Since the Show Cause Notice has been issued based on the difference noticed between the S.T.-3 Return filed by them and their income as per the audited Balance Sheet / Profit Loss Account, it is found that there is no suppression of fact with intention to evade payment of tax established in this case - it is apt to refer to the judgement of the Hon ble Apex Court in the case of Nirlon Ltd. v. Commissioner of Central Excise, Mumbai 2015 (5) TMI 101 - SUPREME COURT , wherein the Hon ble Apex Court has set aside the demand pertaining to the extended period of limitation considering the fact that there was no mala fide intent on the part of the appellant - the demand raised by invoking the extended period of limitation is not sustainable. In the Financial Years 2011-12 and 2012-13, there is no additional Service Tax demand liable to be paid by the Appellant. It is observed that the Show Cause Notice in this case was issued on 04.10.2012, covering the period from 2007-08 to 2012-13. Out of this period, there is no demand of service tax for the Financial Years 2011-12 and 2012-13. The demands pertaining to the Financial Years 2007-08, 2008-09, 2009-10 and 2010-11 are barred by limitation, in view of the above finding that there is no suppression of fact with intention to evade the tax established in this case. Accordingly, the demand confirmed by invoking the extended period of limitation is not sustainable in this case. Therefore, the demand of Service Tax confirmed in the impugned order pertaining to the Financial Years 2007-08 to 2010-11 is not sustainable on the ground of limitation. Thus, the entire demand of Service Tax confirmed in the impugned order is not sustainable and hence, the same is set aside. Whether the demand of Rs.46,931/- charged on the ground of non-payment of Service Tax on advance received from customers is sustainable or not? - HELD THAT - The Appellant have received these advances as security deposit, which is refundable along with interest and hence, no Service Tax is payable on this amount received as advances. Accordingly, this demand of Rs.46,931/- pertaining to the advances received is not liable to Service Tax. Whether the demand for recovery of irregularly availed CENVAT Credit to the tune of Rs.69,73,243/- is sustainable or not? - HELD THAT - The said credit has been denied on the ground that the input bills/invoices are not meeting the requirements as provided under Rule 4(7) of the CENVAT Credit Rules, 2004. On verification of the bills/invoices, we observe that the bills contain all the details required in terms of Rule 9(2) of the CENVAT Credit Rules, 2004. Accordingly, there is no contravention of Rule 4(7) ibid. as alleged and they are eligible to avail the CENVAT Credit of Rs.69,73,243/-. Thus, the appellant has rightly availed the CENVAT Credit. Accordingly, the demand confirmed in the impugned order on this count. Whether the invocation of extended period of limitation is sustainable or not, consequently, the penalty imposed on the appellant is sustainable or not? - HELD THAT - Since there is no suppression of fact with intention to evade the tax established in this case, the penalty imposed on the Appellant under section 78 of the finance act and under Rule 15(2) of the CENVAT Credit Rules, 2004 are not sustainable and hence, the same is set aside. Appeal disposed off.

Summary

Issues Involved:

1. Sustainability of the demand of Rs.80,61,111/- due to differences between taxable value in S.T.-3 Returns and income shown in financial statements.
2. Sustainability of the demand of Rs.46,931/- for non-payment of Service Tax on advance received.
3. Recovery of irregularly availed CENVAT Credit amounting to Rs.69,73,243/-.
4. Invocation of extended period of limitation and the associated penalty imposed.

Issue-wise Detailed Analysis:

1. Demand of Rs.80,61,111/-:

The demand was based on discrepancies between the taxable value recorded in S.T.-3 Returns and the income shown in the Balance Sheet and Profit & Loss Account. The Appellant provided a reconciliation statement for the period 2007-08 to 2012-13, claiming various deductions (D-1 to D-6) from the total turnover. They argued that these deductions, if applied, would eliminate any service tax liability. The Tribunal observed that the Appellant regularly filed returns without suppressing information. The demand was deemed unsustainable due to the absence of mala fide intent and the improper invocation of the extended period of limitation, referencing the Apex Court's decision in Nirlon Ltd. v. Commissioner of Central Excise.

2. Demand of Rs.46,931/-:

This demand related to the non-payment of Service Tax on advances received from customers. The Appellant contended these were security deposits, refundable with interest, and thus not subject to Service Tax. The Tribunal agreed, finding the demand unsustainable.

3. CENVAT Credit of Rs.69,73,243/-:

The denial of CENVAT Credit was based on the alleged non-compliance of input bills/invoices with Rule 4(7) of the CENVAT Credit Rules, 2004. Upon verification, the Tribunal found the invoices met the requirements of Rule 9(2) of the CENVAT Credit Rules, 2004, and thus, the Appellant was eligible for the credit. The demand was set aside.

4. Extended Period of Limitation and Penalty:

The Tribunal found no suppression of facts with intent to evade tax, rendering the invocation of the extended period of limitation inappropriate. Consequently, the penalties under Section 78 of the Finance Act, 1994, and Rule 15(2) of the CENVAT Credit Rules, 2004, were deemed unsustainable and were set aside.

Conclusion:

The Tribunal set aside the demand of Rs.80,61,111/- on the grounds of limitation, the demand of Rs.46,931/- for advances received, and confirmed the eligibility of the Appellant for the CENVAT Credit of Rs.69,73,243/-. It also annulled the penalties imposed, disposing of the appeal in favor of the Appellant.