2009 (12) TMI 427 - AT - Service Tax

Valuation Material Cost - Adjudicating allegations of the appellants wrongly availing exemption benefit of Notification No.12/2003-ST dated 26.2.2003 and not paying the full duty due on the photography service rendered by it during the material period, the Assistant Commissioner had confirmed demand. Abatement was allowed earlier by the Tribunal. Impugned matter before Tribunal based on Supreme Court remand direction to verify whether records of inputs used for providing service maintained. Held that report by department that records for inputs used in photography services maintained during material period. Benefit of notification admissible. Penalty set aside.

Summary

Issues:
1. Denial of exemption benefit under Notification No.12/2003-ST.
2. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.
3. Verification of maintenance of records of inputs used in photography service.

Analysis:

1. Denial of Exemption Benefit:
The case involved the denial of exemption benefit under Notification No.12/2003-ST to the appellant, a photography service provider. The Assistant Commissioner confirmed the demand of service tax, interest, and penalties on the grounds that the exemption required the cost of material to be shown separately in each invoice. The Commissioner (Appeals) upheld this decision, stating that the exemption was contingent on the cost of material being detailed in all invoices. However, the Tribunal found that the appellant was engaged in providing taxable photography services and that the value of goods and materials consumed in the service could not be included in the service tax levy. Consequently, the Tribunal allowed the appeal, granting the appellant consequential relief.

2. Imposition of Penalties:
In addition to the denial of the exemption benefit, penalties under Sections 76 and 78 of the Finance Act, 1994 were imposed on the appellant. The Assistant Commissioner had imposed penalties for wrongly availing the exemption benefit and not paying the full duty on the photography service. The Tribunal, however, ruled in favor of the appellant, stating that the denial of benefits by the lower authorities was not justified in light of the records maintained by the appellant. As a result, the Tribunal held that the appellant was not liable for the penalties imposed.

3. Verification of Records:
The Hon'ble Supreme Court directed the Tribunal to verify whether the appellant had maintained records of the inputs used in the photography service. The Additional Commissioner's report confirmed that the appellant had produced original records, including Ledger Accounts, for the specified periods, and the particulars furnished were found to be correct. Based on this verification, the Tribunal concluded that the appellant was entitled to the benefit of the notification and was not liable for the penalties. Consequently, the appeal of the appellant was disposed of with consequential relief, as ordered by the Supreme Court.

This detailed analysis of the judgment highlights the issues of denial of exemption benefit, imposition of penalties, and verification of records, providing a comprehensive overview of the legal proceedings and outcomes in the case.