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TMI Blog2018 (1) TMI 1462X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Excise & Service Tax, Hyderabad-IV Commissionerate, Hyderabad, demanding a Service Tax of Rs. 80,22,513/- under the proviso to Section 73(1) of the Finance Act, 1994, along with interest, with proposal for imposition of penalties under Sections 76, 77 and 78 of the Finance Act, 1994, besides proposing appropriation of Rs. 73,51,682/- paid by the Applicant towards the Service Tax liability. The notice also proposed penalty under Section 78A of the Finance Act, 1994, on Shri Pogiri Narasimha Murthy, Co-Applicant. Brief facts : 1.2 The Applicant were engaged in providing Manpower Recruitment or Supply Agency services taxable under Clause (44), read with Clause (51) of Section 65B of the Finance Act, 1994. On intelligence that the Applicant was rendering taxable service to their clients, receiving consideration for the services rendered and not paying Service Tax, search operation was conducted by the officers of DGCEI, Hyderabad at the premises of the Applicant and some incriminating documents were recovered. Statement was also recorded from the Co-Applicant, Managing Director in the Applicant company. Investigation revealed that the Applicant provided skilled, semi-sk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Applicant with proposals for penalty on the Applicant and Co-Applicant. Applicant's disclosure : 2.1 The Applicant, in their application filed on 12-7-2017, accepted a Service Tax liability of Rs. 73,59,771/-, as against the demanded amount of Rs. 80,22,513/-, and an interest liability of Rs. 13,16,371/-, and submitted, inter alia, that - * Due to operational problems and lack of proper knowledge about Service Tax statute, they had not filed ST3 returns since 2014-15 though they were making periodical payments and they had made payments of over Rs. 65 lakhs from the day of inception. * They were new to the business segment and not well-versed with the Rules and Regulations and due to lack of legal guidance they could not understand the objections raised during investigation and were bound to give statements in a blind manner and in distressed mind without realizing the impact. Subsequently, they realized that the demand of Rs. 6,70,831/-, being 75% of the Service Tax liability paid by the Service recipients, is not payable by them. * Despite true and transparent statements given, fair cooperation extended, providing all the data required for investigation and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the Service provider. Relying on a number of case laws, the Applicant submitted that it is a settled position of law that but for the procedural infraction, the substantial benefit available under the Act was not deniable. * Hence, no Service Tax liability would be focused on the Applicant on that part of the demand of Rs. 6,70,831/-. * While reconciling the data on Service Tax payable, paid, short paid and actual interest payable, they noticed an additional short payment of Service Tax of Rs. 8,089/- pertaining to the half-yearly ending March, 2015, over and above the quantum arrived at by the department and they had paid the same along with appropriate interest. * They had paid the entire accepted Service Tax liability with interest and paid a sum of Rs. 34,000/- towards penalty for belated filing of ST3 returns. * As regards imposition of penalty, the department had failed to establish any one of the acts, viz, undervaluation of service consideration, receipt of sale consideration from customers by cash and suppressing the same in the books of account and any shady transaction held in benami. In the absence of any such case, there is no justification to inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant : 4.1 In their further submission dated 15-12-2017, the Applicant submitted, inter alia, that the Managing Director appeared on the days summoned; that the Managing Director had multiple roles; that they regularly filed returns up to March, 2014 payments up to April, 2015; that there were no mala fide intention to evade Service Tax; that as the department was in receipt of ST3 returns, it could have called for details of invoices and verification of values could have been done within the normal period of assessment; that invoking of suppression of fact did not warrant in their case; that the Government, while deciding to revert the benefit of Reverse Charge Mechanism to Manpower Supply should categorically worded in the notification to the extent that the service had been removed from the purview of Reverse Charge Mechanism; that keeping the said service category continuously under Reverse Charge Mechanism by inserting certain clauses under para 1(A)(ii)(v) of Notification No. 30/2012-ST., dated 20-6-2012 in confused state would attribute to committing procedural lapses unintentionally; that as change of percentage of Service Tax ratio and non-observance would be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ST., dated 20-6-2012 and the Notification No. 30/2012, dated 20-6-2012 was amended by Notification No. 7/2015, dated 1-3-2015, whereby 100% liability was fastened on the service provider. Since the 75% of the tax has already been paid by the Service recipients and 25% by them, the subject transaction has already suffered full rate of Service Tax leaving no revenue loss to the exchequer. It was further submitted that all the transactions were transparent and fairly accounted for at every stage and all the details were available to anyone at any given point of time and the only lapse that could be noticed apparently on record is the belated payment of Service Tax which was candidly admitted by them in the statement given before the officers of the DGCEI. The above lapse was due to various operational problems and lack of proper knowledge about the Service Tax provisions, as a result, they failed to file ST3 returns since 2014-15, although they made a periodical payment of Rs. 65 lakhs. They committed certain mistakes unintentionally during the initial stage of operations. 5.3 In view of the above and as the Department has failed to establish any of the acts, viz., undervaluatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investigation conducted, the alleged evasion of Service Tax would not have come to light and hence the applicant was liable for penal actions. 5.6 The Applicant also submitted a written submission dated 19-12-2017, post-personal hearing, on 20-12-2017, in which they produced photocopies of paid up challans along with statements by the two service recipients, viz, M/s. Tecumseh Products India Ltd. and M/s. Sagar Asia Pvt. Ltd, in order to substantiate the payment of Rs. 6,70,831/-. Findings and decision of the Bench Service Tax and interest : 5.1 This is a case of short payment of Service Tax on Manpower Supply Service. The charge against the Applicant was that, being a Private Limited Company, they should have paid 100% of the Service Tax liability on Manpower supply services rendered to their clients instead of 25% of the liability, as reverse charge mechanism envisaged under Notification No. 30/2012-S.T., dated 20-6-2012 was not applicable to them. Thus a demand of Rs. 80,22,513/- was raised on them. The Applicant contended that they were totally new to business segment and not well-versed with the rules and regulations. On initiation of investigation they had p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or them to approach the proper authority and seek refund. Payment of Service Tax by the service recipients of the Applicant cannot extinguish the liability cast on the Applicant. Therefore, the Bench is of the view that the Applicant is required to pay an additional Service Tax of Rs. 6,70,831/-. The Bench, thus, settles the Service Tax liability at Rs. 80,30,602/- (Rs. 80,22,513 + Rs. 8,089/- (not covered in the Show Cause Notice, but accepted by the Applicant and paid). The Applicant, having paid Rs. 73,59,771/- (Rs. 73,51,682/- + Rs. 8,089/-), is required to pay the remaining amount of Rs. 6,70,831/-. 5.4 As regards the interest liability, the Applicant had paid a sum of Rs. 13,16,371/-, which has been accepted by the jurisdictional Commissioner. The jurisdictional Commissioner had also reported that the interest payable on the amounts paid by them was Rs. 12,49,461/-. However, as the Applicant is required to pay an additional amount of Rs. 6,70,831/- towards Service Tax, the quantum of interest payable shall vary and the Applicant shall work out the revised interest liability to the satisfaction of the Jurisdictional Commissioner. Penalty : 5.5 This case was invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , thirty thousand six hundred and two only). The Applicant, having paid Rs. 73,59,771/- (Rupees Seventy-three lakhs fifty-nine thousand seven hundred and seventy-one only) is required to pay the remaining amount of Rs. 6,70,831/- (Rupees Six lakhs seventy thousand eight hundred and thirty-one only). ii. The Applicant shall work out the interest liability afresh to the satisfaction of the jurisdictional Commissioner. After adjusting the sum of Rs. 13,16,371/- (Rupees Thirteen lakhs sixteen thousand three hundred and seventy-one only) already paid, the Applicant is required to pay the balance interest, if any. iii. The Bench imposes a penalty of Rs. 2,00,000/- (Rupees Two lakhs only) on the Applicant and grants waiver in excess of the penalty imposed. iv. The Bench imposes penalty of Rs. 10,000/- (Rupees Ten thousand only) on Shri Pogiri Narasimha Murthy, Co-Applicant, under the provisions invoked in the show cause notice and grants waiver in excess of the penalty indicated herein. v. The Applicant and the Co-Applicant shall pay the amounts ordered above in Para 6.1(i), (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X
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