No Service Tax Can Be Determined Without Clarifying The Category Of Service Under Which The Said Amount Can Be Attributed: CESTAT

Under Section 78 of the Finance Act, 1994, if service tax has not been levied, paid, short-levied, short-paid, or erroneously refunded due to fraud, collusion, willful misstatement, suppression of facts, or contravention with the intent to evade payment, the person served with a notice under section 73(1) is liable to pay the service tax amount due, interest on this amount, and a penalty equal to 100% of the service tax amount.

The Bench of Binu Tamta (Judicial Member) has observed that “it appears that amount of Rs.25,83,338/- has been directly taken from Note 16 of the balance sheet, whereas the assessee had taken the amount as per the Ledger records. The revenue was required to clarify the service under which the differential amount of ₹56,169/- was chargeable.”

The appellant/assessee, faced a discrepancy during an audit and reconciliation of figures of amounts received against various financial services shown in the profit and loss accounts and ST-3 returns pertaining to the year 2012–13. A difference of ₹25,83,338/- was found between the taxable value in the profit and loss account and the ST-3 returns. A show cause notice was issued demanding service tax for various charges totalling ₹30,215/-, which was later confirmed by the adjudicating authority. An appeal was filed by the assessee before the Commissioner (Appeals) and the matter was remanded back for fresh adjudication. On remand, the adjudicating authority dropped the demand of ₹2,89,086/-, but confirmed the demand of ₹30,215/- along with interest and penalty in terms of section 78 of the Finance Act, 1994. Being aggrieved the assessee filed an appeal before the Commissioner (Appeals), who rejected the appeal. The assessee has challenged the order passed by the Commissioner (Appeals) before the Tribunal.

The assessee contended that the nature of service on which demand of service tax has been confirmed are either exempted services or no service element is involved and therefore the service tax demand on Road Cutting Charges, Land Application Processing Charges, and Street Light Charges are liable to be set aside.

The Tribunal observed that differential value of service tax has been included by the revenue on the ground that the assessee had justified sum of ₹25,27,169/- only out of the total taxable value shown as Rs.25,83,338/- and therefore on the amount of ₹56,169/-, service tax is leviable. It appears that amount of Rs.25,83,338/- has been directly taken from Note 16 of the balance sheet, whereas the assessee had taken the amount as per the Ledger records.

The revenue was required to clarify the service under which the differential amount of ₹56,169/- was chargeable. The assessee has rightly contended that no service tax can be determined without clarifying the category of service under which the said amount can be attributed. Consequently, the service tax on account of differential value cannot be sustained, added the Tribunal.

The Tribunal noted that the revenue has taken the details of the valuation from the balance sheet and the profit and loss account maintained by the assessee. Hence there is no suppression justifying the invocation of the extended period of limitation.

In view of the above, the Tribunal allowed the appeal.

Counsel for Appellant/ Assessee: Ankur Upadhyay

Counsel for Respondent/ Department: Rohit Issar

Case Title: M/s. M.P. Audyogik Kendra Vikas Nigam (Indore) Ltd. v. Commissioner of Central GST & Central Excise, Indore, M.P.

Case Number: SERVICE TAX APPEAL No. 55053 OF 2023

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