2014 (7) TMI 744 - AT - Service Tax

Court quashes service tax order due to lack of evidence

M/s. Prabhu Dayal Kanojiya Versus CCE, Jaipur

The appeal was successful as the court quashed the service tax order confirming liability under Section 73A(4) of the Finance Act, 1994, along with ... Commercial or Industrial Construction Service - Works contract service for Delhi Jal Board - Tax imposed on the basis of agreement which states that 'if payable is extra, it must be inferred that the appellant had collected the amount of service tax' - Held that:- The conditions precedent for ordering any person to remit (an amount collected as service tax, which is not required to be so collected), is a finding of fact that the person had in fact collected an amount towards service tax even though no service tax liability arises under the transaction qua which such collection is made. This finding of fact must be recorded by the Revenue. The liability to remit service tax under Section 73 A(2) does not arise on the basis of a mere permission in an agreement that the liability to compensate/reimburse to service tax liability of the service provider, is on the service recipient. Sub-section (3) of Section 73(A) requires a notice to be issued to show cause why the amount, as specified in the notice, in respect of a liability arising under Section 1 and 2, should not be paid by the Noticee to the credit the Central Government. - The show cause notice in this case failed to allege that the appellant had collected service tax of ₹ 41,18,665/- from the Delhi Jal Board - Impugned order unsustainable - Decided in favour of assessee. Issues: Appeal against service tax order confirming liability under Section 73A(4) of the Finance Act, 1994, along with interest and penalties. Issue of liability to remit service tax collected under Section 73A(2) based on a specific work order.Analysis:Issue 1: Liability under Section 73A(4) of the Finance Act, 1994The appellant appealed against the order confirming a service tax liability of &8377; 4,18,665/- under Section 73A(4) of the Finance Act, 1994, along with interest and penalties. The proceedings were initiated through a show cause notice proposing a service tax levy for various services provided. The appellant contended that the services provided fell within the scope of Commercial or Industrial Construction Service but argued that the works executed were not for commercial or industrial purposes. The Adjudicating Authority accepted the classification of the services but concluded that the works executed fell outside the taxable service definition. However, a demand for &8377; 4,18,665/- was confirmed based on a specific work order involving construction of digester domes for the Delhi Jal Board. The Authority observed that since the agreement mentioned the service tax element as extra, it was inferred that the appellant had collected the service tax amount, leading to the demand.Issue 2: Liability to remit service tax collected under Section 73A(2)Section 73A of the Act outlines provisions for the liability to remit service tax collected by a person. Sub-section (2) specifies that if a person collects an amount not required as service tax, it should be paid to the Central Government. The judgment emphasized that a factual finding of the person collecting service tax is essential for passing an order under this provision. The show cause notice in this case did not allege that the appellant had collected the service tax amount from the Delhi Jal Board, leading to the conclusion that the liability to remit the service tax under Section 73A(2) was not established.In conclusion, the judgment quashed the impugned order as it lacked the necessary factual finding of the appellant collecting the service tax amount. The appeal was allowed with no costs incurred.