2018 (5) TMI 486 - AT - Service Tax

Dispute over service tax liability, penalties remanded for reconciliation

The case involved a dispute regarding the discharge of service tax liability for a specific period, resulting in a demand with interest and penalty under ... Short payment of service tax - main allegation is that service tax paid by the tax payer as shown in the ST-3 returns for this period was less than the tax payable as calculated on the value shown in the same ST-3 returns by them for the impugned period - penalty - Held that: - it is clear that the adjudicating authority has primarily focused on comparing the figures given by the appellants in the first and second round of adjudication. In the first round of litigation, CESTAT Chennai had clearly indicated that the adjudicating authority came to pass the impugned demand as the proper reconciliation exercise was avoided. These directions of the CESTAT Chennai have evidently not been followed in the de novo adjudication. In the circumstances, while this Bench is averse to remand matters again and again, we are left with no other alternative but to once more send the matter back to the adjudicating authority to cause reconciliation as per the directions already given by the Tribunal Penalty - Held that: - the issue is on a matter of interpretation of the figure provided by the appellants - there is definitely a case for waiver of penalty imposed under Section 78 since none of the ingredients which call for imposition of penalty under that section is present. Matter is remanded to the adjudicating authority for de novo adjudication - appeal allowed by way of remand. Issues:1. Discharge of service tax liability for the period October 2005 to March 2006.2. Allegation of underpayment of service tax by the taxpayer.3. Confirmation of demand, interest, and penalty by the adjudicating authority.4. Appeal to CESTAT Chennai and subsequent remand for fresh adjudication.5. Discrepancies in data furnished by the appellants in different rounds of adjudication.6. Misinterpretation of the new format of ST-3 returns.7. Justification for the imposition of penalty under Section 78 of the Finance Act, 1994.Analysis:1. The case involved the appellants providing various taxable services but failing to discharge their service tax liability fully for the period October 2005 to March 2006, leading to a demand of Rs. 1,86,23,877 with interest and a penalty of Rs. 2,00,00,000 under Section 78 of the Finance Act, 1994.2. Upon appeal, CESTAT Chennai remanded the matter for fresh adjudication, emphasizing the need for full reconciliation after allowing the appellants to present their case adequately. The Commissioner, in the de novo adjudication, confirmed the same demand and penalty, leading to the current appeal.3. During the hearing, the appellants argued that the discrepancies arose due to errors in reporting caused by the new format of ST-3 returns, where the taxable value was mistakenly indicated as inclusive of tax, resulting in a higher service tax demand. They requested a remand with specific directions for reconciliation based on the data submitted in the second round of adjudication.4. The adjudicating authority, however, noted differences in the data furnished by the appellants in different rounds of adjudication, leading to a lack of reconciliation and justification for the demand. The issue of penalty hinged on the interpretation of the figures provided by the appellants in the ST-3 returns.5. The CESTAT Chennai's earlier directions for full-scale reconciliation were not followed in the de novo adjudication, prompting the current Bench to remand the matter once more for reconciliation based on the data provided during the second round of adjudication.6. Considering the misinterpretation of the ST-3 return format and the absence of grounds for penalty under Section 78, the Bench set aside the penalty and remanded the matter for fresh adjudication in line with the Tribunal's earlier directions.This detailed analysis highlights the issues of underpayment, discrepancies in data, misinterpretation of tax figures, and the justification for penalty in the legal judgment, ultimately leading to a remand for fresh adjudication.