2018 (12) TMI 260 - AT - Service Tax

Tribunal sets aside order, exempts services in J&K, upholds penalty. Cenvat Credit granted.

The tribunal allowed the appeal, setting aside the impugned order. Key points include the time-barred nature of demands prior to 23.10.2008 and the second ... Supply of Tangible Goods Services - non-payment of Service Tax - appellant had been collecting Service Tax from its customers since 2008, but had not deposited the same with the Government Exchequer - demand alongwith interest and penalty - extended period of limitation - Best Judgment method as prescribed under Section 72 of Finance Act, 1994 - Held that:- The Learned Commissioner while confirming the demand in respect of the service provided in J&K has held that the appellant has not been able provide the details, supported by documents whereas the said amounts were reflected in the Balance Sheets, perused by the department. The learned Commissioner has taken total receipts from 01.04.2008 to 31.03.2014 for calculating the Service Tax. Service Tax on Supply of Tangible Goods Service came w.e.f 16.05.2008 therefore receipts before 16.5.2008 were not taxable - Further first Show Cause Notice was issued on 21.10.2013, thus the demand for the period from 16.05.2008 to 20.10.2013 is held beyond the extended period of limitation. Further, it is admitted in the impugned order that the appellant was registered with the Department vide Service Tax Registration No. AACCD1501GST001 for providing “Supply of Tangible Goods Services”, therefore it cannot be alleged that the appellant had suppressed anything from the department. Best Judgement assessment - Held that:- It is admitted in the impugned order that the department obtained total receipt value for the preceding years from the appellant. There is no reason that the department could not get the actual receipts details for the year 2013-14 also - This Tribunal in the case of Shubham Electricals Vs Commissioner of C.Ex. & S.T., Rohatak [2015 (6) TMI 786 - CESTAT NEW DELHI] has held that a best judgment assessment should be based on material and data on record. It is not a tool in the hands of the Adjudicating Authority to punish the assessee. The estimation should be fair and reasonable, and not a wild guess work. The appellant has submitted all calculations of admitted tax liabilities, and deposit of Tax, duly certified by a Chartered Account with the appeal - the impugned order suffers from infirmities as explained and is not sustainable under the law. Appeal allowed. Issues Involved:1. Service Tax liability on services provided in Jammu & Kashmir.2. Appropriation of Service Tax collected but not deposited.3. Calculation of taxable turnover and application of Best Judgment method.4. Invocation of extended period of limitation.5. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.Issue-wise Detailed Analysis:1. Service Tax Liability on Services Provided in Jammu & Kashmir:The appellant contested the demand of service tax on services provided in Jammu & Kashmir, arguing that service tax is not leviable on services provided in Jammu & Kashmir under the Finance Act, 1994. The appellant provided evidence that services originated and terminated in Jammu & Kashmir, thus qualifying for exemption under Section 64 of the Finance Act, 1994. The tribunal directed the appellant to submit sample invoices and passenger manifests, which substantiated their claim. Consequently, the tribunal held that services amounting to Rs. 29,41,62,101 provided in Jammu & Kashmir were exempt from service tax.2. Appropriation of Service Tax Collected but Not Deposited:The appellant admitted to collecting service tax from customers but not depositing it due to a misunderstanding that they were not liable to pay service tax if they had paid service tax on inputs. The appellant had deposited Rs. 38,00,000 towards service tax and interest, which was appropriated by the Commissioner. The tribunal noted that the appellant had maintained the RG-23 Register and paid tax from CENVAT Credit, which the Commissioner ignored.3. Calculation of Taxable Turnover and Application of Best Judgment Method:The appellant challenged the Commissioner’s method of calculating taxable turnover by taking gross receipts from the balance sheets and applying the Best Judgment method for the year 2013-14. The tribunal found that the Commissioner had erred in taking the total receipts from 01.04.2008 to 31.03.2014 for calculating service tax, including receipts before 16.05.2008, when the service tax on Supply of Tangible Goods Service became effective. The tribunal referenced the case of Shubham Electricals, emphasizing that a best judgment assessment should be fair and reasonable, not arbitrary.4. Invocation of Extended Period of Limitation:The appellant argued that the extended period of limitation was not invokable as there was no intent to evade tax, and all necessary information was provided to the department. The tribunal agreed, noting that the demand for the period from 16.05.2008 to 20.10.2008 was beyond the extended period of five years and thus time-barred. The tribunal also found that the first Show Cause Notice (SCN) issued on 21.10.2013 was beyond the extended period for services provided before 23.10.2008.5. Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994:The appellant contended that penalties under Sections 76, 77, and 78 were not leviable due to bona fide reasons for non-payment of tax. The tribunal upheld the penalty under Section 77 for non-filing or late filing of returns but set aside penalties under Sections 76 and 78, as the appellant had not willfully suppressed facts.Conclusion:The tribunal set aside the impugned order, allowing the appeal with the following key points:- Demand for the period prior to 23.10.2008 was time-barred.- The second SCN dated 24.04.2015 for the period 2013-14 was time-barred.- Services amounting to Rs. 29,41,62,101 provided in Jammu & Kashmir were exempt under Section 64 of the Finance Act.- Penalty under Section 77 was upheld.- The appellant was entitled to Cenvat Credit on spare parts and input services.