2019 (1) TMI 777 - AT - Service Tax

Tribunal emphasizes substance over procedure in tax appeal, ruling in favor of appellant.

M/s. Krishna Developers Versus CCE, Indore

M/s. Krishna Developers Versus CCE, Indore - TMI Issues:Assessment of Service Tax on construction services, consideration of sundry debtors, abatement eligibility, refund amount not shown in returns, compliance with Rule 6(3) of Service Tax Rules, 1994, procedural lapse in not separately showing credit in return form.Analysis:1. Assessment of Service Tax on Construction Services:The appellant, engaged in providing construction services, faced a demand for service tax based on a search revealing discrepancies in their ST-3 returns. The issue arose from not considering the quantum of sundry debtors for tax assessment and not accounting for book adjustments in service tax calculations. Additionally, the eligibility for abatement was questioned due to the area of flats exceeding 2000 sq. ft. The demand was made for the period 2011-12 to 2012-13, leading to a Show Cause Notice and subsequent orders confirming the demand.2. Refund Amount Not Shown in Returns:The primary contention of the appellant was that the demand was based on the refund amount not separately reflected in their returns. The appellant argued that they had started the project before the imposition of service tax on builders and had refunded advance amounts due to customer cancellations. The appellant cited Rule 6(3) of the Service Tax Rules, 1994, which allows adjustment of excess service tax paid against future liabilities in case services were not provided.3. Compliance with Rule 6(3) of Service Tax Rules, 1994:The appellant provided detailed refund details, demonstrating compliance with Rule 6(3) by refunding advance amounts to customers who had cancelled their bookings. The documents presented by the appellant, along with payment challans, supported the claim of refund adjustments made against the gross value. The Tribunal found sufficient evidence to prove compliance with the rule, contrary to the Commissioner (Appeals)’s assertion of lack of documentation.4. Procedural Lapse in Not Separately Showing Credit in Return Form:The Tribunal acknowledged that while the credit adjustment was not separately shown in the return form, it was a procedural lapse rather than a substantive issue. Citing legal precedent, the Tribunal highlighted that technical procedural lapses are condonable, especially when no revenue loss occurs. As the appellant had not availed credit in excess and had paid the tax due, the procedural error was considered inconsequential, leading to the appeal being allowed and the order set aside.In conclusion, the Tribunal ruled in favor of the appellant, emphasizing that technical procedural lapses should not result in the denial of substantial benefits when no revenue loss is incurred. The judgment highlighted the importance of compliance with legal provisions and the distinction between substantive and procedural issues in tax matters.