2019 (2) TMI 28 - AT - Service Tax

Tribunal remands appeal for further verification and adjudication, addressing service tax, legal interpretation, and valuation.

M/s Aviva Life Insurance Co. India Limited Versus CST, Delhi-II

M/s Aviva Life Insurance Co. India Limited Versus CST, Delhi-II - TMI Issues:- Short levy of service tax based on discrepancy between balance sheet and service tax return for the appellant during the audit period.- Interpretation of relevant provisions of the Finance Act, 1994, Service Tax Rules, and circulars concerning liability to pay service tax for services received from foreign-based service providers.- Assessment of taxable value for services received by the appellant and the implications of differences in financial reporting between balance sheet and service tax return.- Validity of disallowing credit to the appellant for certain expenses and adjustments made in the balance sheet.Analysis:1. Short Levy of Service Tax:The Department alleged short levy of service tax on the appellant based on discrepancies between the figures reported in the balance sheet and the service tax return during the audit period. The show cause notice proposed a substantial demand, which was confirmed by the Commissioner. The appellant contended that the differences were due to the nature of financial reporting in the balance sheet and the service tax return, arguing that the balance sheet reflects overall financial details, not specifically service-related payments. The appellant requested the demand to be set aside.2. Interpretation of Relevant Provisions:The Tribunal analyzed the relevant provisions of the Finance Act, 1994, particularly Section 66A concerning services provided by foreign-based service providers to recipients in India. The Tribunal highlighted the obligations of the appellant as the service recipient under the Act. Additionally, Rule 2(1)(d)(iv) of the Service Tax Rules and Notification No. 36/2004-ST were considered in determining the liability to pay service tax for specific services received by the appellant.3. Assessment of Taxable Value:The Tribunal examined the valuation of taxable services under Section 67 of the Act, emphasizing that the gross amount charged by the service provider is the taxable value. In this case, discrepancies were noted in foreign exchange expenses between the balance sheet and the service tax return. The Tribunal provided detailed analysis on specific expenses such as employee salaries, travel abroad expenses, medical check-up costs, and reinsurance premium remittance, addressing the tax implications and the need for further verification by the authorities.4. Validity of Disallowing Credit:The Tribunal scrutinized the disallowance of credit to the appellant for certain expenses and adjustments made in the balance sheet, such as salary payments, travel expenses, medical check-up costs, and reinsurance premium remittance. The Tribunal emphasized the importance of verifying the taxability of these expenses and the impact of adjustments on the credit availment scheme. The Tribunal allowed the appeal by remanding the case for further verification and adjudication by the authorities, highlighting the need to recheck the assessed values and consider any limitations.In conclusion, the Tribunal's judgment addressed the complex issues of short levy of service tax, interpretation of legal provisions, valuation of taxable services, and the validity of disallowing credit, providing detailed analysis and directions for further assessment and verification by the authorities.