2019 (3) TMI 1387 - AT - Service Tax

Tribunal overturns tax demand due to lack of investigation into donations

The tribunal set aside the order confirming a service tax demand of Rs. 1,08,292/- against the appellant for a discrepancy in data between ST-3 returns ... Non-payment of service tax - excess amount of ₹ 16,69,841/- collected from customers/public which were not shown in the periodical ST-3 returns - mandap keeper service - Held that:- Undisputedly, the appellants are a charitable organisation. Although, they are rendering Mandap Keeper Services, they may also be receiving funds in the nature of donation. The learned counsel for the appellants has furnished the details with regard to the amount received by the appellants in the nature of donation. The department has not done any investigation so as to check whether such amounts were received from various persons. Being a charitable organisation, a strong inference can be drawn that the amount received are in the nature of donations only. The demand is raised on mere assumption that appellant has not been able to explain that these are donations. The department has not been able to support their allegation with evidence that the said amount were collected for providing services of Mandap Keeper. Demand do not sustain - appeal allowed - decided in favor of appellant. Issues:1. Discrepancy between data in ST-3 returns and financial statements.2. Service tax liability on excess amount collected.3. Applicability of service tax on donations received.4. Failure to provide evidence of donations.5. Justification for demand raised by the department.Analysis:1. The case involved a discrepancy between the data furnished in the ST-3 returns and the Profit & Loss Account in the Balance Sheet, where an excess amount of Rs. 16,69,841/- collected from customers was not reflected in the periodical ST-3 returns. This led to a show-cause notice proposing a demand for service tax of Rs. 1,08,292/- along with interest and penalties, which was confirmed by the original authority and upheld by the Commissioner (Appeals).2. The appellant argued that the difference in figures was due to donations received, which are not subject to service tax. They provided details of donations received, amounting to Rs. 16,09,264/- during the disputed period. Additionally, they explained discrepancies due to advance payments received in one financial year for services rendered in the next. Despite presenting evidence, the authorities failed to consider the nature of the disputed amount as donations.3. The Revenue's representative contended that the appellant failed to prove the amount was received as donations and did not explain the discrepancies. However, the tribunal noted that being a charitable organization, the appellant may receive funds as donations alongside providing Mandap Keeper Services. The department did not investigate the source of these funds and raised the demand based on assumptions rather than concrete evidence.4. The tribunal observed that as a charitable organization, the appellant likely received the amounts in question as donations for specific purposes like building construction or setting up a dispensary, as accounted for in the General Fund Account. The demand was deemed unsustainable as the department could not prove that the funds were collected for Mandap Keeper Services, and the appellant's explanation of donations was plausible.5. Ultimately, the tribunal set aside the impugned order, allowing the appeal with consequential reliefs, highlighting the lack of evidence supporting the department's claim that the disputed amounts were not donations. The decision emphasized the importance of considering the nature of funds received by charitable organizations and the need for proper investigation before raising tax demands.