2019 (5) TMI 158 - AT - Service Tax

Tribunal sets aside duty demand, interest & penalty for double taxation, allowing CENVAT credit claim

The Tribunal allowed the appeal, setting aside the duty demand, interest, and penalty imposed on the appellant for paying Service Tax on the net amount ... Valuation - Payment of Service Tax on net amount received by the appellant - violation of Section 67(1) of the Finance Act, 1994 that contemplates payment of Service Tax on gross amount charged for the taxable service - HELD THAT:- Certain amount was paid to M/s ASMACS from such collection towards the service rendered by it and basing on the computer generated copies obtained from M/s ASMACS, appellant was asked to produce cash register, balance sheet etc. The said amount paid to M/s ASMACS also included component of Service Tax which M/s ASMACS paid and that had gone to the credit of appellant but due to erroneous filing of ST-3 return, they failed to put the CENVAT credit in the appropriate column for which demand was raised where as duty was not payable as it was a technical error. From para 22.5 (v) as well as show-cause notice, It is found that no invoice/bill was raised against such collection from the candidates and therefore the amount shown in the balance sheet was taken by the respondent-department as the gross value. Therefore, there is no evidence on record to substantiate that the entire bill is raised by the appellant except figure mentioned in the balance sheet. Service Tax was paid by the appellant and M/s ASMACS separately on the gross amount collected and distributed between them and imposing duty liability on the appellant, on the ground that it had paid the same alone on the net amount would amount to double taxation, which no law of the land had ever approved of. Appeal allowed - decided in favor of appellant. Issues:Payment of Service Tax on net amount received in violation of Section 67(1) of the Finance Act, 1994.Analysis:The appellant, engaged in Manpower Recruitment or Supply Agency services, was found to have paid Service Tax on a net amount received, which was in violation of Section 67(1) of the Finance Act, 1994. The case involved a discrepancy where the appellant had paid Service Tax based on the net income after deducting the amount paid to another company, M/s ASMACS, to whom the appellant forwarded selected candidates. The appellant argued that the Service Tax paid by M/s ASMACS should be considered as CENVAT credit, which would negate any tax liability on the appellant. However, the Adjudicating Authority, as well as the Appellate Authority, confirmed the duty demand, interest, and penalty. The appellant appealed the decision, citing procedural lapses and double taxation concerns.During the appeal, the appellant's counsel argued that the denial of substantial benefit due to procedural lapses was unjust. The appellant contended that the net amount shown in the ST-3 return was a technical error, as the amount paid to M/s ASMACS for their services was also subject to Service Tax. The appellant relied on various case laws to support the argument of revenue neutrality and the entitlement to CENVAT credit. On the other hand, the respondent-department contended that the appellant was liable for the duty as there was no contract between the candidate and the appellant vis-a-vis M/s ASMACS, treating the services as two separate entities.After hearing both sides and examining the case records, it was noted that the appellant had been booked based on statements and documents. The appellant's process of preliminary interviews and forwarding selected candidates to M/s ASMACS was considered as a continuous service. The failure to correctly claim CENVAT credit in the ST-3 return led to the demand, even though the duty was not technically payable. The Tribunal found that the entire bill amount was not raised by the appellant, as no invoices were issued against the candidate collections. The Tribunal also emphasized that the CENVAT credit should have been considered, and the appellant and M/s ASMACS had paid Service Tax separately on the gross amount collected and distributed between them.The Tribunal allowed the appeal and set aside the order passed by the Commissioner of CGST and Central Excise Commissionerate, Belapur, Navi Mumbai, dated 24.03.2018, concluding that imposing duty liability on the appellant for paying Service Tax on the net amount would result in double taxation, which was not supported by any law.