2019 (6) TMI 905 - AT - Service Tax

Tribunal upholds service tax demand, interest, penalties in evasion case.

The Tribunal upheld the Order-In-Original, confirming the demand for service tax, interest, and penalties. The appellant's argument that penalties should ... Suppression of facts with intent to evade - proviso to Section 73(1) - invocation of extended period of limitation - penalty for deliberate suppression under Section 78 - interest for delayed payment under Section 75 - personal liability of director under Section 78A and failure to furnish information under Section 77C - appropriation of amounts already deposited / adjustment of CENVAT creditProviso to Section 73(1) - invocation of extended period of limitation - suppression of facts with intent to evade - Confirmation of demand of service tax on receipts from booking/sale of flats for the period July 2010 to March 2014 - HELD THAT: - The Tribunal affirmed the Original Authority's finding that the assessee collected service tax but did not deposit the same on the due dates. The record (Annexure A) shows substantial tax liabilities remained unpaid or were discharged belatedly and partly through CENVAT credit, with payments made well after the prescribed due dates. Registration in June 2011 did not negate the Department's finding of omission during the earlier period and the pattern of non-payment and delayed payments supported the conclusion of suppression with intent to evade. Reliance placed on decisions by the appellant was examined and rejected as distinguishable on facts (e.g., earlier payments with interest or different factual matrices). In view of the proven suppression and delay, invocation of the proviso to Section 73(1) for extended period assessment was sustained and the demand was confirmed.Demand of service tax on receipts from booking/sale of flats for July 2010 to March 2014 confirmed.Taxability of advances - proviso to Section 73(1) - invocation of extended period of limitation - Confirmation of demand of service tax on amounts treated as advances/receipts for the period July 2010 to March 2014 - HELD THAT: - The Tribunal upheld the Original Authority's conclusion that sums shown in balance sheets as advances were taxable and that the assessee had failed to discharge tax on those amounts in time. The adjudicating authority's reliance on available records (including balance sheet entries) to characterize those receipts as taxable advances was accepted. The appellant's contention that such amounts were loans was not accepted on the material before the Authority. Consequently, the demand under the proviso to Section 73(1) was sustained.Demand of service tax on advances/receipts for July 2010 to March 2014 confirmed.Interest for delayed payment under Section 75 - Confirmation of interest for delayed payment of service tax - HELD THAT: - The Tribunal observed that interest on delayed payment was not discharged before issuance of the show cause notice. The payment pattern showed interest was not paid on due dates and therefore the appellant could not escape liability for interest. Distinguishing the decisions cited by the appellant, the Tribunal held that where interest remained unpaid at the time of SCN, the authority was justified in confirming interest under Section 75.Interest for delayed payment confirmed.Penalty for deliberate suppression under Section 78 - Imposition of penalty on the company for deliberate suppression with intent to evade service tax - HELD THAT: - The Tribunal found the Original Authority's conclusion of deliberate suppression to be supported by the record of non-payment and delayed payment of service tax and the failure to file returns timely. The pattern of conduct, including not depositing collected tax on due dates and not paying interest timely, was held to establish intention to evade. The Tribunal therefore did not interfere with the penalty imposed under Section 78.Penalty under Section 78 imposed on the company upheld.Personal liability of director under Section 78A - failure to furnish information / production of documents under Section 77C - Imposition of personal penalties on the director under Section 78A and under Section 77C - HELD THAT: - The Tribunal accepted the Original Authority's finding that the director was in charge of and responsible for conduct of the company's business and was knowingly concerned in the acts of omission and commission. The Authority also recorded failures to furnish information and to appear when called, supporting penal provisions. The Tribunal found no merit in the appellant's challenge that the director's role was not shown and therefore sustained the personal penalties imposed under the cited provisions.Personal penalties on the director under Section 78A and Section 77C upheld.Appropriation of amounts already deposited / adjustment of CENVAT credit - Appropriation of amounts already deposited and adjustment of CENVAT credit against the confirmed demand - HELD THAT: - The Original Authority appropriated the amounts the assessee had deposited, including debits to CENVAT account, against the confirmed demand. The Tribunal noted that payments made were partial and belated and that appropriation by the Authority was within its powers in view of the confirmed demand and the payment history.Appropriation of amounts already deposited (including CENVAT debits) against the confirmed demand sustained.Final Conclusion: Both appeals are dismissed. The Tribunal upholds the Order in Original in all material respects, confirming the demands of service tax (including on advances), interest for delayed payment, appropriation of amounts deposited, and the penalties imposed on the company and the director for the period July 2010 to March 2014. Issues Involved:1. Non-payment of service tax by the appellant.2. Invocation of extended period of limitation due to alleged suppression of facts.3. Imposition of penalties on the appellant and its director.4. Appropriation of already deposited service tax.5. Demand for interest on delayed payment of service tax.6. Classification of advances as loans or taxable services.Issue-wise Detailed Analysis:1. Non-payment of Service Tax:The appellants were engaged in providing taxable services under the category of 'Construction of Residential Complex'. A search conducted on 01 August 2012 revealed that the appellant was collecting service tax from buyers but not depositing it with the exchequer. The show cause notice dated 30 March 2015 alleged that the appellant received Rs. 428,58,76,761/- from customers between July 2010 and March 2014, with a service tax liability of Rs. 12,81,63,138/- which was not deposited timely. The appellant admitted the non-deposition of service tax and subsequently discharged the liability using cash and Cenvat Credit.2. Invocation of Extended Period of Limitation:The show cause notice invoked the extended period of limitation, alleging suppression of facts and intention to evade payment of service tax. The appellant was accused of not declaring their taxable activities and considerations received in their returns, thus escaping proper assessment of service tax. The appellant registered with the Service Tax Department only on 27 June 2011, despite providing taxable services since July 2010.3. Imposition of Penalties:The Original Authority confirmed the demand of service tax and imposed penalties under various sections of the Finance Act, 1994. The penalties included Rs. 13,73,04,094/- under Section 78 for deliberate suppression of facts, Rs. 10,000/- under Section 77(1)(a), Rs. 10,000/- under Section 77(1)(b), and Rs. 1,55,000/- for delayed submission of ST-3 returns. Additionally, a penalty of Rs. 1,00,000/- was imposed on the director under Section 78A, and Rs. 10,000/- under Section 77C for failing to furnish information and appear before Central Excise Officers.4. Appropriation of Already Deposited Service Tax:The Original Authority appropriated the amount of Rs. 12,81,63,138/- already deposited by the appellant against the confirmed demand. The appellant argued that the demand, if confirmed, should not be adjusted towards the amount already paid.5. Demand for Interest on Delayed Payment of Service Tax:The show cause notice demanded interest of Rs. 1,26,89,777/- under Section 75 of the Finance Act, 1994, for delayed payment of service tax amounting to Rs. 12,81,63,138/-. The appellant contended that interest amounting to Rs. 1,22,95,473/- was already paid for late deposit of service tax. However, the Tribunal noted that interest was not paid before the issuance of the show cause notice, and the service tax payable was not paid on due dates, justifying the demand for interest.6. Classification of Advances as Loans or Taxable Services:The appellant argued that the advances received were loans from various parties and not advances from customers, thus not liable for service tax. The Original Authority, however, confirmed the demand of Rs. 91,40,956/- on advances received from customers, as these were not declared as loans in income tax documents.Conclusion:The Tribunal upheld the impugned Order-In-Original, confirming the demand for service tax, interest, and penalties. The Tribunal rejected the appellant's contention that penalties should not be imposed as the tax along with interest was deposited before the issuance of the show cause notice. The Tribunal also found that the appellant had collected service tax but failed to deposit it timely, proving the allegations of suppression and intention to evade payment. Consequently, both appeals were rejected.Order Pronounced in the open Court on 18 June, 2019.