2019 (12) TMI 338 - AT - Service Tax

Partial success in appeal: re-verification of ST-3 returns, service tax on Modems, Cenvat credit, telephone services

M/s Bharat Sanchar Nigam Limited Versus Commissioner of Service Tax – Delhi

M/s Bharat Sanchar Nigam Limited Versus Commissioner of Service Tax – Delhi - TMI Issues Involved:1. Short-payment of service tax as per reconciliation of ST-3 returns and income shown in accounts.2. Short-payment of service tax on proceeds of Modem being part of taxable services.3. Wrong availment of service tax credit on rent-a-cab services.4. Wrong availment of service tax credit on invoices without service tax registration number/STC of service provider.5. Non/short payment of service tax on telephone service provided to employees.6. Non-reversal of Cenvat Credit under Rule 6(3) of Cenvat Credit Rules, 2004.Issue-wise Analysis:Issue-1: Short-payment of service tax as per reconciliation of ST-3 returns and income shown in accountsThe appellant argued that the adjudicating authority did not consider the complete ST-3 returns, leading to an incorrect finding. The appellant provided additional documents showing an excess payment of Rs. 23,67,540/- towards service tax. The Tribunal found that the appellant's document, reflecting extra payment, should be re-verified by the adjudicating authority. The issue is remanded back for re-verification of ST-3 returns.Issue-II: Short-payment of service tax on proceeds of Modem being part of taxable servicesThe appellant claimed that Modems were given to customers free of charge and without VAT liability, hence no service tax was applicable. However, the absence of invoices made it impossible to verify if Modems were part of the telecommunication service value. The Tribunal upheld the adjudicating authority's decision, confirming the demand for service tax on Modems.Issue-III: Wrong availment of service tax credit on rent-a-cab servicesThe appellant acknowledged the wrongful availment of Cenvat credit on rent-a-cab services. The Tribunal upheld the adjudicating authority's demand on this aspect due to the appellant's admission.Issue-IV: Wrong availment of service tax credit on invoices without service tax registration number/STC of service providerThe appellant contended that the absence of PAN-based registration numbers on invoices was a procedural lapse and provided those numbers during the audit. The Tribunal noted that except for M/s L.K. Enterprises, other service providers had discharged their tax liabilities. The Tribunal set aside the demand except for M/s L.K. Enterprises, and remanded the issue to calculate the amount to be recovered from the appellant.Issue-V: Non/short payment of service tax on telephone service provided to employeesThe appellant argued that telephone services provided to employees free of cost were not taxable as they were not services to third parties. The Tribunal agreed, stating that the services were for the efficiency of the appellant's operations and not against any consideration. The demand was set aside.Issue-VI: Non-reversal of Cenvat Credit under Rule 6(3) of Cenvat Credit Rules, 2004The appellant acknowledged the reversal of the proposed amount of credit. The Tribunal upheld the adjudicating authority's order disallowing the credit and confirming the reversal.Conclusion:The appeal was partly allowed with the following directives:1. Remand for re-verification of the difference between trial balance and ST-3 returns.2. Confirmation of service tax demand on Modems.3. Confirmation of Cenvat credit on rent-a-cab services.4. Set aside the denial of Cenvat credit on invoices except for M/s L.K. Enterprises, with remand for calculation.5. Set aside the demand for telephone services to employees.6. Confirmation of the reversal of Cenvat credit under Rule 6(3) CCR, 2004.The adjudicating authority is required to re-adjudicate on the remanded issues.