2023 (9) TMI 927 - AT - Service Tax

Appeal allowed, demand for service tax & penalty set aside under Section 78. Lack of evidence cited.

The Tribunal allowed the appeal filed by the Appellant, setting aside the demand for service tax and the penalty under Section 78. The Tribunal found the ... Non-payment of service tax - Supply of Tangible Goods Service - suppression of gross amount received by them in respect of services - invocation of extended period of limitation - penalty u/s 78 of FA. The demand notice was issued based on the data received from the Income Tax Department. HELD THAT:- The impugned order concluded that in these Bills the Appellant has charged rent on the tangible goods namely, JCB and Trucks, on the basis of number of days of hire. Prior to 01.07.2012, such supplies were liable to service tax under the category of 'Supply of tangible goods' as defined under Section 65(105)(zzzzj) of the Finance Act, 1994. With effect from 01.07.2012, the transfer of goods by way of hiring, leasing, licensing or any such manner without transfer of right to use such goods has been declared as 'deemed service'. Accordingly, the impugned order has justified the demand of service tax by treating the entire amount shown in the AS26 statements as amount received towards rendering of taxable service. From the records it is observed that no effort has been made by the department to ascertain whether the right to use the JCBs and Trucks have been transferred to the customers or retained by the Appellant. Without such ascertainment, it would not be possible to conclude whether the service would fall within the ambit of 'deemed service' or not. The Appellant relied on the decision of the Tribunal in the matter of M/S KUSH CONSTRUCTIONS VERSUS CGST NACIN, ZTI, KANPUR [2019 (5) TMI 1248 - CESTAT ALLAHABAD] and contended that the liability of service tax cannot be determined merely on the basis of Income Tax Returns / Form 26AS - From the decision cited, it is observed that the demands confirmed merely on the basis of the data available in the Income Tax Returns/AS26 Statements is not sustainable. It must be established that the amount shown in the AS26 statements are actually received in connection with taxable service rendered by the Appellant. As the department has not brought in any positive evidence to substantiate the allegation that the amounts received are towards rendering of taxable service liable for service tax, the demand confirmed in the impugned order is not sustainable. Imposition of penalty under section 78 of the Finance Act, 1994 - HELD THAT:- No evidence has been brought on record to establish that the appellant has rendered any taxable service liable for service tax. As the liability of service tax on the Appellant was not established, the question of evasion of tax or having an intention to evade tax does not arise. Accordingly, no penalty is imposable under Section 78 of the Finance Act, 1994 and the same is set aside. Appeal allowed. Issues:The issues involved in the judgment are the demand for service tax on taxable services provided by the Appellant, the basis of confirmation of the demand by the department, the contention of the Appellant regarding the nature of transactions and liability for service tax, and the imposition of penalty under Section 78 of the Finance Act, 1994.Demand for Service Tax:The Appellant, engaged in taxable services, was alleged to have suppressed gross amounts received and not paid service tax for the Financial Year 2015-16. The demand was confirmed based on entries in Form 26AS without verification of the nature of activities or liability for service tax. The Appellant argued that the demand was based on presumption and lacked evidence to substantiate taxable services rendered.Nature of Transactions and Liability for Service Tax:The Appellant contended that the transactions with a contractor did not involve taxable services as claimed by the department. They argued that the right of possession and effective control of goods were transferred to the service recipient, thus not satisfying the conditions for classifying the service under 'Supply of Tangible Goods Service.' The Appellant relied on legal precedents to support their argument.Confirmation of Demand and Imposition of Penalty:The department justified the demand for service tax based on the bills submitted by the Appellant and the deemed service provisions post-July 2012. However, the Tribunal observed that no effort was made to ascertain the transfer of right to use goods. The Appellant's argument that the demand was not sustainable solely based on AS26 statements was supported by legal decisions. The Tribunal held that without evidence of taxable services, the penalty under Section 78 was not imposable.Conclusion:The Tribunal set aside the impugned order, allowing the appeal filed by the Appellant. The demand for service tax was deemed unsustainable due to lack of evidence of taxable services rendered. The penalty under Section 78 was also set aside as the liability for service tax was not established. The judgment was pronounced in the open court on 15.09.2023.