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 demand unsustainable due to a lack of evidence supporting taxable services rendered by the Appellant, particularly noting the absence of verification regarding the nature of activities or liability for service tax. The decision was made on 15.09.2023 in open court.

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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.

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