2023 (11) TMI 1269 - AT - Service Tax

Service tax demands partially set aside due to calculation errors and CENVAT credit issues under Section 75

M/s Origin Advertising Pvt. Ltd. Versus Commissioner of Central Excise & Service Tax

CESTAT Allahabad partially allowed the appeal. The tribunal set aside several demands including Rs.4,38,694.72 due to incorrect abatement calculation, ... Full benefit of abatement to the extent of 85%, in terms of Circular No. 341/43/96- TRU dated 31.10.1996 - service tax on services provided by appellant as sub-contractor prior to Sep 2004, on which service tax liability has been discharged by the contractor - Non-consideration of payment of service tax through CENVAT while calculating amount of service tax paid - Application of rate of tax on the date of provision of services - Grossing up of taxable amount due to inadvertent mentioning of service tax with taxable value of services in some returns - interest - penalties - Extended period of limitation. Full benefit of abatement to the extent of 85%, in terms of Circular No. 341/43/96- TRU dated 31.10.1996 - HELD THAT:- The revenue authorities have acknowledge that revenue agrees that the abatement as claimed by the party i.e. Rs.14,02,0962.21 is correct. However, in the Order-in-Original abatement has been allowed to the extent of Rs.88,93,618/- resulting in confirmation of the demand of Rs.4,38,694.72. However, if the abatement claim as claimed by the party and verified by the officers is allowed. The net demand which is made on this account cannot survive and the same needs to be set aside - Demand set aside. Service tax on services provided by appellant as sub-contractor prior to Sep 2004, on which service tax liability has been discharged by the contractor - HELD THAT:- Officers have found that this amount is recoverable and appellants have contested the demand relying upon the decision of Larger Bench of this Tribunal in the M/s Melange Developers Pvt. Ltd. [2019 (6) TMI 518 - CESTAT NEW DELHI-LB] wherein the Larger Bench of this Tribunal has held that in the absence of any exemption granted subcontractor is required to discharge the tax liability, the service recipient i.e. the main contractor can avail the benefit of Cenvat credit. Accordingly, it is the view that has been canvassed by the department in the matter - In the verification report officers have referred to Master Circular No.96/7/2007 dated 23.08.2007 wherein similar views has been taken. Hence, in absence of any contrary verification/decision at the relevant time, this argument for setting aside the demand is rejected and the order of this account needs to be confirmed. Non-consideration of payment of service tax through CENVAT while calculating amount of service tax paid - HELD THAT:- In respect of demand of Rs.3,52,356/-, officers have agreed that this demand has been made without considering the payments made from the Cenvat Account. This resulting in confirmation of the demand which was already paid by the appellant. In view of the categorical recommendation made by the officers, there are no merits in this demand and set aside the same. Application of rate of tax on the date of provision of services - HELD THAT:- Officers concluded that the rate as applicable at the time of rendering of the service should have been applied. Accordingly, this demand is based on application of erroneous rate of taxation is a basic foundation for his correct application on rate of tax this demand made by application, incorrect rate of taxes needs to be set aside. Grossing up of taxable amount due to inadvertent mentioning of service tax with taxable value of services in some returns - HELD THAT:- The appellant has contested this demand stating that the amount of taxable value indicated in ST-3 returns advertently included the service tax also. Officers verifying the same agree to the contention raised by the appellant. However, they refuse to comment on admissibility of the same as this issue was not raised at the time of adjudication. There are merits in the contention raised and the benefit for computing the taxable values the service tax paid has to be detected from the gross value as per Section 67 (2) of the Finance Act, 1994. Thus the amount of Rs.14,65,840/- as determined by the officers in their report in respect of such clerical error needs to be deleted from the total demand as confirmed by Order-in-Original. Extended period of limitation - penalties - HELD THAT:- The findings recorded by the Commissioner as observed is based upon various decisions of the Tribunal, wherein it has been held that delay in not filling of ST-3 returns amounts to suppression of facts for invoking the extended period. The said findings agreed upon as it was the statutory obligation imposed on the appellant to have filed ST-3 returns in time. In absence of the same the charge of suppression during the material period has to be upheld that being so invocation of extended period in the present case is justified and upheld - As the demand upheld only to the extent of Rs.5,04,247.52 + Rs.3,95,994/- = Rs 9,00,241.52/- the penalty imposed under Rule 15 of CENVAT Credit Rules,2004 read with Section 78 of the Finance Act,1994 is reduced to that extent. Interest - HELD THAT:- In respect of the amounts confirmed the demand for interest under Section 75 is upheld. Appeal allowed in part. Issues Involved:1. Demand of Service Tax2. Wrong Availment of Cenvat Credit3. Delayed Payment of Service Tax and Submission of ST-3 Returns4. Invocation of Extended Period for DemandSummary:1. Demand of Service Tax:The Tribunal addressed the demand of service tax amounting to Rs.30,33,510.00 u/s 73(1) of the Finance Act, 1994, along with applicable interest u/s 75. The appellant argued against the extended period of limitation and the merits of the demand, citing various discrepancies and clerical errors. The Tribunal considered the reconciliation report and found that certain demands were not sustainable, including:- Rs.4,38,694.92 for abatement not provided.- Rs.3,52,356 for non-consideration of payment through CENVAT.- Rs.2,66,019 for incorrect application of the tax rate.- Rs.14,65,840.40 for grossing up of taxable amount.The Tribunal upheld the demand of Rs.5,04,247.52 for services provided by the appellant as a sub-contractor, confirming that sub-contractors are liable for service tax even if the main contractor has paid it.2. Wrong Availment of Cenvat Credit:The Tribunal confirmed the wrong availment of Cenvat credit amounting to Rs.10,46,676.00 u/s 73(1) of the Finance Act, 1994, read with Rule 14 of the Cenvat Credit Rules, 2004. The appellant's contention that the invoices contained the requisite details was partly accepted, allowing credit for Rs.8,31,382.00. However, the Tribunal upheld the disallowance of Rs.3,95,994.00 due to missing details and repeated credits.3. Delayed Payment of Service Tax and Submission of ST-3 Returns:The Tribunal noted the continuous delay in payment of service tax and filing of ST-3 returns beyond the prescribed dates. The appellant had already paid the penalty for late filing, and the Tribunal upheld the interest liability u/s 75 of the Finance Act, 1994.4. Invocation of Extended Period for Demand:The Tribunal upheld the invocation of the extended period for demand due to the appellant's failure to file ST-3 returns on time, amounting to suppression of facts. The Tribunal referenced various case laws to support the invocation of the extended period and confirmed the penalty under Section 78 of the Finance Act, 1994, proportionate to the reduced demand.Conclusion:The appeal was partially allowed, reducing the confirmed demand to Rs.9,00,241.52, with corresponding interest and a reduced penalty under Section 78. The Tribunal upheld the modified order with the indicated adjustments.