2024 (4) TMI 172 - AT - Service Tax

Consulting engineer's service tax liability on advance payments remanded for proper reconciliation under Point of Taxation Rules 2011

M/s Span Structure Versus Commissioner of Central Excise & Service Tax, Lucknow

CESTAT Allahabad addressed service tax liability on advance payments received by a consulting engineer for government projects. The appellant failed to ... Taxability - advance payments - failure to issue invoice/bill on receipt of certain payments towards the value of taxable services, even in case where these payments were received as advance - non-payment of service tax - Consulting engineer services - point of taxation Rules - HELD THAT:- From the facts of the case it is clear that appellant has failed to pay the service tax at the time when it became due. As per the said rule undisputedly when the appellant raised the invoice in respect of these i.e. on completion of the project or at any time, they were making proper accountal and payment of service tax for which reason there is no discrepancy noted in the balance sheet, ST-3 return and from Form 26AS. Nothing has been brought on record as to the effect that service tax in respect of these payments received have not been paid. The entire case against the appellant is that they have not paid service tax at the time as determined under Rule 3 of Point of Taxation Rules, 2011. Even if the allegations made in the show cause notice and in the impugned orders are to be accepted but the service tax on the entire taxable value has been paid on finalization of the service contract with the Government Departments. There cannot be any short/nonpayment of service tax - No exercise has been undertaken in the present case to correlate the payments received as advances, in case of completion of stage, even in case of continuous supply with final invoice issued on completion of the projects. Such a re-conciliation is necessary to determine the tax short paid, if any. In any case if the tax has been found to be paid against the entire value of contract/project undertaken by the appellant, there cannot be any further demand of service tax. In the case of M/S VODAFONE DIGILINK LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX [2019 (7) TMI 521 - CESTAT NEW DELHI] it was held that Since the point of taxation has not occurred under any of the clauses of the said Rule 3, the liability to pay service tax has not arisen. To undertake the exercises of re-conciliation, the matter needs to be remitted back to the Original Adjudicating Authority for recording specific findings in the matter - Appeal allowed by way of remand. Issues Involved:1. Confirmation of Service Tax Demand2. Imposition of Penalty u/s 78 of the Finance Act, 19943. Imposition of Penalty u/s 77(1)(d) of the Finance Act, 19944. Limitation and Suppression of Facts5. Point of Taxation Rules, 2011Summary:1. Confirmation of Service Tax Demand:The Commissioner (Appeals) upheld the Order-in-Original confirming the demand of Service Tax amounting to Rs.25,01,176/- including Cesses for services provided by the appellant. The amount was to be recovered u/s 73(1) of the Finance Act, 1994 along with interest payable u/s 75 of the Finance Act, 1994 read with Sections 174 and 142 of the CGST Act, 2017. The appellant had already deposited Rs.25,00,000/- which was appropriated against the demand.2. Imposition of Penalty u/s 78 of the Finance Act, 1994:A penalty of Rs.25,01,176/- was imposed on the appellant u/s 78 of the Finance Act, 1994 read with Sections 174 and 142 of the CGST Act, 2017 for suppression of the value of taxable service.3. Imposition of Penalty u/s 77(1)(d) of the Finance Act, 1994:A penalty of Rs.10,000/- was imposed on the appellant u/s 77(1)(d) of the Finance Act, 1994 read with Sections 174 and 142 of the CGST Act, 2017 for not depositing Service Tax in due time as per Rule 6 of the Service Tax Rules, 1994 and Section 68 of the Act.4. Limitation and Suppression of Facts:The appellant argued that the demand was barred by limitation as there was no misstatement or suppression of facts. They contended that the balance sheet figures, ST-3 returns, and Form 26AS were in conformity with each other. The revenue, however, found that the appellant had not issued invoices even after the completion of services and received payments in cash which were not reflected in the documents.5. Point of Taxation Rules, 2011:The case was based on Rule 3 of the Point of Taxation Rules, 2011. The appellant was required to pay service tax on completion of an event specified in the contract or on receipt of advances. The adjudicating authority observed that the appellant had failed to issue invoices and pay service tax at the time determined under Rule 3. The Tribunal noted that the Point of Taxation Rules determine the time of payment of service tax and not the liability itself. The matter was remanded back to the Original Adjudicating Authority to undertake a reconciliation exercise and record specific findings.Conclusion:The appeal was allowed by way of remand to the Original Adjudicating Authority for de-novo proceedings within three months, following the principles of natural justice.