Corporate service provider wins appeal against Rs.19.42 lakh service tax demand on consumables sales

The CESTAT Mumbai allowed the appeal filed by the corporate service provider against a service tax demand of Rs.19,42,737/-. The tribunal held that amounts voluntarily paid by the assessee under Section 73(4A) of Finance Act, 1994 before adjudication were properly accepted by the original authority. The confirmed demand related to sale of consumables to clients, which was exempted from service tax under Notification No.12/2003-ST dated 20.06.2003, making the demand unsustainable.

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Issues:
Appeal against demand of service tax on goods sold, confirmation of demand by original authority, applicability of exemptions under Notification No.12/2003-ST, invocation of provisions of Finance Act, 1994, penalties imposition, consideration of subsection (4A) of Section 73, and grounds for dismissal of Revenue's appeal.

Analysis:
The case involved two appeals arising from a common impugned order dated 26.05.2016. One appeal was filed by the Service Tax assessee, M/s. Right Resources Corporate Support Services Pvt. Ltd., and the other by the Revenue. Right Resources provided cleaning and housekeeping services, also selling goods to clients, paying VAT on sales but not including the value for service tax calculation. Revenue issued show cause notices demanding service tax for the period April 2007 to March 2015. Right Resources contended that service tax was not payable on goods sold with VAT paid. The original authority confirmed a demand of Rs. 19,42,737/- and dropped the rest under the provisions of the Finance Act, 1994. Right Resources appealed against the confirmed demand, while Revenue appealed against the dropped demand.

The Advocate for Right Resources argued that the confirmed demand was on goods sold with VAT paid, exempted under Notification No.12/2003-ST. Revenue contended that the demand should have been confirmed and penalties imposed. The Tribunal noted that sub-section (4A) of Section 73 allowed voluntary payment of service tax, which Right Resources had done before adjudication. The Tribunal found no legal flaw in the original authority's decision to drop demands already paid. Revenue failed to cite any legal basis for challenging this decision, leading to the dismissal of their appeal.

Regarding Right Resources' appeal, the Tribunal reviewed the show cause notice and found the demand was on the value of consumables sold to clients, exempted under Notification No.12/2003-ST. Consequently, the Tribunal set aside the part of the order confirming the demand and allowed Right Resources' appeal. In conclusion, Right Resources' appeal was allowed, and Revenue's appeal was dismissed.

This judgment addressed the issues of demand for service tax on goods sold, confirmation of demands by the original authority, applicability of exemptions under Notification No.12/2003-ST, invocation of provisions of the Finance Act, 1994, penalties imposition, consideration of subsection (4A) of Section 73, and the grounds for dismissing Revenue's appeal.

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