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of <h1>Service tax demand of Rs.80,61,111 set aside due to no suppression, time-barred claims, and valid CENVAT credit</h1> <h3>M/s. Saraf Services Private Limited Versus Commissioner of Service Tax, Kolkata</h3> M/s. Saraf Services Private Limited Versus Commissioner of Service Tax, Kolkata - TMI Issues Involved:1. Sustainability of the demand of Rs.80,61,111/- due to differences between taxable value in S.T.-3 Returns and income shown in financial statements.2. Sustainability of the demand of Rs.46,931/- for non-payment of Service Tax on advance received.3. Recovery of irregularly availed CENVAT Credit amounting to Rs.69,73,243/-.4. Invocation of extended period of limitation and the associated penalty imposed.Issue-wise Detailed Analysis:1. Demand of Rs.80,61,111/-:The demand was based on discrepancies between the taxable value recorded in S.T.-3 Returns and the income shown in the Balance Sheet and Profit & Loss Account. The Appellant provided a reconciliation statement for the period 2007-08 to 2012-13, claiming various deductions (D-1 to D-6) from the total turnover. They argued that these deductions, if applied, would eliminate any service tax liability. The Tribunal observed that the Appellant regularly filed returns without suppressing information. The demand was deemed unsustainable due to the absence of mala fide intent and the improper invocation of the extended period of limitation, referencing the Apex Court's decision in Nirlon Ltd. v. Commissioner of Central Excise.2. Demand of Rs.46,931/-:This demand related to the non-payment of Service Tax on advances received from customers. The Appellant contended these were security deposits, refundable with interest, and thus not subject to Service Tax. The Tribunal agreed, finding the demand unsustainable.3. CENVAT Credit of Rs.69,73,243/-:The denial of CENVAT Credit was based on the alleged non-compliance of input bills/invoices with Rule 4(7) of the CENVAT Credit Rules, 2004. Upon verification, the Tribunal found the invoices met the requirements of Rule 9(2) of the CENVAT Credit Rules, 2004, and thus, the Appellant was eligible for the credit. The demand was set aside.4. Extended Period of Limitation and Penalty:The Tribunal found no suppression of facts with intent to evade tax, rendering the invocation of the extended period of limitation inappropriate. Consequently, the penalties under Section 78 of the Finance Act, 1994, and Rule 15(2) of the CENVAT Credit Rules, 2004, were deemed unsustainable and were set aside.Conclusion:The Tribunal set aside the demand of Rs.80,61,111/- on the grounds of limitation, the demand of Rs.46,931/- for advances received, and confirmed the eligibility of the Appellant for the CENVAT Credit of Rs.69,73,243/-. It also annulled the penalties imposed, disposing of the appeal in favor of the Appellant.
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