2025 (9) TMI 129 - AT - Service Tax

Appeal dismissed; ex parte hearing upheld after finding willful suppression, tax not remitted; Sections 75, 78, 70, Rule 7C

AVINASH AZAD SINGH TOMAR Versus PRINCIPAL COMMISSIONER, CGST & CENTRAL EXCISE, Bhopal (M.P.)

CESTAT affirmed the adjudicating order and dismissed the appeal. The tribunal held the ex parte hearing was justified as the appellant failed to avail ... Violation of principles of natural justice - Adjudicating Authority had decided the case ex parte - demand of service tax along with interest and penalty under Section 78 of the Finance Act, 1994 along with imposition of late fees u/s 70 read with Rule 7C of the Service Tax Rules, 1994 and also penalty under Section 77(2) of the Act - appellant provided taxable services of laying of optical fibre cables to BSNL, L&T, Reliance Corporation, and other customers - Invocation of the extended period of limitation - imposition of penalty on the appellant - levy of interest. Violation of principles of natural justice - Adjudicating Authority had decided the case ex parte - HELD THAT:- Though sufficient opportunities were granted to the appellant at his request, however, he failed to avail them. The Adjudicating Authority had no option but to conclude the hearing. There is no error in the approach of the Adjudicating Authority in deciding the case ex-parte - the Adjudicating Authority had noted that the new supporting documents have been furnished by them in support of their claim whereas the information received from L&T Construction reflected that they had reimbursed the service tax amount to the appellant. In the circumstances, it is the appellant who though collected had not paid the service tax to the government exchequer to discharge his service tax liability. Demand of service tax on private work from the appellant for the period 2013-14 - benefit of cum-duty - HELD THAT:- It is found that on the work orders with material, service tax has been reimbursed by L&T by computing taxable value on 40% of gross value in terms of Rule 2A(ii) of Service Tax (Determination of Value) Rules, 2006. From the records of the case, it is also found that in respect of three bills, the appellant had charged full service tax which has been paid by L&T leading to recovery of 50% excess service tax by the appellant. We also need to take note of the work order dated 19.03.2015, which was claimed to be exempt from service tax under Sl.No.12A of Notification No.25/2012, however, the exemption was available only in case of contract which have been entered into prior to 1st March 2015, whereas in the present case, the contract was dated 19.03.2015. Therefore, exemption was wrongly claimed by the appellant. Invocation of the extended period of limitation - imposition of penalty on the appellant - HELD THAT:- The appellant having collected the service tax from the service recipients did not forward the same, clearly shows the intention of the appellant to wilfully evade payment of duty. Although the appellant was registered with the Service Tax Department, they filed the ST-3 Returns only upto the period 2013-14 wherein the value of taxable services was declared as ‘NIL’ and for the subsequent period, they did not file any ST-3 Returns. The non-filing of the returns reflects the intention of the appellant to suppress value of the services provided by them, so as to evade the service tax liability. On the basis of the allegations established against the appellant, the penalty imposed under the provision of Section 78 and the late fee under Section 70 read with Rule 7C of the Rules for non-filing of the returns is justified and accordingly the same is upheld. Levy of interest - HELD THAT:- The levy of interest u/s 75 is automatic once the demand of service tax is upheld and hence the appellant is liable to pay interest on the service tax amount which has not been paid by the due date. There are no reason to interfere with the impugned order and hence the same is affirmed - appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Adjudicating Authority's decision to proceed ex parte and adjudicate without personal hearing violated principles of natural justice where multiple opportunities were granted but not availed. 2. Whether the appellant is liable for service tax on amounts collected from service recipients where returns declared 'NIL' and department evidence (payment records of recipients) indicates tax was charged and reimbursed. 3. Whether reliance on balance-sheet / profit-and-loss figures alone can sustain a demand for service tax when assessee seeks to rely on 26AS / other documentary records to show lower taxable value. 4. Whether claimed exemption for certain contracts is tenable where notification exemption is date-sensitive and contracts post-date fall outside exemption. 5. Whether extended period of limitation, imposition of penalty under Section 78, late fee under Section 70 read with Rule 7C, and penalty under Section 77(2) are justified where there is wilful non-remittance and non-filing of ST-3 returns. 6. Whether interest under Section 75 is payable once demand of service tax is upheld. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of ex parte adjudication and natural justice Legal framework: Principles of natural justice require opportunity of personal hearing; statutory constraints (Section 33A of Central Excise Act made applicable) limit adjournments; adjudicatory authorities may decide ex parte where noticee repeatedly fails to appear. Precedent treatment: The Tribunal relied on established appellate authority that absence of appellant/counsel permits ex-parte disposal and merits adjudication. Interpretation and reasoning: The Adjudicating Authority granted multiple hearing opportunities (including three adjournments) and recorded repeated non-appearance and a lone request for adjournment which was accommodated; subsequent failures justified ex-parte conclusion. The Tribunal observed that continuous non-appearance and non-filing of replies formed material basis to infer absence of defence and to proceed on record materials. Ratio vs. Obiter: Ratio - Where adequate opportunities are granted and the noticee repeatedly fails to appear or seek timely adjournment within statutory limits, ex-parte adjudication does not violate natural justice. Obiter - None significant beyond affirming adherence to Section 33A constraints. Conclusion: Ex-parte adjudication was valid; no breach of natural justice shown. Issue 2: Liability for service tax on amounts collected though not remitted Legal framework: Service tax liability arises where taxable services are provided and tax is collected; collector who does not forward tax to exchequer remains liable. Evidence from service recipients may be used to establish amounts charged and reimbursed. Precedent treatment: Decisions relied upon by appellant (where balance sheet alone could not sustain demand) were examined and found fact-specific; remand or acceptance in those cases depended on availability of invoices and specific records. Interpretation and reasoning: Departmental enquiries with major clients produced payment details showing service tax was charged by the appellant and paid by recipients (partly under RCM). Appellant failed to produce supporting invoices or documentary proof countering recipients' records. The Tribunal accepted recipient statements/work orders/bills as corroborative proof that tax was charged and reimbursed to appellant, and hence not paid to Government. Ratio vs. Obiter: Ratio - Where recipient records and work orders corroborate that service tax was charged and reimbursed to the service provider, and the provider fails to produce contrary transactional documents, liability for unpaid collected tax is established. Obiter - Reliance on recipients' records is acceptable when primary records of provider are absent. Conclusion: Appellant liable for collected but unremitted service tax; demand sustained. Issue 3: Use of balance sheet versus 26AS / invoices to determine taxable value Legal framework: Determination of taxable value requires consideration of invoices and transactional records; reliance solely on ledger or balance-sheet figures is not ideal if detailed invoices/records are available to show correct taxable turnover. Precedent treatment: Authorities cited by appellant (where balance-sheet alone was insufficient) were distinguished on facts; those cases involved availability of invoices or clear absence of wilful suppression. Interpretation and reasoning: In present facts, appellant declared 'NIL' in returns, failed to file subsequent returns, and did not place invoices confirming the lower value shown in 26AS. Departmental evidence (recipient statements, work orders, bills) indicated higher receipts and tax charged. The Tribunal found that the appellant's reliance on 26AS/cum-duty adjustment was unsupported by contemporaneous invoices and thus could not overturn departmental assessment based on broader evidence. Ratio vs. Obiter: Ratio - Balance-sheet figures may be used where direct transactional records are unavailable and recipient records corroborate receipts; where assessee produces substantiating invoices, adjudicator must examine them (distinguishing remand cases). Obiter - Cases where remand was ordered were fact-specific and not applicable where wilful suppression is indicated. Conclusion: Demand based on departmental aggregation and recipient records stands; appellant's balance-sheet/26AS contention rejected for lack of supporting invoices. Issue 4: Claim of exemption for specific contracts and date-sensitive notifications Legal framework: Exemption notifications apply only as to their express scope and effective dates; a contract executed after the cut-off date for an exemption cannot be covered by an exemption applicable only to pre-cut-off contracts. Precedent treatment: Not specifically relied upon; statutory construction of notification and factual application governs outcome. Interpretation and reasoning: The appellant claimed exemption for a contract dated 19.03.2015 under an exemption available only to contracts entered into prior to 01.03.2015. The Tribunal noted the contract date post-dated the exemption cutoff; therefore the exemption was not applicable. Moreover, no substantive documentary basis was produced to support other exemption claims. Ratio vs. Obiter: Ratio - Exemption claims must be strictly construed against the claimant; date-bound exemptions are not available for post-date contracts. Obiter - None material. Conclusion: Exemption claim for the specific contract fails; exemption wrongly claimed. Issue 5: Extended limitation, penalties under Sections 78, 70/Rule 7C, and Section 77(2) Legal framework: Extended limitation and penal provisions apply where there is wilful evasion, suppression, or failure to file returns; non-filing of returns and collection without remittance can constitute wilful evasion justifying penalties. Precedent treatment: Penalty jurisprudence recognizes wilful suppression and non-filing as grounds for imposition; where intention to evade is inferable, penalties are sustained. Interpretation and reasoning: The appellant collected tax, declared 'NIL' for 2013-14, and failed to file subsequent ST-3 returns. Investigation established collection and non-remittance; recipient records corroborated collection. The Tribunal inferred wilful suppression and evasion from the conduct and non-filing, rendering penalties under Section 78 and late fees under Section 70/Rule 7C justified. Penalty under Section 77(2) (fixed amount) was also confirmed. Ratio vs. Obiter: Ratio - Persistent non-filing combined with collection and non-remittance of tax constitutes sufficient material to infer wilful evasion and to justify imposition of statutory penalties and invocation of extended limitation. Obiter - The extent of mens rea may be inferred from conduct and documentary gaps. Conclusion: Extended limitation and penalties sustained; impositions upheld. Issue 6: Liability to pay interest under Section 75 Legal framework: Interest under Section 75 is statutory and automatic upon confirmation of tax demand for period of default. Precedent treatment: Automaticity of interest on confirmed tax demands is well established. Interpretation and reasoning: Once the Tribunal upheld the demand for unpaid service tax, interest under Section 75 necessarily follows for amounts not paid by due dates. Ratio vs. Obiter: Ratio - Interest under Section 75 is payable automatically where tax demand is confirmed. Obiter - None. Conclusion: Interest on the confirmed tax liability is payable; levy of interest upheld. Final Disposition (as applied to issues above) The Tribunal affirmed the adjudicated demand, penalties, late fees and interest, and dismissed the appeal.