Service tax re-quantification on verified receipts reduced demand where documentary linkage to service categories was incomplete.

Service tax liability on receipts attributed to manpower supply, maintenance or repair, courier agency, security agency and cleaning services was reworked after joint verification on remand. The verification found that the assessee could not produce complete documentary linkage between receipts and the relevant award letters or bills, and the records did not permit exact segregation across the service categories. Even so, the verified material showed that the original quantification was excessive. The demand and the penalty under section 78 were therefore reduced to the reworked figure of Rs. 72,80,604, while the remaining parts of the order were upheld.

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Issues: Whether the demand of service tax and consequential penalty, as reworked on remand, could be sustained in full or required reduction on the basis of the verification of receipts and supporting records.

Analysis: The appeal arose from a service tax demand on receipts shown against manpower supply, maintenance or repair, courier agency, security agency and cleaning services. On remand, the parties were directed to undertake a joint verification of the appellant's computation. The verification showed that the appellant could not produce complete documentary linkage between the receipts and the relevant award letters or bills, and the records were insufficient to segregate the receipts across the different service categories with certainty. At the same time, the verification exercise demonstrated that the original quantification required modification and that the demand could not be sustained at the full amount confirmed in the impugned order.

Conclusion: The demand and the penalty under section 78 were reduced to the reworked figure of Rs.72,80,604/-, while the remaining parts of the impugned order were upheld.

Final Conclusion: The appeal succeeded only to the extent of reduction in the quantified demand and corresponding penalty, and was otherwise dismissed.

Ratio Decidendi: Where the assessee fails to produce reliable documentary evidence linking receipts to the claimed services, the tax demand may be sustained on re-quantification, but it must be confined to the amount that can be properly worked out on the verified record.

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