2025 (11) TMI 600 - AT - Service Tax

Mandap-keeper below Rs.10 lakh service-tax threshold; disputed bill inadmissible, demand and extended-period notice quashed, appeal allowed

M/s. Payal Marriage Palace Versus Commissioner of Central Excise & CGST-Alwar

CESTAT held that the appellant, a mandap-keeper, remained below the Rs.10 lakh service-tax threshold for relevant years and therefore was not liable to ... Exemption from service tax - applicability of threshold limit of exemption of Rs. 10 Lakhs - Mandap Keeper Services - demand based on statement of proprietor of appellant and the service recipient - invocation of extended period of limitation. HELD THAT:- It is observed that the proprietor of appellant, in his statement dated 13.04.2016 at the very first opportunity stated that they were not registered with the service tax department as they were out of purview of service tax as the value of service provided by them is much below the threshold limit of exemption of Rs. 10 Lakhs. As per the resumed bills of the Financial Year 2014-15 and 2015-16, bills amounting to Rs.4,85,000/- and Rs.5,85,000/- (in total) had been issued respectively. The value of clearances for 2011-12, 2012-13, 2013-14 comes to Rs.2,76,375/-, 3,33,360/-, 4,02,094/- respectively. Thus it is clear that the value of clearances has always been below threshold limit Rs.10 Lakhs and thus service tax was exempted and registration was not required to be taken by the appellant in terms of Notification No.33/2012 dated 20.06.2012. The dispute is about a bill issued in 2011-12 for Rs.9,00,000/- . It is observed that only Photostat copy of said bill is on record and the original was not produced. The contention of appellant is that in lieu of said Bill No. 3, appellant received only Rs.1,00,000/-. Department has not produced any evidence proving receipt of remaining Rs.8 Lakhs by the appellant. The findings that appellant received the amount of bill are without any evidence and thus are held to be the result of presumption. Otherwise also, as the appellant is an individual firm having turnover less than Rs. 50 Lakhs per annum and therefore as per Rule 6 of service tax they were required to pay service tax on receipt of payment basis. So, even if the above bill is presumed to have been issued by the appellant and payment amount of Rs.1,00,000/- received is added in the turnover of 2011-12 the total turnover of 2011-12 it will be Rs.2,76,375/- + Rs.1,00,000/- i.e. Rs.3,76,375/- i.e. much below threshold limit of Rs.10 Lakhs. Also, even if the whole amount of Rs.9 Lakhs is presumed to have been received, the service in question being a bundled service of providing food while renting the space/mandap, taxable amount will be 70% of the amount received under Notification No. 26/2012-ST dated 20.06.2012 as amended. As per appellant, if the abatement had been allowed, the taxable value of the impugned bill still be Rs.6,30,000/- and taxable value of 2011-12 will be Rs.2,76,375/- + Rs.6,30,000/- i.e. Rs.9,06,375/- i.e. still below the threshold limit prescribed under the aforesaid notification. Department has not produced any evidence to the contrary. Also, there is no evidence of receipt of consideration for alleged 50 marriage ceremonies. It is well settled that tax cannot be demanded on the basis of presumptions and assumptions. The photocopy of the document, invoice herein, is an inadmissible document. Invocation of extended period - HELD THAT:- It is observe that appellant did not have registration nor was filing returns for the bona fide reason that the benefit of SSI exemption is available to him. There is no evidence of alleged suppression and evasion of tax. The show cause notice is held to have wrongly invoked the extended period of limitation. The confirmation of demand on such time barred show cause notice is liable to be set aside. The order order challenge is hereby set aside - Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether a service-tax demand based primarily on a photocopy of an invoice and statements (of the proprietor and the service recipient) constitutes sufficient evidence of receipt of consideration so as to sustain a confirmed demand and penalties. 2. Whether the appellant, being below the statutory exemption threshold, was obliged to obtain service-tax registration and pay service tax on an accrual basis or on receipt basis, and how abatement for bundled services affects taxable value and threshold computation. 3. Whether reliance on the statement of the service recipient, without allowing the appellant to examine/cross-examine that witness, violates principles of natural justice/statutory procedure and vitiates the demand. 4. Whether invocation of the extended period of limitation (beyond the normal limitation) was justified by evidence of suppression or intent to evade payment of service tax. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Sufficiency of evidence: reliance on a photocopy of invoice and statements to prove receipt of consideration Legal framework: Proof of tax liability requires evidence of receipt of taxable consideration; assumptions and presumptions cannot substitute for positive evidence. Admissibility and probative value of documents and testimony govern departmental demands. Precedent Treatment: The Court referred to precedents which hold that tax cannot be based on presumptions and photocopies lacking corroboration are inadmissible or of low evidentiary value; cited decisions include authorities recognizing inadmissibility of mere photocopies and need for positive evidence of receipt. Interpretation and reasoning: The show-cause notice rested primarily on a photostat copy of Bill No. 37 (Rs.9,00,000) and statements. The original invoice was not produced. There was no corroborative evidence from the Department demonstrating actual receipt by the appellant of the alleged Rs.8,00,000 balance (appellant concedes receipt of Rs.1,00,000 only). In absence of evidence of actual payment, the finding that the appellant received the full bill amount is held to be based on presumption rather than proof. The Tribunal observed that tax demands cannot be founded solely on such presumptions and that the photocopy of the invoice is an inadmissible/insufficient basis for confirming demand. Ratio vs. Obiter: Ratio - A tax demand cannot be confirmed on the basis of a photocopied invoice and uncorroborated statements; positive evidence of receipt of consideration is necessary. Obiter - General observations on documentary admissibility and evidentiary weight of photostat copies, insofar as they depend on case specifics. Conclusion: Demand and penalties based solely on the photocopied invoice and uncorroborated statements are unsustainable; the findings of receipt of the billed amount were set aside as premised on presumption. Issue 2 - Applicability of exemption threshold, payment-on-receipt rule, and abatement for bundled services Legal framework: Notification conferring exemption for service providers below a specified aggregate value; Rule 6 (payment on receipt basis) applicable to individual/firm below prescribed turnover; Notification providing abatement (e.g., 70% taxable value for bundled services of renting mandap with food) reduces taxable portion of consideration. Precedent Treatment: The Court relied on established principles that threshold exemptions and abatement must be applied before computing tax liability and that payment/turnover rules determine the relevant taxable period. Interpretation and reasoning: The appellant's resumed bills and accounts showed annual clearances below the Rs.10 lakh threshold for the years in question. Even if the photocopied bill were treated as genuine, (a) the appellant, being a small firm, is governed by payment-on-receipt (Rule 6) - therefore only actual receipts are relevant; (b) the appellant asserted receipt of only Rs.1,00,000; (c) even assuming receipt of full Rs.9,00,000, abatement under the bundled-service notification reduces taxable value to 70% (i.e., Rs.6,30,000), and when aggregated with recorded clearances the total remained below the exemption threshold for the year. The Department produced no evidence to contradict the accounts or to show additional receipts or taxable value above the threshold. Hence imposition of tax without allowing abatement and without proving higher receipts was unsustainable. Ratio vs. Obiter: Ratio - Where (i) a provider legitimately falls within the statutory threshold, (ii) payment-on-receipt rule applies, and (iii) abatement for bundled services lowers taxable value, departmental demand must be supported by evidence showing that actual receipts and taxable value exceeded the exemption threshold; absent such evidence demand fails. Obiter - Remarks on hypothetical computations if alternative evidence were available. Conclusion: The appellant validly fell within the exemption threshold based on available records; abatement and payment-on-receipt rules further demonstrate that confirmed demand was incorrect. The Department failed to establish a taxable turnover above the threshold. Issue 3 - Violation of natural justice / statutory procedure by not permitting examination of the service recipient Legal framework: Principles of natural justice and statutory provisions (Section 9D of Central Excise Act applied pari materia to service tax matters) require that an opportunity be afforded to examine material witnesses relied upon in support of a demand. Precedent Treatment: Court relied on authorities holding that reliance on a witness's statement without permitting cross-examination where requested vitiates conclusions drawn from that statement. Interpretation and reasoning: The Department relied on the statement of the service recipient but did not permit the appellant to examine/cross-examine that witness despite the appellant's request. The Tribunal found this to be a breach of natural justice and statutory procedure; reliance on such an untested statement cannot constitute cogent evidence of payment to sustain the demand. Ratio vs. Obiter: Ratio - A demand based on a third-party statement, when the affected party is denied opportunity to examine/cross-examine that third party, is procedurally infirm and inadmissible as sole or decisive evidence. Obiter - Observations on interplay between statutory provisions and procedural fairness in other factual matrices. Conclusion: Reliance on the service recipient's statement without permitting examination of that witness vitiated the departmental findings; thus the demand could not stand on that basis. Issue 4 - Invocation of extended period of limitation: suppression/evasion requirement Legal framework: Extended period of limitation for tax recovery is invokable only where there is affirmative evidence of suppression of facts or intent to evade tax; mere absence of registration (if explained bona fide by exemption) does not automatically establish suppression/evasion. Precedent Treatment: The Tribunal followed established law that invocation of extended limitation requires proof of suppression/evasion; bona fide non-registration due to threshold exemption does not amount to concealment. Interpretation and reasoning: The appellant had not obtained registration because the aggregate clearances were below the statutory exemption threshold. There was no evidence of suppression of income, concealment of receipts, or active evasion. The Department failed to prove any deliberate suppression that would justify invoking the extended period. Hence the show-cause notice issued beyond the normal period was time-barred and confirmation on that basis was unsustainable. Ratio vs. Obiter: Ratio - Extended limitation cannot be invoked in absence of evidence of suppression or intent to evade; bona fide reliance on threshold exemption cannot be equated with suppression. Obiter - Comments on the evidentiary standard required to establish suppression in tax matters. Conclusion: Invocation of the extended period was unjustified; the show-cause notice was time-barred and consequent confirmation of demand under extended limitation was liable to be set aside. Final Disposition On the combined grounds of insufficiency of evidence (photocopy invoice and uncorroborated statements), correct application of exemption threshold/payment-on-receipt and abatement rules, procedural breach by denial of opportunity to examine the service recipient, and absence of evidence of suppression to justify extended limitation, the confirmed demand, interest and penalties were set aside and the appeal allowed. The Court's conclusions on each point constitute the operative ratio sustaining the relief.