https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=768014 https://www.taxtmi.com/caselaws?id=768014 Validity of demand notice under proviso to Section 73 when tax liabilities have already been accepted by the Appellant by filing ST-3 Returns - demand of Service Tax on the basis of figures of turnover in Balance Sheets - demand of Service Tax on services covered under RCM, when the same is claimed as Cenvat credit by the Appellant - demand of inadmissible credit in respect of services, said not to be input services - penalty u/s 78 - personal penalty on Asstt. Vice President - Demand of late fee for filing ST-3 Returns late, beyond the due date, under Section 70 of the Finance Act, 1994. Whether demand notice is justified under proviso to Section 73 when tax liabilities have already been accepted by the Appellant by filing ST-3 Returns? - HELD THAT:- An in-depth reading of tprovisions of Section 73(1B) of the Finance Act, 1994 reveals that where tax was self- assessed and returns were furnished, no notice of demand was required to be issued under Section 73(1). It is further found that in the present case, tax was self- assessed and service tax liability was declared in returns as already admitted in the SCN as well as impugned order. So, issuance of SCN for recovery of self- assessed tax is patently unwarranted and legally incorrect. There should also be no demand of interest under Section 75. It is also found that the service tax liability declared in the ST-3 returns was deposited before issuance of SCN. As per provisions Section 73(3), if short levied or non-paid service tax deposited before issuance of the SCN, no notice under sub Section (1) of 73 in respect of the amount so paid was required to be issued. Whether demand of Service Tax on the basis of figures of turnover in Balance Sheets is legally correct? - HELD THAT:- It indicates that no service tax was chargeable on sale of flats by the Appellant in its own account. Service tax was payable only on the commission amount earned by the Appellant for sale of flats of other builders. The demand of service tax on the turnover shown in Balance Sheets is incorrect. Thus, demand of service tax on differential value, i.e., difference between figure of turnover shown in Balance Sheets and value of service declared in ST-3 is unjustified and is not sustainable. It is a settled legal position that demand raised on the basis of Balance Sheet or Form 26AS is not sustainable as held in M/s Lord Krishna Real Infra P. Ltd., [ 2019 (2) TMI 1563 - CESTAT ALLAHABAD] . It has been held that by raising demand on the value shown in the Balance Sheets without any investigation, the Department had not discharged the onus on them. Following the ratio of the above decision, the demand raised on the figure of Balance Sheet is not sustainable. Whether demand of Service Tax on services covered under RCM is justified when the same is claimed as Cenvat credit by the Appellant? - HELD THAT:- It is a case of revenue neutrality with no loss of revenue to the Exchequer. It is a settled law that in case of revenue neutrality, demand of any differential duty would not be sustainable. In this context, reliance is placed on the judgement of the Hon ble Supreme Court in the case of V.E. Commercial Vehicles Ltd., [ 2019 (9) TMI 887 - SC ORDER] . In the above case, the Hon ble Supreme Court held that the demand of differential duty would not be sustainable as the same is available as rebate to the assessee. So, it is revenue neutrality case. Decision of the Hon ble Supreme Court in the case of Mahindra Mahindra Ltd., [ 2019 (11) TMI 783 - SC ORDER] is also referred to. In this case the Court has enunciated that demand of differential duty is not sustainable on the ground of revenue neutrality in as much as differential duty would be available as credit to the assessee. In view of the above judgments, it is clear that demand in the present case is not sustainable. Whether demand of inadmissible credit in respect of services, said not to be input services, is justified or not? - HELD THAT:- The business of the Appellant to provide real estate agent services whereunder, as commonly known, they arranged customer s meeting, arranged their visits to location, provide free catering to customers and also used to visit abroad for promotional activities of its business. Therefore, any service for undertaking above said activities were covered in the definition of input services - In view of utilisation of the services, it is held that they were covered under the definition of input services and credit availed thereon would be admissible. Whether penalty under Section 78 is imposable? - HELD THAT:- As there was no requirement to issue notice u/s 73, the imposition of penalty u/s 78 is not warranted. In this regard, the Tribunal in the case of Ms Mass Marketing and Advertisement Services Pvt. Ltd., [ 2006 (2) TMI 20 - CESTAT BANGALORE] where it has been held that no penalty is imposable if service tax deposited before issuance of show cause notice. The same view has also been taken in the case of [ 2004 (8) TMI 3 - CESTAT, BANGALORE] where it was held that no penalty is imposable if service tax is deposited before issuance of SCN. Whether personal penalty on Asstt. Vice President is justified? - HELD THAT:- In the present case, evasion of service tax has not been established. There is no case of issuance of fake invoice or challan and also no case of wrong availment of credit. Nothing has been discussed that taxes were collected but not paid. Hence, no penalty is imposable. Demand of late fee for filing ST-3 Returns late, beyond the due date, under Section 70 of the Finance Act, 1994 - HELD THAT:- There are no provisions to raise any demand notice for late fees. It is provided that a Return can be filed with late fees of maximum amount of Rs.20,000/-. It does not prescribe that incase of non- payment of late fees any demand notice is required to be issued. Lack of any provision for issuing SCN for demand of late fee, it is refrained to confirm any such demand. Conclusion - i) Self-assessed tax liabilities declared in returns do not warrant an SCN under Section 73. ii) Service tax demands based on Balance Sheet figures require thorough investigation to establish liability. iii) Revenue neutrality precludes sustainable demands for differential duty. iv) Services related to business promotion and operations qualify as input services for CENVAT credit purposes. v) No penalties imposed. Appeal allowed. Case-Laws Service Tax Wed, 26 Mar 2025 00:00:00 +0530