AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 1516
X X X X Extracts X X X X
X X X X Extracts X X X X
....interest and proposing penalties under Sections 76, 77 and 78 of the Finance Act, 1994. The said application received by the Secretariat of the Commission on 10-3-2017, was registered as 'SA(ST) 102/2017. 2. M/s. Vishal Security Force, (hereinafter referred to as M/s. VSF) are providing inter alia, security agency services to their customers. They are duly registered with the jurisdictional Service Tax authorities (with Registration No. AAFPC6236PST001) for providing the Security Agency Services as defined under the Section 65(105)(w) of Chapter-V of the Finance Act. 2.1 Information was gathered and developed by the officers of Directorate General of Central Excise Intelligence, (DGCEI) Mumbai Zonal Unit, that M/s. VSF, engaged in the providing of 'Security service/Man Power service' to various clients has evaded payment of Service Tax ("ST") during the period of 2010-11 to 2014-15 in spite of collection of Service Tax from their clients. 2.2 Investigations were initiated against M/s. VSF on 11-2-2016 when the premises of the applicant were visited. The statement of Shri Kripashankar Ramroop Chaturvedi, (referred to as Shri Chaturvedi hereafter) Proprietor o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....vice Tax. From the copies of Balance Sheet submitted it is further observed that M/s. VSF have shown the amount of Service Tax paid in the Profit and Loss account separately, as such it appears that the value of service mentioned in the Balance Sheet is inclusive of Service Tax amount. 2.7 The calculation of Service Tax liability has been worked out as under :- (i) While calculating the Service Tax liability gross income figures appearing in Balance sheet were compared with the gross income figures appearing in the Income-tax 26AS statement. It was observed that the value of service as appearing in Balance Sheet and as appearing is 26AS statement for a particular years do not tally. M/s. VSF failed to furnish return under Section 70, giving correct value of the service and assess the tax in accordance with the provisions of Chapter-V of Finance Act, 1994, therefore the provisions of Section 72 of F.A., 1994 'Best Judgment Assessment' are used for arriving at the value of service and highest of the two figures is taken for calculating Service Tax liability as given below; Table-A (Amounts in Rupees) Period Income as per bala....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5,151/- (Rupees Four Crore Twenty-Five Lakh Fifty-Five Thousand One Hundred and Fifty-one) as detailed below; Period Service tax payable (in Rs.). October 10 to March 11 33,34,035 April 11 to March 12 1,02,99,826 April 12 to March 13 87,12,402 April 13 to March 14 95,93,974 April 14 to March 15 1,06,14,914 Total Service Tax payable 4,25,55,151 (vii) Out of the above liability of Rs. 4,25,55,151/- M/s. VSF had deposited Rs. 1,28,86,104/- till the date of visit of the officers (as per the ACES data). As such there remained an unpaid Service Tax liability of Rs. 2,96,69,047/- on the date of visit i.e. 11-2-2016 for the period of October, 2010-March 11 to 2014-15. 2.8 During the course of investigations M/s. VSF have paid Rs. 1,50,00,000/- (Rupees One crore Fifty Lakh) and submitted the challans. M/s. VSF vide their letter dated 22-4-2016 have informed that they have paid Service Tax liability for the period of April, 2010 to September, 2010 amounting to Rs. 37,72,600/- out of Rs. 1,50,00,000/- paid by them during investigation. As such the amount available for adjusting against the Service Tax liability for further period (i.e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....-15 as shown above, should not be demanded and recovered from them under the proviso to Section 73(1) of the Finance Act, 1994, read with the Section 66/66B and the Section 68 of the Finance Act, 1994 read with Rule 6 of the STR, 1994. (iii) The amount of Rs. 1,17,74,483/- paid by them during the course of investigations should not be appropriated against the above Service Tax liability. (iv) Interest at the appropriate rates and as applicable in force, under Section 75 of the FA, 1994, should not be demanded and recovered from them on Service Tax demanded in (ii) above, (v) Penalty should not be imposed upon them under the provisions of Section 76 of the Finance Act, 1994 for failure to pay Service Tax in accordance with the provisions of Section 68 of the Finance Act, 1994 read with Rule 6 of the Service Tax Rules, 1994. (vi) Penalty should not be imposed upon them under the provisions of Section 78 of the Finance Act, 1994 for wilful misstatement, suppressing the facts, contravention of statutory provisions with intent to evade payment of Service Tax. (vii) Penalty should not be imposed upon them un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the amounts written off are reflected on debit side of the Balance Sheet. Therefore, for arriving at the correct liability, the gross amount ought to have been reduced by the amount of Bad Debts and the amounts written off as reflected in the debit side of the Balance Sheet. 3.3 The Applicants are providing services to three types of clients, viz (1) Corporate Clients; (2) Non-Corporate clients; and (3) Educational Institutions. In relation to services provided to Corporate Clients, in terms of S. No. 8 of Table to Notification No. 30/2012-S.T., the Applicants are required to pay Service Tax on 25% of the service value and the balance Service Tax on 75% value of services is paid by the clients under the Reverse Charge Mechanism. In relation to services provided to Educational Institutions, these services are exempted from payment of Service Tax in terms of S. No. 9 of the Table to Notification No. 25/2012-S.T., dated 20-6-2012, effective from 1st July, 2012. In case of remaining non-corporate clients, the Service Tax in full is payable by the Applicants. While computing the value of services provided to Corporate clients, it appears that there are certain mistakes in comp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....period covered by the show cause notice, works out to Rs. 3,44,92,387/- as against the Service Tax liability of Rs. 4,25,55,151/- computed in Para 6.0 of the show cause notice. In this regard a work-sheet showing the correct Service Tax liability of Rs. 3,44,92,387/- during the period covered by the show cause notice was enclosed alongwith the application. 3.7 In para 6.1 of the show cause notice it is admitted that the Applicants had already paid Service Tax amount of Rs. 1,28,86,104/- and demand for the balance amount of Rs. 2,96,69,047/- has been raised in the show cause notice (i.e. Rs. 4,25,55,151/- less Rs. 1,28,86,104/-). The Applicants state that when the correct amount of Service Tax liability of Rs. 3,44,92,387/- is taken into consideration, the actual amount of Service Tax to be demanded works out to Rs. 2,16,06,283/- (i.e. Rs. 3,44,92,387/- less Rs. 1,28,86,104/-) as against the demand for the tax for Rs. 2,96,69,047/- raised in the show cause notice. 3.8 The Applicants therefore, hereby accept their liability for the differential Service Tax amount of Rs. 2,16,06,283/-, along with interest thereon. They have paid the entire amount of Service Tax of Rs. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed 21-2-2017. It is further intimated that said Order-in-Original issued on 9-3-2017 whereas applicant has filed their settlement application on 10-3-2017 and therefore this was not a fit case for settlement. 6. Hearing in this case was held on 12-7-2017. The applicant was represented by Shri Nitin N. Mehta, Consultant and Shri K.S. Chaturvedi. Revenue was represented by Shri S.B. Bhosle, Superintendent and Shri P.C. Thomas, I.O. 6.1 Ld. Consultant briefly explained the submissions made in their application and further highlighted the following points : - (a) As regards adjudication of the case, it is stated that they have filed the settlement application on 10-3-2017 and case was also adjudicated on 10-3-2017 since the said Order-in-Original No. 62/ST-V/SKD/16-17, dated 21-2-2017 was dispatched on 10-3-2017. In the said case, applicant has stated before adjudicating authority during hearing held on 5-12-2016 that they would approach the settlement commission for settlement of case within two months since they were making funds arrangement for making payment of Service Tax and Interest. They made their intention of approaching settlement c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... reason wise break up of Service Tax not admitted by them to the Bench with a copy to DGCEI in 3 days. Applicant is also directed to produce all the relevant original records pertaining to point No. (i), (iii), and (iv) of para 2(b) above within 3 days before the DGCEI, Mumbai for verification. DGCEI was further directed to submit their verification report clearly stating whether said claim of applicant is admissible or not, within 10 days, to the Bench with a copy to applicant. Applicant shall file their counter reply if any within another 3 days. 7. Joint Director DGGSTl, Mumbai has submitted a report dated 14-7-2017 intimating that applicant is required to pay interest of Rs. 1,46,07,357/- and a balance Service Tax of Rs. 37,72,600/-. 7.1 Applicant in their reply dated 20-7-2014 has stated that interest liability as per their calculation comes to Rs. 1,20,05,774/-. The diffidence in amount of interest is stated to be due to following reasons : (a) The DGCEI has not taken into consideration the amount of Rs. 37,72,600/- paid by the applicants and has not considered the applicants' letter dated 22-4-2016, a copy of which is enclosed herew....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er filing of the application the order passed by the Commissioner is non est (c) Applicant referred to following decisions whereunder the order-in-original passed without following principles of natural justice was held bad in law and set aside. (i) RB Shree Ram Durga and Fatehchand Nursing Das v. S.C., (1989) 176 ITR 169 (SC) (ii) Krishna Engineering Works v. C.C.E., 2001 (134) E.L.T. 14 (P & H) 8. Bench has carefully considered the contents of impugned applications, relevant records available in base file, revenue report and submissions made during hearing on behalf of applicant as well as Revenue. 8.1 In this case, before proceeding further to examine case on merits, the issue of maintainability of application is to be decided since case is reported to be adjudicated as per Revenue report dated 9-6-2017. Revenue has submitted that the said SCN dated 22-4-2016 was adjudicated by the Commissioner of Service Tax-V, Mumbai vide Order-in-Original No. 62/ST-V/SKD/16-17, dated 21-2-2017. It was further intimated by Revenue that the said order-in-original was issued o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Settlement Commission. There is also the danger that the adjudicating authority may back date an order. Adjudicating authorities are not supposed to behave in this manner and are presumed to function within the boundaries of law but, these things can happen. Would not a literal construction of the provisions then come in aid of such errant officers and run counter to the legitimate hopes of assessees who want to come clean, pay their taxes and have their cases settled by the Settlement Commission. The answer to this would lie in construing the date of adjudication to be the date on which the adjudicating authority loses his locus poenitentia, or opportunity to tear off, destroy of alter the adjudication order. In other words, when the order goes out of his control. And, that happens when the order is signed and the one-way process of sending it to the assessee is put in motion either directly or indirectly through some other agency.'' We respectfully concur with this view." 8.2 The Bench, therefore, respectfully following the above said judgment of Bombay High Court, hold that an order of adjudication is made on the date on which adjudicating authority dispatched it....