TaxTMI 
TaxTMI 
2025 (12) TMI 1253
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....llishment (Anita V. Mishra), 4/15, Vivek Khand, Gomti Nagar, Lucknow Uttar Pradesh under proviso to Section 73(1) of the Act read with Section 173, 174 & 142 of Central Goods & Services Tax Act, 2017 (hereinafter referred as "CGST Act"). I also appropriate the Service Tax amounting to Rs. 55,00,000/- deposited during course of investigation for which challans are available on record, against the tax liability being confirmed. If any other amount as claimed by the Noticee has been deposited the same shall also be appropriated subject to production of evidence to the satisfaction of proper officer in this regard. 2. I also demand and confirm interest due on the Service Tax being confirmed at the applicable rate on the Noticee under Section 75 of the Act read with Section 173, 174 & 142 of CGST Act. 3. I also impose a penalty of Rs. 96,18,331/- (Rupees Ninety Six Lakh Eighteen Thousand Three Hundred and Thirty One only), upon M/s Embellishment (Anita V. Mishra), 4/15. Vivek Khand, Gomti Nagar, Lucknow under Section 78 of the Act for non-payment of due Service Tax by suppressing the value of taxable services with intent to evade the payment of Service Tax from the dep....
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....h due interest but they did not pay any heed. Therefore, the summon dated 26.09.2018 was issued to provide information/documents regarding their Service Tax compliance but the appellant neither appeared nor submitted the desired documents. 2.4 On scrutiny of the documents i.e. Balance Sheet and From 3CD of Income Tax for the Financial Year 2013-14 to 2016-17 it was observed that the appellant had received a huge amount against Beauty Parlour service during this period. They had also received Rental Income. These receipts against the activity undertaken qualify as taxable service as per Section 65 B (44), 65B(22), 66 (B) & 66(E) of the Finance Act, 1994. 2.5 From the Balance Sheet and other Financial Records of the appellant following was observed: BEAUTY PARLOUR RECEIPT (amount in Rs.) Financial Year 2013-14 2014-15 2015-16 2016-17 Value as per Balance Sheet 20434509 44513346 48114244 44474511 Value as per 3CD 20434509 44513346 48114244 Not available Taxable Value 20434509 44513346 48114244 44474511 INCOME FROM RENT RECEIPT Value as per Balance Sheet 364000 473000 0 0 Value as per 3CD 36....
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...., as to why :- a. Service Tax amounting to Rs. 2,19,00,1 19/- (Rupees Two Crore Nineteen Lakh One Hundred Nineteen Only) (including Ed. Cess, H.Ed.Cess, SBC & KKC as applicable) due upon them for the period from April '2013 1o March'2017 should not be demanded and recovered under proviso of Section 73(1) & 73(A) of the Act read with Section 173 174 & 142 of Central Goods & Services Tax Act, 2017 (hereinafter referred as "CGST Act"). b. Interest due thereon at the applicable rate should not be demanded and recovered from them under Section 75 & 73B of the Act read with Section 173, 174 & 142 of CGST Act on the amount of Service Tax short paid. c. Penalty should not be imposed upon them under Section 78 of the Act for non-payment of due Service Tax by suppressing the value of taxable services with intent to evade the payment of Service Tax from the department read with Section 173 & 174 of CGST Act. d. Penalty should not be imposed upon them under Section 77(1)(c) of the Act read with Section 173 & 174 of CGST Act for failure to furnish the full information & records as desired by the department. e. Penalty should not be imposed up....
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....8 needs to be set aside. 3.3 Authorized representative reiterated the findings recorded in the impugned order and the grounds taken in the appeal. 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 Impugned order records the findings as follows: "8. On the basis of above allegations and defense submissions I observe that following are the issues pending before me for determination & adjudication. a. Whether the taxable value determined in the Show Cause Notice includes the value of goods actually sold as claimed by the Noticee and whether such sale value needs to be deducted from the taxable value determined in the Show Cause Notice; b. Whether the taxable value is inclusive of Service Tax as claimed by the Noticee or whether the taxable value determined in the impugned Show Cause Notice is exclusive of Service Tax in the light of allegation that Service Tax was charged by the Noticee from their client; c. Whether the benefit of CENVAT Credit of the levied tax paid by the Noticee on input services is liable to be allowed to the Noticee and to be adjusted from the Ne....
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....the Noticee are chargeable to State VAT if sold to the customer. I also take note of the fact that during 2013-14 and 2014-15, the value of goods has been accounted for as consumable goods meaning thereby that the goods were consumed during the course of provision of service. During 2015-16 and 2016-17, however, the purchase of goods has been accounted for but the value of goods consumed during the course of provision of service to clients has not been accounted for separately and therefore the only logical conclusion that can be drawn is that the amount accounted for as purchases is nothing but the value of goods consumed during the course of provision of service. This analysis is further supported by the fact that neither in the invoices said to be the invoices covering the sale of goods nor in the Profit & loss A/c, has any VAT been shown to have been paid by Noticee. The Noticee has also not submitted any proof of payment of VAT on sale of goods claimed by her. I have also considered the fact that during 2013-14 the value of goods consumed is Rs. 20,96,816/- as against the claimed sale of Rs. 10,86,900/-, meaning thereby that the Assessee herself is not taking the reba....
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....y on oral statement of the Noticee. It is well settled that the statement has to be corroborated by some other evidence. I also take note that the investigating officers should have taken pains to properly substantiate the allegation of collection of Service Tax by the Noticee from its customers. I find that except for the oral statement no evidence documentary or otherwise is on record to support the allegation 14. Even otherwise I find from the Profit & Loss A/c which are duly audited, that except for the receipts from beauty salon no other amount has been credited by the Noticee in the P & L A/c. According to the standard accounting principles, the amount indicated in the P & L A/c is the gross amount received. There is no entry of Service Tax either in credit side or the debit side of the P & L A/c. On the basis of these facts, I am of the considered opinion that the amount in the P & L A/c of the Noticee should be treated as the gross amount even if the Service Tax is charged from the customers, the gross amount will reflect in the credit side of the P & L A/c. I therefore hold that as per provisions of Section 67 of Finance Act, 1994, the gross value should be treate....
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.... take up the issue mentioned at (c) i.e. of allowing CENVAT Credit of Service Tax paid by the Noticee on input services used in providing output services. The Noticee has claimed that various input services have been used for providing output services, mainly Royalty for franchise service, among other services. I have gone through all the documents submitted by the Noticee in her defense. I do not find any document wherein Service Tax has been charged from the Noticee. CENVAT Credit admissible under CENVAT Credit Rules, 2004 are subject to observance of conditions provided therein and also Rule 9 of the said rules provides the list of documents which alone are admissible for availing the credit. The Noticee has not submitted an, such document. As I have already observed herein above, the burden to prove the admissibility of any benefit under the Act or Rules is on the person claiming such benefits. I hold that the Noticee has failed to substantiate her claim for CENVAT Credit of Service Tax said to have beer paid on input services used for providing output services. I am therefore unable to allow any CENVAT Credit in absence-of any evidence-on-record-in this-regard. Even-otherwise ....
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....ord that the value of taxable services was running in Crores. Leviability of Service Tax on ' Beauty Parlor Services' is well known and well accepted in the trade. The Noticee has submitted that she was under the impression that Service Tax shall be dealt with by the franchiser i.e. M/s. Lakme. She has also argued that mensrea is essential for imposing the penalty. 19. I have carefully examined the submissions made by the Noticee in this regard. The Noticee has no reason for harbouring presumption that franchiser shall be dealing with the matters of payment of Service Tax. It is also not on record if she has made any efforts to find out the facts in this regard. As regards the mensrea, the Noticee was providing taxable services for years together under Service Tax Registration but she has neither filed any return nor paid Service Tax nor did she take pains to know her liability of Service Tax. It has been alleged in the Show Cause Notice that she was collecting the Service Tax from her clients (Service recipients). Although as I observed herein above, the investigating officers did not take pains to collect any documentary evidence in this regard, but it is also tr....
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....course of operation of "beauty parlour" she also was selling certain products of the franchisor. The value of the goods sold should have been deducted from the arrive at the taxable value, from the gross receipts in respect "beauty parlour" taken from her profit and loss account. The said claim made has been examined in the impugned order and it was found that the appellant has failed to establish the claim made in respect of the sale of goods. We find that appellant claim for from the gross receipt remains unsubstantiated even before us. To claim the sale of the goods appellant should have produced documents in respect of the sale so affected. Appellant has not produced any sale document - invoice, bill etc made for affecting such sale. They have claimed the sale of goods by relying on the entry made in the book of accounts for the purchase of goods. 4.4 In order to test the correctness of the claim made by the appellant we refer to the certain clauses of the Franchisee Agreement and Schedule C of the same with Lakme Lever Pvt. Ltd., reproduced below:- From the above it is evident that appellant ⮚ was required to pay royalty @ 18% on the net sale value from t....
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....ng the goods from their beauty salon, then definitely they would have been registered with VAT authorities and would be paying VAT in respect of the goods sold. No document in respect of discharging the VAT in respect of the sales affected has been produced. Thus we reject the claim made by the appellant in this respect. 4.5 To understand the manner of computation of the franchisee fees, as per the Schedule C to the agreement we reproduce one of the invoices issued, for charging franchisee fees from the appellant. This invoice is also depicted in the ledger account of Franchisee Fees maintained by the appellant: From the above invoice it is evident for calculation of the franchisee fees, the total sale value of services as per franchise agreement for the ten day period is taken (in the invoice it is Rs 5,34,556.39/-). Then the franchisee fees is computed @ 18% of the sale value as per Schedule C to the franchise agreement reproduced above. (0.18 * 534556.39 = Rs 96,220.15/-). On this value of franchisee fees VAT, Service Tax, Swacch Bharat Cess and Krishi Kalyan Cess is paid.) Thus we can compute the value of services provided under this agreement just by dividing the Franchi....
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....edit Rules, 2004: 3.In the said rules, in rule 4, - (a) in sub-rule (1), after the second proviso, the following proviso shall be inserted with effect from first day of September 2014,namely :- "Provided also that the manufacturer or the provider of output service shall not take CENVAT credit after six months of the date of issue of any of the documents specified in subrule (1) of rule 9."; (b) in sub-rule (7),- (i) for the first and second provisos the following provisos shall be substituted, namely:- "Provided that in respect of input service where whole of the service tax is liable to be paid by the recipient of service, credit shall be allowed after the service tax is paid: Provided further that in respect of an input service, where the service recipient is liable to pay a part of service tax and the service provider is liable to pay the remaining part, the CENVAT credit in respect of such input service shall be allowed on or after the day on which payment is made of the value of input service and the service tax paid or payable as indicated in invoice, bill or, as the case may be, challan referred to in rule 9: ....
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....The right will continue till the facility is available. A manufacturer who is working under the Modvat Scheme can certainly utilise the credit of the duty paid on the inputs used in or in relation to the manufacture of final product for payment of duty on such final product; but he has to take credit on such inputs within six months from the date of issue of the duty paying documents. After the amendment credit cannot be taken on duty paying documents which are more than 6 months old. 13. In view of the above discussions, we answer the question referred to Larger Bench in the favour of Revenue. Therefore, the view taken in case of Osram Surya Pvt. Ltd. v. Commissioner of Central Excise, Indore, reported in 1998 (29) RLT 684 is the correct view and the contrary view taken in correct. The decision of tribunal in case of Osram Surya Pvt. Ltd. referred in para 13 of the above decision has been upheld by the Hon'ble Supreme Court as reported at [2002 (142) E.L.T. 5 (S.C.)] and following was observed: 8. It is vehemently argued on behalf of the appellants that in effect by introduction of this rule, a manufacturer in whose account certain credit existed, would be den....
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....tered for payment of service tax with the department, they were during the period neither paying any service tax nor filing any return. They have never claimed the CENVAT Credit in respect of the input services at any time before the commencement of adjudication proceedings. The proceedings against the appellant were initiated on the basis of intelligence gathered and are not on the basis of comparison of figures from the Income Tax data and ST-3 return. In fact appellant ahs never filed any ST-3 return. The observation made by the Chandigarh Bench in case of Antares Services (P) Ltd. & Mumbai Bench in case Kaybee Developers Private Ltd., which go contrary to the above provisions of the Rules and decision of Larger Bench of Tribunal and Hon'ble Supreme Court cannot be relied as binding precedent. The decision of Allahabad Bench in case of Indus Valley Partners (India) Pvt. Ltd. is clearly distinguishable. In that case the credit was sought to be claimed in respect of the tax paid on reverse charge basis within the prescribed period. 4.10 We also observe that the decision of Hon'ble Karnataka High Court in case of mPortal India Wireless Solution P. Ltd. is for the period when the....
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.... S No Details of Cheque Amount Bank No Date 1 Kotak Mahindra 000268 24.02.2017 2500000 2 Kotak Mahindra 000269 15.03.2017 2500000 3 Kotak Mahindra 000271 31.03.2017 5000000 Total 10000000 We also reproduce the letter dated 09.11.2017 of the appellant:   From the discussions as above and from the conduct of the appellant we have no hesitation in holding that the appellant has with sole intent of evading payment of due service tax, suppressed the facts in relation to the services provided by her. Extended period of limitation has been rightly invoked in the present case to demand the tax. Tribunal has in the case of Applied Solar Technologies (India) Pvt. Ltd. [2023 (70) G.S.T.L. 378 (Tri. - Del.)] held as follows: 26.There is no error in the finding recorded by the Commissioner in this regard, as indeed the appellant did try to evade payment of service tax by treating the amount as a security deposit when in fact it was clearly an advance, which fact was very specifically mentioned in the Agreement. The intention to evade payment of service tax by suppression of ....
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....e periods relevant to the two appeals. 15. Sub-section 2B of Section 11A provides that in case the person in default makes payment of the escaped amount of duty before the service of notice then the Revenue will not give him the notice under sub-section 1. This, perhaps, is the basis of the common though erroneous view that no penalty would be leviable if the escaped amount of duty is paid before the service of notice. It, however, overlooks the two explanations qualifying the main provision. Explanation 1 makes it clear that the payment would, nevertheless, be subject to imposition of interest under Section 11AB. Explanation 2 makes it further clear that in case the escape of duty is intentional and by reason of deception the main provision of sub section 2B will have no application. 16. The other provision with which we are concerned in this case is Section 11AC relating to penalty. It is as follows : [11AC. Penalty for short-levy or non-levy of duty in certain cases.- where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppressi....
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....tions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to subsection 1 of Section 11A and Section 11AC use the same expressions : "....by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,...". In other words the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty. It, therefore, follows that if the notice under Section 11A(1) states that the escaped duty was the result of any conscious and deliberate wrong doing and in the order passed under Section 11A(2) there is a legally tenable finding to that effect then the provision of Section 11AC would also get attracted. The converse of this, equally true, is that in the absence of such an allegation in the notice the period for which the escaped duty may be reclaimed would be confined to one year and in the absence of such a fin....
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....ade payment of service tax, the person who has been served notice under the proviso to sub-section (1) of section 73 shall, in addition to the service tax and interest specified in the notice, be also liable to pay a penalty which shall be equal to hundred per cent. of the amount of such service tax : Provided that in respect of the cases where the details relating to such transactions are recorded in the specified records for the period beginning with the 8th April, 2011 upto the date on which the Finance Bill, 2015 receives the assent of the President both days inclusive), the penalty shall be fifty per cent of the service tax so determined. (Emphasis supplied) The Finance Act, 1994 received the assent of the President on the 14th May, 2015). 4.16 From perusal of the above amended section it is evident that statutorily it has been provided that penalty imposed in respect of transaction taken between the period 08.04.2011 to 14.05.2015 only penalty at @ 50% of the tax evaded is imposable. For the period after 14.05.2015 the penalty has to be 100% of the tax evaded. This being statutorily provided the adjudicating authority was not having any discretio....
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.... Franchisor and such feedback is properly recorded sent to the Franchisor as part of the monthly course conduct report and action taken on the suggestions and complaints, if any, of the customers. The records of such feedback shall be open for inspection by the Franchisor, 19.6 The Franchisee shall submit to the Franchisor reports, statements relating to the Salon or conduct in such form and manner and at such intervals as may be required, from time to time, by the Franchisor. 19.7 The said statements shall contain the following information, namely - a. The number of customers being treated, giving particulars of each customer, b. The total amount collected (along with the copies of relevant invoices and receipts issued by the Franchisee); and C. The statement shall be verified by an official of the Franchisee in a form and manner required by the Franchisor. 20. RECORDS, ACCOUNTS & AUDIT 20.1 The Franchisee shall maintain a record of the costs of materials, salaries and wages and direct operating expenses. Such records shall be made available to the Franchisor, in a format and at a frequency determined by the Franchisor, in order to enable the Franchisor to pro....
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....to time. The instructions may be in the forms of joint bank account solely used for payment to franchisor ot through standing instructions for debiting their account. 1.3 In the event, any aforesaid payments (in whole or in part) have not been paid by the Franchisee to the Franchisor on the respective due dates, the Franchisee shall pay interest at the rate of 18% per annum rests on all overdue amounts and such interest at the rate of 18% shall be payable by the Franchisee from the date on which the overdue amounts were due till the date of actual payment both before and after judgment. The Franchisees acknowledges and agrees that the rate of interest contemplated in the aforesaid Clause is not by way of penalty but the genuine pre-estimate of damages which the Franchisor may suffer if the payment is not made within the stipulated time; 1.4 Any existing and/or future taxes or duties imposed or assessed by the central government, state government, local authority or any other governmental department by virtue of any existing and/or new enactment or amendment to the existing statutes or otherwise in respect of any payment made or due by the Franchisee to the Franchisor, under t....
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.... instruction issued by franchisor time to time subject to maximum of end of next TDP 1.2 The Franchisee shall make arrangement of making payment to franchisor in terms of this agreement as per guidelines and instruction issued by the franchisor time to time. The instructions may be in the forms of joint bank account solely used for payment to franchisor ot through standing instructions for debiting their account. 1.3 In the event, any aforesaid payments (in whole or in part) have not been paid by the Franchisee to the Franchisor on the respective due dates, the Franchisee shall pay interest at the rate of 18% per annum rests on all overdue amounts and such interest at the rate of 18% shall be payable by the Franchisee from the date on which the overdue amounts were due till the date of actual payment both before and after judgment. The Franchisees acknowledges and agrees that the rate of interest contemplated in the aforesaid Clause is not by way of penalty but the genuine pre-estimate of damages which the Franchisor may suffer if the payment is not made within the stipulated time; 1.4 Any existing and/or future taxes or duties imposed or assessed by the central government....
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....tal expenses related to the premises like electricity, water, telephone bills etc. 5 Renewal Fees Upon renewal of the term of this Agreement, in order to enable to franchisee to run and operate the salon business under the same name and style "Lakme Salon", the franchisce shall pay to the Franchisor a sum equivalent to 50% of the start-up fees prevailing at the time of renewal plus service tax or any other applicable tax, as one-time, non refundable renewal charges for such renewal. EMBELLISHME .. Proprietor For Embellishment Andla Document 3 259 LAKMÉ SALON TAX INVOICE PP To. Embellislsment ITWon NO 7021003721 wvoice Date /10/2/2017 Ballues Gate 22601201 Puntos 01/12/2017 10 10/02/2017 Labda : 0415201200 Emastb [email protected] Feas payable pursuant to Particulars Amount (Ra) TOP TOP 3586.00 Base Service Sain made in Current Linbeied Dasis Service sale from last Total Servies Sale $34556.39 96220.35 Lees On invoice Discount 0.no Net Franchises Fees 90220.15 VATO 0%% 8773:23 Service Taxda 14% Swaohn Bnatal Cassel 0,5% 481 10 481.10 Invoice Total 116420.38 Thon Amount (Ra) TOP TOP 3586.00 Declara....