By TIOL News Service

MUMBAI, MAY 15, 2014: THESE are two Revenue appeals against the order passed by the Commissioner(A), Mumbai-II.

The facts:

On the basis of information that the two respondents are not depositing the appropriate amount of service tax in relation to security services provided by them, respondents were visited by the Central Excise officials on 22.10.2002 and certain incriminating documents were recovered under panchanama. Statements were recorded and thereafter demand noticeswere issued for the period 16.10.1998 to 30.9.2002. Investigation showed that the respondents were issuing invoices covering security services and some invoices covering labour services. In respect of invoices relating to security services, most of such invoices showed that service tax amount was charged and collected. However, in respect of some of the invoices, though the services were mentioned as security services but no service tax was charged. In respect of remaining invoices, supply of labour was indicated as the service and no service tax was collected. Parallel invoices were also recovered. In one set, the service was mentioned as security service while in other invoice, though the amount charged, service receiver, number, amount were same, the service indicated was labour service.It was also found that service tax deposited with the department was only a small percent of the service tax actually collected. In respect of first respondent, amount deposited was Rs.3,29,513/- as against the charged and collected amount of Rs.15,64,272/-. Similarly in respect of second respondent, service tax paid was Rs.28,907/- as against service tax collected Rs.7,39,696/-.

The demand notices were adjudicated by the original authority who confirmed the demands besides imposing penalties under various sections.

The Commr(A) had dismissed their appeals for non-compliance of the stay order but the Tribunal remanded the matter subject to the appellants making pre-deposit. Thereafter the impugned orders were passed by the Commissioner (Appeals).

The Commissioner (Appeals) accepted the pleas of the respondents relating to labour services, dues collection charges, security charges on movable property and bad debts. The Commissioner (Appeals) after giving the benefit of the said amounts partially allowed the appeals of the respondents. Further, the penalty proposed for delay in registration was set aside. However, the penalties under Sections 76 and 77 of the Finance Act were upheld and penalty under Section 78 was reduced to the duty amount confirmed by the Commissioner (Appeals).

As mentioned, against this order the Revenue is before the CESTAT.

The main argument is that it is apparent from Annexure B to the SCN that substantial portion of the demand consists of the amount which has been charged and collected by the respondents. Further, in respect of the services provided to the so called movable property, Notification No. 56/98-ST is not applicable inasmuch as the Notification is applicable only to safe deposit vaults whereas the invoices do not indicate what movable properties have been secured by the respondents. Similarly, other services like dues collection service is not indicated in the invoices.

It is further submitted that the respondents have recovered service tax of Rs.15,64,272/- &Rs.7,39,696/- respectively from the clients but deposited only Rs.3,29,513/- &Rs.28,907/- respectively with the Government. Also, the figures claimed by the respondents before original / first appellate authority and Tribunal are without any supporting documents, while the demand made by the department is supported by the invoices issued by the respondents themselves and these were recovered during the visit of Central Excise officer to respondent's office under panchnama.

Further, the respondents have inflated and wrongly submitted the various charges collected by them before the Commissioner (Appeals) and which have been accepted by him. A comparative table is also produced to indicate the differences and it is emphasized that since parallel invoices were recovered the revised figures given by the respondents cannot be accepted as true.

The Bench inter alia observed -

+ The show cause notice is based upon invoices issued by the respondents. These invoices have been tabulated number wise, date wise, year wise and thereafter a summary has also been prescribed under Annexure B; the respondents have not questioned any details given in respect of various invoices and details of Annexure B; that instead of explaining invoice-wise details, the respondents have chosen to give certain figures year wise or consolidated for all the years; the quantum given before original authority and first appellate authority varies widely and do not appear to inspire any confidence.

+ The respondents are directed to pay the amounts shown as service tax collected in Annexure B to the show cause notice, within 30 (thirty) days from the receipt of the order.

+ And the matter was remanded to the original authority for examination of each invoice for the claim made by the respondent of exemption notification 56/98-ST as well as invoices relating to labour services.

+ It was also held that in view of the facts and circumstances of the cases the extended period of limitation is rightly applicable and penalties under Sections 76, 77 and 78 are imposable;Interest to be also paid.

Before parting the CESTAT found it prudent to advert to the apex court decision in Tata Engineering and Locomotive Co. Ltd. vs. Assistant Commissioner of Commercial Taxes, and another 1970 (1) SCC 622 and comment - “The Commissioner (Appeals) has fallen into error in taking certain figures (year wise or consolidated for the total period) instead of examining invoice wise/transaction wise details .”

The appeals were disposed of in above terms.

(See 2014-TIOL-772-CESTAT-MUM)