ST - Just because service recipient had instructed them not to raise invoices, it cannot be justifiable reason for not raising invoices and non-payment of tax when it is not disputed that payments were received from clients: CESTAT
By TIOL News Service
MUMBAI, AUG 14, 2018: INVESTIGATIONS revealed that the appellants were supplying earth moving machineries viz., excavators, dozers, screen plant and also tipper trucks on hire basis to their clients namely, M/s Kala Mines and Minerals (KMM), M/s Maheshwari Minerals, M/s Mineral enterprises, M/s Deep Mining Equipments, S SobanBabu etc.
It was also found that Appellants were issuing periodical invoices to all their Clients except M/s KMM in respect of the services rendered.
They have collected the service Tax in respect of the services rendered to their clients but did not deposit the same and also did not file any service tax returns.
It was also found that although Appellant received huge payments from KMM, they had not issued any invoices in respect of the services provided and also not charged and collected service tax. From the statements recorded and documents resumed, it was found that the Appellant had received a gross amount of Rs.8,05,22,947/- ( from all their clients which includes the receipts of Rs.3,11,01,168/- from M/s KMM) by deploying their earth moving machineries on hire basis and the Service Tax payable on the same isRs.88,49,572/- under the category of "Supply of Tangible Goods Services". It was also observed that the Appellant had received High Speed Diesel Oil at concessional rate from KMM for operating the said machinery and the value of said additional consideration is Rs.16,92,617/- on which too Service Tax is payable.
A show cause notice dated 14.10.2013 was accordingly issued invoking the extended period of limitation and by the impugned order the tax demand was confirmed on the above counts along with appropriation of the amounts paid as well as imposition of penalties and interest.
The appellants have assailed this order-in-original before the CESTAT and the following submissions were made -
+ As far as issue of levying service tax on the supply of HSD at concessional rate by the recipient is concerned the matter is no longer res integra. Issue has been decided against inclusion of such charges for computation of tax liability in case of Bhayana Builders (P) Ltd. - 2013-TIOL-1331-CESTAT-DEL-LB.
+ In case of Supplies made to M/s KMM, they had not paid any service tax for the reason that they had not been issuing any invoice to them as directed by the service recipient. Since no invoice was issued to KMM, there was no occasion to determine the Tax liability in respect of the taxable services provided by them to KMM.
+ Since they have not received any service tax from the service recipient namely KMM, the amounts received by them from KMM should treated as cum tax value for determination of tax liability.
+ The amounts paid by them even before the start of investigation should not be taken into account for determining the penalty under section 78 of Chapter V of the Finance Act, 1994.
The AR rebutted the submissions thus -
+ Benefit of Cum tax value cannot be allowed to the Appellant in view of Apex Court decision in case Amrit Agro Industries Ltd - 2007-TIOL-244-SC-CX wherein it is held that unless it is shown that the price includes the tax payable, no question of exclusion of tax element;
+ Non-preparation of invoice in respect of the amounts being so received (from M/s KMM) cannot be a justification for non-payment of Service Tax.
+ By non-payment of tax and not filing the returns, Appellants have suppressed the information in respect of taxable services and hence extended period of limitation as provided in Section 73 has rightly been invoked;
+ The penalty under section 78 is also justified in view of malicious conduct of Appellant in not paying the tax on due date and non filing of return.
The Bench considered the submissions, extracted paragraphs 23 & 25 of the o-in-o and inter alia observed -
++ Objections raised by the appellant in respect of quantification, i.e. for allowing them the benefit of cum tax value as gross value cannot be sustained in view of the Apex Court decision in case of Amrit Agro Industries Ltd (supra).
++ Second issue raised in respect of invocation of extended period too cannot be allowed, for the reason that in case of clients other than KMM they were raising invoices for receiving the payment in respect of the services provided. Also they were in all such cases collecting the Service Tax from their client but were not depositing the same with government account.
++ In case of KMM, just because service recipient had instructed them not to raise the invoices cannot be justifiable reason for not raising the invoices in respect of the supply of services as provided in law more so when they were receiving huge payments against such supply from KMM. The fact about receipt of payment from KMM is not in dispute.
++ Accordingly, extended period of limitation as provided by proviso to Section 73(1) of Finance Act 1994 has been correctly invoked in the present case. Also since all the ingredients for imposing penalty under section 78 are present in the matter the imposition of penalty equivalent to the quantum of tax evaded cannot be faulted with.
++ Following the decision (in Bhayana Builders (P) Ltd. - 2013-TIOL-1331-CESTAT-DEL-LB as upheld - 2018-TIOL-66-SC-ST, the demand of tax in respect of such concessional supply of HSD is dropped and also the penalty amount received to that extent.
The appeal was partly allowed.
(See 2018-TIOL-2518-CESTAT-MUM)
