2025 (1) TMI 890 - AT - Service Tax

Liability to pay service tax based on the full value Service Tax reflected in 38 invoices - requirement to remit amount collected as Service Tax from the client as per Section 73A - failure to consider CA certificate - extended period of limitation - HELD THAT - The appellants have been maintaining that the full Service Tax was reflected in the Invoices but such Invoices were never sent to the client not they have paid the full Service Tax to the appellant. On the other hand the appellants have passed rectification entries in their books of account to the effect that the total Tax is to be divided under the heading of VAT and Service Tax. The VAT amounts have been remitted to the concerned authorities. The Chartered Accountant has issued the Certificate on 11.02.2015 clearly showing the way the Invoices which were taken for issue of demand in the Show Cause Notice. The date of this CA s Certificate clarifies that this was obtained before the Personal Hearing and before the impugned Order was passed. The Adjudicating authority has recorded at page 15 of the OIO that the CA s Certificate has been filed. But instead of going through the details given therein he has simply ignored the same and has not given any finding whatsoever as to why or how the certificate does not carry the defence of the appellant. It has been held in catena of decisions that once the CA s Certificate is produced before the Adjudicating / Appellate authority he is required to consider the same and if he is not in agreement with the same he should rebut with proper reason. The demand with interest an dpenalties set aside. Extended period of limitation - HELD THAT - The Show Cause Notice issued on 17.10.2014 for the period 2009-10 to 2012-13. The requisite details have been found from the books of accounts maintained by the appellant which were made available to the Audit team. Even the proper rectification making entries were put up before them which was not considered by the Audit team. Being a reputed Public Limited Company the appellants are required to maintain proper books of accounts as well as rectify the mistakes by passing proper counter entries so as to nullify the same. Since they have undertaken all these steps it is not found that they have indulged in any activity which would point out to suppression on their part. Hence the confirmed demand in respect of the extended period is time barred. The confirmed demand pertaining to the extended period set aside on account of limitation and allow the appeal even on this ground. Conclusion - It is not open for Revenue to arrive at a conclusion in disregard of the certificate without challenging or controverting the same with cogent evidence and reasoning. The extended period for tax demands requires evidence of intent to evade. The appeal was allowed fully on merits regarding the Service Tax demand and partly on account of limitation concerning the extended period.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the appellant was liable for the confirmed demand of Service Tax amounting to Rs.75,20,988, along with interest and penalties, based on the full value Service Tax reflected in 38 invoices.
• Whether the issuance of the Show Cause Notice for the period 2009-10 to 2012-13 was barred by limitation under the applicable legal framework.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Liability for Confirmed Demand of Service Tax

• Relevant Legal Framework and Precedents: The demand was made under Section 73A, which mandates that any amount collected as Service Tax must be remitted to the government. The legal precedent set by the case of Gillette India Ltd. was considered, emphasizing the necessity for authorities to consider Chartered Accountant (CA) certificates when presented.
• Court's Interpretation and Reasoning: The court noted that the appellant had raised invoices with full Service Tax by mistake and had not presented these invoices to clients. The CA's certificate confirmed rectification entries in the appellant's books, which the Adjudicating Authority failed to consider.
• Key Evidence and Findings: The CA's certificate dated 11.02.2015 was pivotal, showing corrections made in the appellant's accounts. The court found that the Adjudicating Authority ignored this evidence without providing reasons.
• Application of Law to Facts: The court applied the principle that CA certificates must be considered unless contradicted by cogent evidence. The failure to address the CA's certificate led to the setting aside of the demand.
• Treatment of Competing Arguments: The court found the Revenue's argument insufficient, as it did not address the CA's certificate or provide evidence to counter the appellant's claims.
• Conclusions: The court concluded that the confirmed demand of Rs.75,20,988, along with interest and penalties, should be set aside on merits.

Issue 2: Limitation for Issuance of Show Cause Notice

• Relevant Legal Framework and Precedents: The extended period for issuing a Show Cause Notice is permissible only if there is evidence of suppression, misrepresentation, or fraud. The burden is on the Revenue to prove such intent.
• Court's Interpretation and Reasoning: The court noted that the appellant maintained proper accounts and rectified errors promptly. The evidence did not support an intent to suppress facts or evade tax.
• Key Evidence and Findings: The appellant's records and the CA's certificate demonstrated transparency in accounting practices, undermining the Revenue's claim of suppression.
• Application of Law to Facts: The court applied the principle that the extended period requires proof of intent to evade tax, which was absent in this case.
• Treatment of Competing Arguments: The court found the appellant's argument persuasive, supported by documented evidence, while the Revenue failed to substantiate its claims.
• Conclusions: The court held that the demand for the extended period was time-barred and set aside the confirmed demand on this ground as well.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "It is not open for Revenue to arrive at a conclusion in disregard of the certificate without challenging or controverting the same with cogent evidence and reasoning."
• Core Principles Established: The judgment reinforces the principle that CA certificates must be considered by authorities and that the extended period for tax demands requires evidence of intent to evade.
• Final Determinations on Each Issue: The appeal was allowed fully on merits regarding the Service Tax demand and partly on account of limitation concerning the extended period. The appellant was deemed eligible for consequential relief as per law.

The judgment underscores the necessity for tax authorities to thoroughly consider evidence presented by taxpayers, such as CA certificates, and to substantiate claims of tax evasion with clear evidence. The court's decision to set aside the demand due to both merits and limitation reflects a commitment to fair adjudication based on documented facts and legal standards.