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2025 (3) TMI 1400 - AT - Service TaxValidity of demand notice under proviso to Section 73 when tax liabilities have already been accepted by the Appellant by filing ST-3 Returns - demand of Service Tax on the basis of figures of turnover in Balance Sheets - demand of Service Tax on services covered under RCM when the same is claimed as Cenvat credit by the Appellant - demand of inadmissible credit in respect of services said not to be input services - penalty u/s 78 - personal penalty on Asstt. Vice President - Demand of late fee for filing ST-3 Returns late beyond the due date under Section 70 of the Finance Act 1994. Whether demand notice is justified under proviso to Section 73 when tax liabilities have already been accepted by the Appellant by filing ST-3 Returns? - HELD THAT - An in-depth reading of tprovisions of Section 73(1B) of the Finance Act 1994 reveals that where tax was self- assessed and returns were furnished no notice of demand was required to be issued under Section 73(1). It is further found that in the present case tax was self- assessed and service tax liability was declared in returns as already admitted in the SCN as well as impugned order. So issuance of SCN for recovery of self- assessed tax is patently unwarranted and legally incorrect. There should also be no demand of interest under Section 75. It is also found that the service tax liability declared in the ST-3 returns was deposited before issuance of SCN. As per provisions Section 73(3) if short levied or non-paid service tax deposited before issuance of the SCN no notice under sub Section (1) of 73 in respect of the amount so paid was required to be issued. Whether demand of Service Tax on the basis of figures of turnover in Balance Sheets is legally correct? - HELD THAT - It indicates that no service tax was chargeable on sale of flats by the Appellant in its own account. Service tax was payable only on the commission amount earned by the Appellant for sale of flats of other builders. The demand of service tax on the turnover shown in Balance Sheets is incorrect. Thus demand of service tax on differential value i.e. difference between figure of turnover shown in Balance Sheets and value of service declared in ST-3 is unjustified and is not sustainable. It is a settled legal position that demand raised on the basis of Balance Sheet or Form 26AS is not sustainable as held in M/s Lord Krishna Real Infra P. Ltd. 2019 (2) TMI 1563 - CESTAT ALLAHABAD . It has been held that by raising demand on the value shown in the Balance Sheets without any investigation the Department had not discharged the onus on them. Following the ratio of the above decision the demand raised on the figure of Balance Sheet is not sustainable. Whether demand of Service Tax on services covered under RCM is justified when the same is claimed as Cenvat credit by the Appellant? - HELD THAT - It is a case of revenue neutrality with no loss of revenue to the Exchequer. It is a settled law that in case of revenue neutrality demand of any differential duty would not be sustainable. In this context reliance is placed on the judgement of the Hon ble Supreme Court in the case of V.E. Commercial Vehicles Ltd. 2019 (9) TMI 887 - SC ORDER . In the above case the Hon ble Supreme Court held that the demand of differential duty would not be sustainable as the same is available as rebate to the assessee. So it is revenue neutrality case. Decision of the Hon ble Supreme Court in the case of Mahindra Mahindra Ltd. 2019 (11) TMI 783 - SC ORDER is also referred to. In this case the Court has enunciated that demand of differential duty is not sustainable on the ground of revenue neutrality in as much as differential duty would be available as credit to the assessee. In view of the above judgments it is clear that demand in the present case is not sustainable. Whether demand of inadmissible credit in respect of services said not to be input services is justified or not? - HELD THAT - The business of the Appellant to provide real estate agent services whereunder as commonly known they arranged customer s meeting arranged their visits to location provide free catering to customers and also used to visit abroad for promotional activities of its business. Therefore any service for undertaking above said activities were covered in the definition of input services - In view of utilisation of the services it is held that they were covered under the definition of input services and credit availed thereon would be admissible. Whether penalty under Section 78 is imposable? - HELD THAT - As there was no requirement to issue notice u/s 73 the imposition of penalty u/s 78 is not warranted. In this regard the Tribunal in the case of Ms Mass Marketing and Advertisement Services Pvt. Ltd. 2006 (2) TMI 20 - CESTAT BANGALORE where it has been held that no penalty is imposable if service tax deposited before issuance of show cause notice. The same view has also been taken in the case of 2004 (8) TMI 3 - CESTAT BANGALORE where it was held that no penalty is imposable if service tax is deposited before issuance of SCN. Whether personal penalty on Asstt. Vice President is justified? - HELD THAT - In the present case evasion of service tax has not been established. There is no case of issuance of fake invoice or challan and also no case of wrong availment of credit. Nothing has been discussed that taxes were collected but not paid. Hence no penalty is imposable. Demand of late fee for filing ST-3 Returns late beyond the due date under Section 70 of the Finance Act 1994 - HELD THAT - There are no provisions to raise any demand notice for late fees. It is provided that a Return can be filed with late fees of maximum amount of Rs.20, 000/-. It does not prescribe that incase of non- payment of late fees any demand notice is required to be issued. Lack of any provision for issuing SCN for demand of late fee it is refrained to confirm any such demand. Conclusion - i) Self-assessed tax liabilities declared in returns do not warrant an SCN under Section 73. ii) Service tax demands based on Balance Sheet figures require thorough investigation to establish liability. iii) Revenue neutrality precludes sustainable demands for differential duty. iv) Services related to business promotion and operations qualify as input services for CENVAT credit purposes. v) No penalties imposed. Appeal allowed.
ISSUES PRESENTED and CONSIDERED
The Tribunal considered six principal issues: (i) Whether the demand notice is justified under the proviso to Section 73 when tax liabilities have already been accepted by the Appellant by filing ST-3 Returns. (ii) Whether the demand of Service Tax based on figures of turnover in Balance Sheets is legally correct. (iii) Whether the demand of Service Tax on services covered under Reverse Charge Mechanism (RCM) is justified when the same is claimed as CENVAT credit by the Appellant. (iv) Whether the demand of inadmissible credit in respect of services, said not to be input services, is justified. (v) Whether penalty under Section 78 is imposable. (vi) Whether personal penalty on Shri Shailendra Sharma, Assistant Vice President, is justified. ISSUE-WISE DETAILED ANALYSIS Issue No. (i): Demand Notice Justification The Court examined the applicability of Section 73(1B) of the Finance Act, 1994, which states that no notice of demand is required if the tax is self-assessed and declared in returns. The Tribunal found that the Appellant had self-assessed and declared the tax liabilities in the ST-3 returns before the issuance of the Show Cause Notice (SCN). The issuance of the SCN for recovery of self-assessed tax was deemed unwarranted and legally incorrect. Consequently, no demand of interest under Section 75 was justified. Issue No. (ii): Demand Based on Balance Sheets The Tribunal noted that the turnover in the Balance Sheets included the sale value of flats sold by the Appellant in its own account, which is not subject to service tax under Section 66B of the Finance Act, 1994. The service tax was only applicable to the commission earned on sales for other builders. The demand based on the turnover in Balance Sheets was found to be incorrect and unsustainable, as it did not account for the nature of the transactions. Issue No. (iii): Demand on Services under RCM The Tribunal highlighted that the services in question were input services eligible for CENVAT credit. It was a case of revenue neutrality, as any service tax paid could be claimed back as credit. The demand was not sustainable due to the principle of revenue neutrality, supported by precedents from the Supreme Court. Issue No. (iv): Inadmissible Credit for Input Services The Tribunal analyzed the definition of "input service" under Rule 2(l) of the CENVAT Credit Rules, 2004, which includes services used for providing output services and activities related to business. The services in question, such as hotel rent, building rent, air ticket booking, and catering, were found to be related to the Appellant's business activities and thus qualified as input services. The credit availed was deemed admissible. Issue No. (v): Imposition of Penalty under Section 78 The Tribunal found that since there was no requirement to issue a notice under Section 73, the imposition of penalty under Section 78 was not warranted. The Tribunal referenced previous decisions where penalties were not imposed if the service tax was deposited before the issuance of the SCN. Issue No. (vi): Personal Penalty on Shri Shailendra Sharma The Tribunal referred to Section 78A of the Finance Act, 1994, which penalizes directors or officers of a company for certain contraventions. In this case, no evasion of service tax, issuance of fake invoices, or wrong availment of credit was established. Therefore, no personal penalty was justified. SIGNIFICANT HOLDINGS The Tribunal set aside the impugned Order-in-Original, allowing the appeal with consequential relief. The key principles established include: - Self-assessed tax liabilities declared in returns do not warrant an SCN under Section 73. - Service tax demands based on Balance Sheet figures require thorough investigation to establish liability. - Revenue neutrality precludes sustainable demands for differential duty. - Services related to business promotion and operations qualify as input services for CENVAT credit purposes. - Penalties under Section 78 are not applicable if tax is paid before SCN issuance, and personal penalties require clear contraventions.
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