2025 (6) TMI 454 - AT - Service Tax

Short payment of service tax - discrepancies between turnover declared in Profit Loss accounts and ST-3 returns - CENVAT Credit on input services - inability to produce prescribed documents during enquiry - HELD THAT - The original authority has very clearly stated in para 14 of the order-in-original that the appellant had filed ST- 3 returns wherein the assessable value was shown to the tune of Rs.9.65 crores and Rs.15.74 crores. It is noted that there was difference between the assessable value shown in the ST-3 return and the turnover in the P L account but it is not found that there was any intention not to pay service tax on the balance amount because balance amount involved service tax of merely Rs.11 lakhs. There is no case for imposition of penalty in the present case. Insofar as the demand of service tax is concerned ends of justice will meet once the appellant pays balance service tax of Rs.11, 42, 268/- with applicable rate of interest. Denial of CENVAT Credit - HELD THAT - The input service invoices were pertaining to the years 2013 2014 and 2015 and they were attempted to be produced in the year 2021 before the original authority and the appellant could establish a case of Rs.5.69 crores and could not produce invoices having service tax payment to the tune of Rs.2.94 lakhs. It appears to me that it is a genuine case where some invoices could not be traced out. It is also noted that Service Tax Law and Cenvat Credit Rules have nowhere specified the time limit for which input service invoices are to be maintained and kept on record of the appellant. There are no merit in disallowing cenvat credit of Rs.2, 94, 972.17/-. Conclusion - i) Demand for short paid service tax confirmed to the extent of Rs.11, 42, 268/- with interest; penalty not imposed due to no intention to evade and filing of returns. ii) Cenvat credit of Rs.2, 94, 972.17 disallowance set aside; credit allowed in full. iii) Appropriation of Rs.11, 80, 034/- upheld; penalty set aside; no extended limitation invoked. Appeal allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the appellant had short paid service tax for the periods 2013-14 and 2014-15 based on discrepancies between turnover declared in Profit & Loss accounts and ST-3 returns.

- Whether the appellant was entitled to claim cenvat credit for input services amounting to Rs.5,77,58,121/- despite inability to produce prescribed documents during enquiry.

- Whether penalty for short payment of service tax and denial of cenvat credit was justified in light of the facts and law.

- Whether the appellant's payment of Rs.5,00,000/- towards interest on delayed payment of service tax could be appropriated against the confirmed demand.

- Whether the extended period of limitation for demand and penalty was invokable given the filing of ST-3 returns.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Short payment of service tax due to discrepancies in turnover declarations

Relevant legal framework and precedents: The Finance Act, 1994 governs service tax liability. Section 73(1) provides for demand of service tax where there is short payment or non-payment. The ST-3 return is the statutory return for service tax filing. The assessable value declared in ST-3 returns is crucial for levy of service tax.

Court's interpretation and reasoning: The Tribunal noted that the appellant's P&L account turnover figures for 2013-14 and 2014-15 were higher than those declared in ST-3 returns, leading to a short payment of service tax amounting to Rs.26,09,338/-. However, the Tribunal found that the difference in assessable value resulted in a relatively small service tax amount of approximately Rs.11 lakhs. The Tribunal further observed that the appellant had filed ST-3 returns and there was no evidence of deliberate evasion or intention to avoid payment.

Key evidence and findings: The Revenue's enquiry revealed turnover discrepancies: Rs.2,07,81,856/- difference in 2013-14 and Rs.3,29,298/- in 2014-15. The appellant filed ST-3 returns showing lower turnover. The appellant also paid Rs.5,00,000/- towards interest on delayed payment.

Application of law to facts: The Tribunal applied Section 73(1) to confirm the demand but moderated the penalty considering the absence of mala fide intent and the appellant's compliance in filing returns. The Tribunal held that the balance service tax of Rs.11,42,268/- with applicable interest was payable.

Treatment of competing arguments: The appellant argued that the service tax confirmed was cum duty and with cum duty benefit, the payable amount was less. The Tribunal accepted this and adjusted the net payable accordingly. The appellant also argued against penalty on the basis of timely filing of ST-3 returns, which was upheld.

Conclusions: Demand for short paid service tax confirmed to the extent of Rs.11,42,268/- with interest; penalty not imposed due to no intention to evade and filing of returns.

Issue 2: Denial of cenvat credit for input services due to non-production of invoices

Relevant legal framework and precedents: Cenvat Credit Rules require production of prescribed documents, including input service invoices, to claim credit. However, no specific statutory time limit exists for maintaining such invoices. The proviso to Section 73(1) permits demand where credit is availed without prescribed documents.

Court's interpretation and reasoning: The Tribunal observed that the appellant initially could not produce invoices for cenvat credit amounting to Rs.5.77 crores. Subsequently, in 2020-21, the appellant produced available invoices covering Rs.5.69 crores. The shortfall was Rs.2,94,972.17. The Tribunal noted that the appellant's inability to produce some invoices was genuine given the passage of time (invoices pertained to 2013-15, produced in 2020-21). It also emphasized that the law does not prescribe a time limit for retaining input service invoices.

Key evidence and findings: Two invoices for Rs.2,86,052.45 and Rs.328.69 were verified and found in order by Field Formation. The balance credit of Rs.2,94,972.17 was disallowed by the original authority.

Application of law to facts: The Tribunal applied the principle that absence of a statutory time limit for invoice retention and the genuine difficulty in tracing old invoices warranted relief. It held that disallowance of Rs.2,94,972.17 was not justified.

Treatment of competing arguments: The Revenue insisted on denial of credit for lack of documents. The appellant argued genuine difficulty and partial production of invoices. The Tribunal sided with the appellant given the circumstances and absence of statutory retention period.

Conclusions: Cenvat credit of Rs.2,94,972.17 disallowance set aside; credit allowed in full.

Issue 3: Appropriation of amount paid towards interest and imposition of penalty

Relevant legal framework and precedents: Appropriation of payments made towards interest or tax is a matter of revenue procedure. Penalty under service tax law is imposed based on intention to evade or failure to comply with statutory obligations. Extended period of limitation applies where suppression or fraud is established.

Court's interpretation and reasoning: The Tribunal noted that the appellant had paid Rs.5,00,000/- towards interest, and Rs.11,80,034/- was appropriated against the confirmed demand. The Tribunal found no case for penalty since ST-3 returns were filed and no mala fide intention was established. The Tribunal also found no justification for invoking extended limitation period.

Key evidence and findings: Payment records, ST-3 returns, and absence of fraud or suppression.

Application of law to facts: The Tribunal balanced the revenue's right to recover dues with the appellant's compliance and lack of intentional default.

Treatment of competing arguments: The appellant argued no penalty due to timely return filing. The Revenue sought penalty and appropriation. The Tribunal partially allowed appropriation but rejected penalty.

Conclusions: Appropriation of Rs.11,80,034/- upheld; penalty set aside; no extended limitation invoked.

3. SIGNIFICANT HOLDINGS

"I note that there was difference between the assessable value shown in the ST-3 return and the turnover in the P&L account, but I do not find that there was any intention not to pay service tax on the balance amount because balance amount involved service tax of merely Rs.11 lakhs. I, therefore, am of this opinion that there is no case for imposition of penalty in the present case."

"Service Tax Law and Cenvat Credit Rules have nowhere specified the time limit for which input service invoices are to be maintained and kept on record of the appellant. I, therefore, do not find any merit in disallowing cenvat credit of Rs.2,94,972.17."

"Ends of justice will meet once the appellant pays balance service tax of Rs.11,42,268/- with applicable rate of interest."

Core principles established include that mere discrepancies in declared turnover and assessable value without mala fide intent do not warrant penalty; absence of statutory time limit for invoice retention entitles credit claimants to relief where genuine difficulty exists; and that filing of statutory returns negates invocation of extended limitation period for penalty.

Final determinations:

- Confirmed demand of service tax of Rs.11,42,268/- with interest.

- Allowed cenvat credit claim in full, setting aside denial of Rs.2,94,972.17.

- Rejected penalty imposition due to absence of intentional default.

- Upheld appropriation of part payment towards interest and service tax dues.