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2025 (6) TMI 1433 - AT - Service TaxFailure to pay service tax as a recipient of service in terms of the N/N. 30/2012-ST dated 20.06.2012 under reverese charge mechanism - appellant had acted mischievously and fraudulently by altering the date of stamp paper of the agreement in order to evade service tax payment - whether the appellant was liable to pay service tax for the amounts received by them for the services of man power supply under reverse charge mechanism? - period of dispute in the present appeals is from July 2012 to March 2014 and December 2014 to March 2015 - suppression of facts or not - revenue neutrality - HELD THAT - There is no dispute that the copy of the agreement/contract entered between the appellant and their clients was back dated by altering the date on the stamp paper. The original copy of the agreement showed the date of issue of stamp paper 28.12.2012 while the Xerox copy showed as 28.12.2011 thus clearly proving the fraudulent activity of the appellant to avoid payment of service tax hence the reliance placed by the appellant is rightly rejected by the Commissioner. The second reasoning by the appellant is that the contractor supplied the manpower for which no evidence is placed on record. Moreover the invoices placed on record by the appellant do not provide any details except to show that they are charges for production as per specifications. The Commissioner (Appeals) in the impugned order has rightly observed that the bills/invoices raised by M/s. Ganesh Trading clearly show that the charges are meant for job work services. Thus there is no co-relation between the demands raised in the show cause notice for the man power services received by the appellant as against the invoices relied upon by him - In fact admittedly the appellant has fraudulently changed the date to get undue benefit by evading service tax which clearly goes against the appellant and hence the question of suppression with intention to evade payment of duty also needs to be upheld. Conclusion - Since suppression is rightly invoked the reliance placed on by the appellant on revenue neutrality is misplaced. Accordingly the demand for the period July 2013 to March 2014 is upheld along with interest and penalty under Section 77 and 78 of the Finance Act 1994. The second show-cause notice dated 19.04.2016 cannot invoke suppression once again for the same issue hence the demand is limited to normal period along with interest and the penalty under Section 78 stands set aside. Appeal disposed off.
The core legal questions considered in this judgment are:
1. Whether the appellant was liable to pay service tax under the reverse charge mechanism for the supply of manpower services received by them. 2. Whether the back-dating of the agreement/contract by altering the date on the stamp paper amounted to fraudulent activity aimed at evading service tax liability. 3. Whether the invoices and evidence produced by the appellant substantiated the claim that the payments were for job work services rather than manpower supply. 4. Whether the principle of revenue neutrality could be invoked by the appellant to negate the service tax demand and extended limitation period. 5. The applicability of extended limitation period and penalty provisions under the Finance Act, 1994 in light of alleged suppression and fraud. Issue-wise Detailed Analysis: 1. Liability to Pay Service Tax under Reverse Charge for Manpower Supply Legal Framework and Precedents: The relevant legal framework includes the Finance Act, 1994 provisions relating to service tax and the Notification No. 30/2012-ST dated 20.06.2012, which imposes service tax liability on the recipient of manpower supply services under the reverse charge mechanism. Precedents cited include decisions clarifying the nature of services liable to service tax and the requirement of proper documentation to establish the nature of services. Court's Interpretation and Reasoning: The Tribunal noted that the appellant was engaged in manufacturing and had received manpower supply services for which service tax was payable under reverse charge. The appellant contended that payments were made on a lump sum or piece rate basis for job work, not manpower supply, and thus not liable to service tax under reverse charge. Key Evidence and Findings: The Tribunal observed that the invoices submitted by the appellant did not detail manpower supply but indicated charges for production as per specifications. The agreement was back-dated and altered, indicating an attempt to misrepresent the nature and timing of the contract. The Commissioner (Appeals) found that the bills from the contractor indicated job work services, but the demand was for manpower supply services, showing a disconnect between the appellant's claim and documentary evidence. Application of Law to Facts: Since the appellant failed to produce credible evidence that the payments were solely for job work and not manpower supply, the Tribunal upheld the service tax demand under reverse charge for manpower supply services. Treatment of Competing Arguments: The appellant's argument that the payments were for job work and not manpower supply was rejected due to lack of supporting evidence and the fraudulent back-dating of agreements. The Tribunal found the revenue's contention that the appellant attempted to evade service tax by misclassifying services persuasive. Conclusion: The appellant was liable to pay service tax under reverse charge for manpower supply services received. 2. Fraudulent Back-dating of Agreement and Its Consequences Legal Framework and Precedents: The law prohibits fraudulent activities to evade tax, including altering documents such as agreements. Relevant case law includes principles that suppression or misrepresentation with intent to evade tax justifies invoking extended limitation and penalties. Court's Interpretation and Reasoning: The Tribunal noted that the original stamp paper was dated 28.12.2012, while the copy submitted showed 28.12.2011, confirming fraudulent alteration. This was held to be a deliberate attempt to evade service tax. Key Evidence and Findings: The discrepancy in the date on the stamp paper was undisputed and constituted clear evidence of fraud. The Tribunal relied heavily on this finding to reject the appellant's defense and to uphold the invocation of suppression provisions. Application of Law to Facts: The fraudulent back-dating was held to be a material factor justifying the demand for service tax, interest, and penalty for suppression under Sections 77 and 78 of the Finance Act, 1994. Treatment of Competing Arguments: The appellant's claim that back-dating did not affect the nature of service was rejected as the alteration was intended to mislead and evade tax. Conclusion: The fraudulent back-dating was established and justified the imposition of penalties and extended limitation period for the relevant demand. 3. Nature of Payments and Evidence Regarding Job Work vs. Manpower Supply Legal Framework and Precedents: The distinction between job work services and manpower supply is significant for tax liability. Precedents cited by the appellant pertained to lump sum payments for job work not attracting service tax under reverse charge for manpower supply. Court's Interpretation and Reasoning: The Tribunal found no correlation between the invoices and the service tax demand for manpower supply. The bills from the contractor indicated job work, but the demand related to manpower supply services, which were not substantiated by the appellant's documentation. Key Evidence and Findings: The invoices lacked details of manpower supply and only reflected production charges. The Tribunal relied on the Commissioner (Appeals)'s observation that the invoices did not support the appellant's claim. Application of Law to Facts: Since the appellant failed to prove that the payments were not for manpower supply, the demand for service tax under reverse charge was upheld. Treatment of Competing Arguments: The appellant's reliance on decisions involving lump sum job work payments was found inapplicable due to differing facts and evidence of fraudulent conduct. Conclusion: The appellant's claim that payments were for job work and not manpower supply was rejected. 4. Revenue Neutrality and Its Applicability Legal Framework and Precedents: The principle of revenue neutrality suggests that if tax paid under one scheme is available as credit under another, no net loss occurs. However, precedents clarify that revenue neutrality is a question of fact and does not excuse suppression or fraudulent conduct. Key decisions include the Larger Bench ruling in Jay Yuhshin Ltd and the Tribunal decision in Shree Ranie Gums and Chemicals Pvt Ltd. Court's Interpretation and Reasoning: The Tribunal reiterated that revenue neutrality cannot be invoked as a defense where suppression or fraud is established. The availability of an alternate credit scheme does not mitigate tax liability or penalty for evasion. Key Evidence and Findings: The appellant failed to establish bona fide belief or eligibility for credit that could negate the tax demand. The Tribunal emphasized that allowing revenue neutrality to excuse non-payment would undermine the value-added tax system. Application of Law to Facts: Given the established suppression and fraudulent conduct, the appellant's reliance on revenue neutrality was misplaced and rejected. Treatment of Competing Arguments: The appellant's argument that the tax demand should be negated due to revenue neutrality was dismissed in light of the facts and legal principles. Conclusion: Revenue neutrality does not apply to mitigate the service tax demand or penalties in this case. 5. Extended Limitation Period and Penalty Provisions Legal Framework and Precedents: Sections 77 and 78 of the Finance Act, 1994 provide for interest and penalty where suppression or fraud is established, allowing extension of limitation period. The Tribunal referred to established case law on invoking extended limitation in cases of suppression. Court's Interpretation and Reasoning: For the period July 2013 to March 2014, the Tribunal upheld the extended limitation period and penalties due to suppression. However, for the second show cause notice covering December 2014 to March 2015, the Tribunal held that suppression could not be invoked again for the same issue, limiting the demand to the normal period and setting aside the penalty. Key Evidence and Findings: The fraudulent back-dating and misrepresentation justified extended limitation and penalty for the first period but not for the subsequent period where the issue was already adjudicated. Application of Law to Facts: The Tribunal applied the law consistently, distinguishing between periods where suppression was established and where it was not newly invoked. Treatment of Competing Arguments: The appellant's plea against penalties was rejected for the first period but accepted for the second period regarding penalty under Section 78. Conclusion: Extended limitation and penalties upheld for the first period; limited demand and penalty set aside for the second period. Significant Holdings: "The original copy of the agreement showed the date of issue of stamp paper 28.12.2012 while the Xerox copy showed as 28.12.2011, thus, clearly proving the fraudulent activity of the appellant to avoid payment of service tax." "The invoices placed on record by the appellant do not provide any details except to show that they are charges for production as per specifications...there is no co-relation between the demands raised in the show cause notice for the man power services received by the appellant as against the invoices relied upon by him." "Revenue neutrality being a question of fact, the same is to be established in the facts of each case and not merely by showing the availability of an alternate scheme...a purported revenue neutral situation cannot, by any means, mitigate a tax liability of an assessee, which is otherwise payable in view of clear legal position of charging section and the tax entry." "The penal action and demand for extended period arises when the ingredients of suppression, wilful misstatement, etc., are established." Final determinations:
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