2025 (6) TMI 457 - AT - Service Tax

Non-payment of service tax - mis-match in the gross amount declared in the ITR/TDS Returns from the services vis- -vis Service Tax Returns for the corresponding period - entitlement to benefit of abatement of 60% on Rent-a-Cab services under Sr. No. 9 of N/N. 26/2012-ST dated 20.06.2012 - Requirement to pay service tax only on 40% of the value of such services - the impugned order passed without properly appreciating the facts and the law - violation of principles of natural justice - interest - penalties - HELD THAT - The learned Commissioner (Appeals) has observed in 6.3.1 of the impugned order that in respect of services provided by the appellant to Punjab State Sports Council Punjab Energy Development Agency and National Company Law Tribunal the appellant is eligible for benefit of abatement on the taxi services while paying service tax in terms of Sr.No. 9 of the N/N. 26/2012-ST dated 20.06.2012. The learned Commissioner (Appeals) has further noted in the impugned order that the benefit to pay service tax on an abated value is conditional and the appellant has not submitted anything on the conditional aspect to avail the benefit of the above notification; the appellant has simply stated that he has not availed any Cenvat Credit; consequently the appellant was not entitled to benefit of abatement. The learned Commissioner (Appeals) after going through the financial report has only confirmed the demand of Rs.5, 13, 223/- along with interest and penalties. Further the learned Commissioner (Appeals) has observed that the appellant has not proved on record that he has not availed the Cenvat Credit on input capital goods or input services which is a condition precedent to avail the abatement under Notification No. 26/2012-ST dated 20.06.2012. It is found that the learned Commissioner (Appeals) has given substantial benefit to the appellant wherever the appellant was entitled to and has only confirmed the demand of Rs.5, 13, 223/-. There are no infirmity as regards the confirmation of the said demand by denial of the benefit of abatement to the appellant. Interest - HELD THAT - The appellant is liable to pay the same on the amount of Rs.5, 13, 223/- as per Section 75 of the Act. Penalties - HELD THAT - In the facts and circumstances of the present case said penalties are not imposable as the appellant has a bona fide belief that he is not liable to pay service tax on Rent- a-Cab service provided to the body corporates and those body corporates are liable to pay service tax under reverse charge basis. Hence the penalties under Sections 77 78 of the Act dropped. Conclusion - i) The demand for service tax was confirmed at Rs. 5, 13, 223/- along with interest under Section 75 of the Finance Act 1994. ii) The appellant was not entitled to abatement under N/N. 26/2012-ST due to failure to prove non-availment of Cenvat Credit. iii) Penalties under Sections 77 and 78 were dropped considering the bona fide belief of the appellant. v) The invocation of extended period of limitation was upheld. Appeal allowed in part.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

(a) Whether the appellant is entitled to the benefit of abatement of 60% on Rent-a-Cab services under Sr. No. 9 of Notification No. 26/2012-ST dated 20.06.2012, thereby being liable to pay service tax only on 40% of the value of such services;

(b) Whether the appellant has fulfilled the conditional requirement of not availing Cenvat Credit on inputs, capital goods, or input services used in providing Rent-a-Cab services, which is a prerequisite for claiming the abatement;

(c) Whether the demand for service tax and interest under Sections 73, 75, 77, and 78 of the Finance Act, 1994, as confirmed by the Commissioner (Appeals), is sustainable;

(d) Whether penalties under Sections 77 and 78 of the Finance Act, 1994, are imposable in the facts and circumstances of the case;

(e) Whether the extended period of limitation for demand of service tax was rightly invoked by the department.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) & (b): Entitlement to Abatement under Notification No. 26/2012-ST and Condition of Non-Availing of Cenvat Credit

The relevant legal framework is Notification No. 26/2012-ST dated 20.06.2012, which grants a 60% abatement on Rent-a-Cab services, effectively making the taxable value 40% of the gross amount charged for such services. However, this benefit is conditional upon the service provider not availing Cenvat Credit on inputs, capital goods, or input services used in providing the taxable service, as per the provisions of the Cenvat Credit Rules, 2004.

The appellant contended that he is entitled to the abatement and liable to pay service tax only on 40% of the value of Rent-a-Cab services. The appellant claimed not to have availed any Cenvat Credit and thus qualified for the abatement.

The Commissioner (Appeals) examined the appellant's submissions and financial reports. It was observed that the appellant did not provide sufficient documentary evidence or proof to establish that no Cenvat Credit was availed, which is a mandatory condition precedent to claim the abatement. The appellant's mere assertion without corroborative evidence was held insufficient.

The Tribunal concurred with the Commissioner (Appeals), noting that the benefit of abatement is conditional and the appellant failed to meet the condition of non-availment of Cenvat Credit. Consequently, the benefit of abatement could not be extended to the appellant in full, though the Commissioner (Appeals) granted partial relief where applicable.

The Tribunal thus applied the law to the facts by confirming that the abatement cannot be allowed without satisfying the statutory condition of non-availment of Cenvat Credit, and since the appellant failed to prove this, full abatement was denied.

Issue (c): Sustainability of Demand for Service Tax and Interest

The demand for service tax was initially Rs. 14,02,765/-, based on a mismatch between the appellant's declared gross receipts in Income Tax Returns and Service Tax Returns, as revealed by third-party data from the Income Tax Department. The adjudicating authority confirmed the demand under Section 73 of the Finance Act, 1994, with interest under Section 75 and penalties under Sections 77 and 78.

On appeal, the Commissioner (Appeals) reduced the demand to Rs. 5,13,223/- after considering the financial documents and partial entitlement to abatement. The appellant did not contest the demand on merits but sought relief only on the abatement issue.

The Tribunal found no infirmity in the Commissioner (Appeals)'s order reducing the demand and confirmed the balance demand of Rs. 5,13,223/- along with interest under Section 75. The Tribunal held that the demand was rightly quantified after due consideration of evidence and applicable law.

Issue (d): Imposition of Penalties under Sections 77 and 78

Sections 77 and 78 of the Finance Act, 1994, provide for penalties in cases of failure to pay service tax or for fraudulent evasion.

The appellant argued that there was a bona fide belief that the service tax liability on Rent-a-Cab services provided to certain corporate bodies was on the recipients under reverse charge mechanism, and hence penalties should not be imposed.

The Tribunal accepted this bona fide belief as a mitigating factor and held that penalties under Sections 77 and 78 were not imposable in the facts and circumstances of the case. Therefore, the penalties confirmed by the Commissioner (Appeals) were set aside.

Issue (e): Invocation of Extended Period of Limitation

The department invoked the extended period of limitation for demand of service tax on the ground that the appellant did not respond to various letters and failed to supply requisite information, thereby delaying the investigation.

The Tribunal noted the department's justification and did not find any fault with the invocation of extended limitation period. The appellant did not challenge this aspect substantively, and the Tribunal upheld the extended limitation period as valid.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"The benefit to pay service tax on an abated value is conditional and the appellant has not submitted anything on the conditional aspect to avail the benefit of the above notification; the appellant has simply stated that he has not availed any Cenvat Credit; consequently, the appellant was not entitled to benefit of abatement."

"The appellant has not proved on record that he has not availed the Cenvat Credit on input, capital goods or input services, which is a condition precedent to avail the abatement under Notification No. 26/2012-ST dated 20.06.2012."

"In the facts and circumstances of the present case, said penalties are not imposable as the appellant has a bona fide belief that he is not liable to pay service tax on Rent-a-Cab service provided to the body corporates and those body corporates are liable to pay service tax under reverse charge basis. Hence, I drop the penalties under Sections 77 & 78 of the Act."

The Tribunal's final determinations were:

• The demand for service tax was confirmed at Rs. 5,13,223/- along with interest under Section 75 of the Finance Act, 1994.
• The appellant was not entitled to abatement under Notification No. 26/2012-ST due to failure to prove non-availment of Cenvat Credit.
• Penalties under Sections 77 and 78 were dropped considering the bona fide belief of the appellant.
• The invocation of extended period of limitation was upheld.