Service Tax Payable for Balance Returned Back only if Initially Due for Providing Taxable Services and No Tax Previously Paid: CESTAT Remands Matter [Read Order]

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has remanded the issue of service tax on balances returned back, emphasising that such tax is applicable only if the amounts were initially due for providing taxable services and no tax was previously paid.

This directive came in the appeal filed by M/s Divine Autotech Private Limited against the Commissioner of Central Tax, Delhi.

The appellant, M/s Divine Autotech Private Limited, represented by Shri Atul Gupta and Anmol Gupta argued that the “balance written back” amounts were repayments from old debtors whose bad debts were previously written off.

The appellant also maintained that these repayments were not for any taxable service provided and hence should not attract service tax. It was also asserted that the Commissioner failed to consider the nature of these repayments, which did not relate to any taxable service.

The respondent revenue, Commissioner of Central Tax, represented by Shri Anand Narayan contended that the “balance written back” amounts should be subject to service tax if they were initially due for providing taxable services.

It was also argued that since the appellant did not provide supporting evidence to distinguish these repayments from taxable services, the amounts should be presumed as consideration for services rendered and, therefore, liable to service tax.

The two-member bench of the CESTAT comprising Ms. Binu Tamta (Judicial Member) and Mr. P. V. Subba Rao (Technical Member) noted that the Commissioner had confirmed the service tax demand on balances returned without sufficient evidence linking these amounts to taxable services.

In result, the tribunal remanded the matter instructing the Commissioner to reassess the entries to determine if the amounts were originally due for taxable services and to verify if service tax had already been paid on these amounts. If the amounts were received for non-taxable services or goods, no service tax should be levied.

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