Deduction claim of Gross Value of Service on “Supply of Tangible Goods Service” for Period before 16.05.2008: CESTAT directs Denovo Proceedings [Read Order]

The Allahabad Bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) directed denovo proceedings on the deduction claim of gross value of service on “Supply of Tangible Goods Service” for Period before 16.05.2008. The Tribunal remanded the matter back to the original authority for reconsideration of the issue to the extent of allowing deduction claim received against the services of “Supply of Tangible Goods Service” before 16.05.2008, the date from which the service was made taxable.

M/s Sagar Road Lines, the appellant is registered with the department and is engaged in providing taxable services under the category of Manpower Recruitment Agency, Cargo Handling Services, Maintenance & Repair Services, Construction Services in respect of Commercial or Industrial Buildings and Civil structures, Site Preparation and Clearance, Cleaning Services.

It was gathered from M/s Hindalco Industries Ltd. Renukoot, Sonebhadra, that in respect of various services received by them from various service providers including the appellant, they have made the payments to the service providers during the period 2005-06 to 2009-10.

Based on the information received revenue was of the view that the appellant had not paid the service tax, amounting to Rs 12,88,132/- (including cess) during the said period, by suppressing the value of taxable service provided by them.

A Show Cause Notice was issued to the appellant demanding service tax amounting to Rs. 12,88,132/- (Service Tax Rs. 11,56,872/- + Education Cess Rs. 25,137/-+ Secondary & Higher Education Cess Rs. 6,123/-) should not be demanded and recovered from them alongwith appropriate Interest under the proviso to Section 73(1) of the Act r/w Section 75 of the Act.

The show cause notice was adjudicated as per the order. The appeal filed by the appellant before the first appellate authority has been dismissed as per the impugned order. The demand has been confirmed by the authorities below, for the reason that the appellant had accepted their liability for payment of service tax, and they had disputed the demand only on the account of quantification, in respect of which both the authorities have concluded that the appellant had failed to substantiate their claim by producing the relevant records for verification.

The appellant has claimed a deduction on account of the threshold exemption of Rs 4 lakhs, without establishing that the same is admissible to them by providing the details of their turnover for the past year etc. Hence the same is also not admissible to them. Thus deductions claimed on this account would not be admissible to them.

The major deduction that has been claimed by the appellant from the gross value of taxable services is on the account of services provided by them before the same became taxable, specifically the services under the category of Supply of Tangible Goods services. These services became taxable with effect from 16.05.2008. Appellants have claimed that the value of the taxable services provided by them under this category for the period before the levy of service tax.

The entire period is before 01.07.2012 when service tax was leviable on the services which were specified as taxable services. Appellants have claimed that the major chunk of the services provided by them were within the category and specified as taxable services only from 16.05.2008.

Appellant pleaded ignorance of the law and had claimed waiver from penalty. Acting on the submissions made by the appellant, the adjudicating authority has noted the fact that the appellant is un-educated and out of ignorance failed to pay the service tax, extended the benefit of Section 80 of the Finance Act, 1994 and did not impose any penalty on the appellant under Section 76, 77 & 78 as were proposed in the show cause notice. 

Consequently in the second writ petition, when the appellant as well as its counsel knew that the issue as to whether the interest is payable or not on other grounds had already been foreclosed in the earlier writ petition, the counsel for the appellant did not make any submission with regard to the aforesaid plea raising the issue in Show Cause Notice and limited his prayer from the date from which the interest was to be paid.

The Tribunal comprising Mr P K Choudhary, Member (Judicial) And Mr Sanjiv Srivastava, Member (Technical) remanded the matter back to the original authority for reconsideration of the issue to the extent of allowing deduction of Rs. 84,17,327.67/- which appellant claim was received by them against the services of “Supply of Tangible Goods Service” before 16.05.2008, the date from which the service was made taxable.

The appeal was partly allowed to the extent of remanding the matter to the original authority to the extent. As the matter is quite old adjudicating authority should in de novo proceedings adjudicate the matter within three months from the date of receipt of the order, following the principles of natural justice.

Shri Atul Gupta appeared for the Appellant and Shri Santosh Kumar, Authorised Representative appeared for the Respondent.

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