Difference in balance sheet and in  ST-3 returns during same period: CESTAT remands to Decide on Payment of Service Tax due to difference

The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the value of material supplied for providing taxable services cannot be included in the value of taxable services. The tribunal set aside the demand for service tax along with the penalties.

M/S Vividh Landscape Consultants (P) Ltd., the appellant provides taxable services under the category of Security Agency, Interior Decorators, Cleaning Service and Outdoor Catering services.  On re-conciliation of the figures of gross receipts against the services rendered appearing in balance sheet for the period 2008-09 to 2011-12 with the gross receipts of services shown in ST-3 returns for the concern period audit observed discrepancy.

The case of the assessee was that such interest was not leviable under Section 11AB of the Act, particularly in view of the fact that prices indicated in the purchase orders were final during the period of supply of goods. According to the assessee, the Department has accepted the position that the prices in the purchase orders were final. Further, according to the assessee there was no price variation clause in the purchase orders, therefore, there was no scope for increase in prices subsequently and that too, retrospectively.

It was found from the records maintained by the appellant that the figures in the balance sheet were higher than those in the ST-3 returns during this period also. On the same lines they have short paid service tax to the tune of Rs.8,66,770/-. 

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It was submitted that the present case was not a case of shortlevy or non-levy of the goods removed by the assessee calling for recovery under Section 11A of the Act, hence, this was not a case for charging of interest under Section 11AB of the Act.

Section 11A, however allow the assessees in default in both kinds of cases to make amends, subject of course to certain terms and conditions. The cases where the non-payment or short payment etc. of duty is by reason of fraud collusion etc. are dealt with under sub-section (1A) of section 11A and the cases where the non-payment or short payment of duty is not intentional under sub-section (2B).

Sub-section (2B) of section 11A provides that the assessee in default may, before the notice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about the payment made by him and in that event he would not be given the demand notice under sub-section (1).

The payment of differential duty by the assessee at the time of issuance of supplementary invoices to the customers demanding the balance of the revised prices clearly falls under the provision of sub-section (2B) of section 11A of the Act.

When the differential duty is paid after the date of clearance, it indicates a short-payment or short-levy on the date of removal, according to a two-member bench made up of P.K. Choudhary, Member (Judicial), and Sanjiv Srivastava, Member (Technical). As a result, interest for loss of revenue is levyable under Section 11AB of the Act. The assessee claimed that the government had authorized its price list on May 14, 1983. However, the government of India later ordered the assessee to return the prices to their pre-14 May 1983 level due to consumer opposition.

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Because of the price difference, the assessee sought a refund of excise duty, but this Court denied the claim, stating that the assessee was liable to pay duty on the date of removal after clearing the goods on classification and that any subsequent price reduction for any reason could not be a matter of concern to the Department insofar as the obligation to pay excise duty was concerned.

The Tribunal remanded the matter for ascertaining the factum of payment of service tax on account of the difference in the manner of the figures in the balance sheet which were higher than those in the ST-3 returns during the same period.

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