As a relief to Adani Enterprises, the Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal(CESTAT) set aside demand for an extended period under “Renting of Immovable Property”.
During the audit, it was observed that the appellant Adani Enterprises Ltd had made short payment of service tax under the category of “Management Consultancy Service” amounting to Rs. 10,30,000/- and interest applicable thereon amounting to Rs. 2,03,601/- during the period April 2009 to September 2009.
Detailed scrutiny revealed that the appellant had charged service tax to the tune of Rs. 1 crore on bills raised by the appellant to M/s Adani Energy Ltd., on the taxable value of Rs. 10 Crores, which was paid @10%. The record revealed that for the value of the said services, half of the services were provided before February 2009, when the service tax rate was 12%, according to which the appellant had failed to assess the tax of that half of value at the prevailing rate @12%, thus creating a difference and short payment to the extent of 2%.
The Service tax authorities ascertained that the Appellant did not pay service tax on “Renting of Immovable Property” provided to Adani Wilmar Ltd. and therefore, the appellant was liable to pay Service tax of Rs. 9,51,108/- under the category of “Renting of Immovable Property”. On being pointed out by the audit team, the appellant immediately deposited the entire amount of service tax with interest.
A show cause notice was issued to the appellant proposing to demand service tax under Section 73(1) of the Finance Act amounting to (i) Rs. 10,30,000/- and interest applicable thereon amounting to Rs. 2,03,601/- under the category of “Management Consultancy Service” and (ii) Rs. 10,36,797/- for providing “Renting of Immovable Property Services”.
Since the appellant had paid the entire amount of Service tax of Rs. 10,30,000/- along with interest under the category of “Management Consultancy Service” the same was proposed for appropriation against the demand and also since the appellant had paid an amount under the head of “Renting of Immovable property‟ services, the demand amount of Rs. 10,36,797/- proposed was to be appropriated against the paid-up amount of Service tax respectively.
The Commissioner (Appeals), partly allowed the appeal of the appellant and upheld the demand for a differential amount of Service tax under the category of taxable services “Management Consultancy Services” and penalty under Section 78 of the Act confirmed by the additional Commissioner of Service tax while dropping Penalties under Section 76 and 77 of the Act by extending the benefit of Section 80(2) of the Finance Act in respect of taxable services provided under the category of “Renting of Immovable Property”.
Shri Hardik Modh, Advocate appeared on behalf of the appellant and submitted that the appellant provided services before February 2009 for which the invoices were raised and payment was received after February 2009.
It was submitted that where the issue involved in any case is of interpretation, the same being technical, mens-rea to evade payment of duty cannot be alleged. Thus, the show cause notice issued invoking an extended period of limitation is not sustainable being barred by limitation. Since the audit team pointed out in the Audit Report that the Appellant deposited the tax along with interest, the show cause notice ought not to have been issued. Per contra, Shri R. Nathan, Assistant Commissioner (AR) supported the findings of Adjudicating authority.
It was observed that the impugned order confirming the differential service tax demand in respect of “Management Consultancy Service” is not sustainable. A two-member bench comprising Mr Ramesh Nair, Member (Judicial) and Mr C L Mahar Member (Technical) observed that the ingredients for invoking demand for an extended period are not present in the present case. Accordingly, the demand raised on “Renting of Immovable Property” shall be restricted to the normal period only. The CESTAT set aside the impugned order and allowed the appeal.
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