1. The appellant was engaged in the business of providing Maintenance and Repair Servicer in the factory of M/s. Tractor and Farm Equipment Ltd. (TAFE), Kalladipatti, near Madurai. They did not pay appropriate the service tax on such service for the period 01-10-04 to 31-03-08 in time. Revenue conducted investigations with TAFE and found that TAFE was making payments to the appellant. Then, Revenue approached appellant in Nov2008 for details of service tax payment on such consideration received from TAFE. By this time, the appellant had taken out registration under service tax regime and started discharging service tax from April 2008. However, there was a dispute regarding tax liability pertaining to previous period. Appellant did not pay it immediately because TAFE had not paid service tax amount to the appellant. Later the appellant remitted this service tax amount of Rs.5,20,274/- and interest of Rs.1,59,598/- in May 2009. Subsequently, show cause notice dt. 23.4.2010 for the period 2004-05 to 2008-09 covering both the periods i.e. the period for which they were not registered and had not paid tax as also for the period for which they were registered and were paying service tax.
2. After adjudication, there is a demand of Rs.5,71,328/- confirmed against the appellant along with interest under section 75 and penalty of Rs.5000/- under section 77 and penalty of Rs.5,71,328/- under section 78. The order also appropriates an amount of Rs.5,20,274/- and interest of Rs.1,59,598/- paid by the appellant. Therefore, a dispute in this appeal is only to the extent of tax amount of Rs.51,054/- and corresponding interest and penalty. Aggrieved by the order of Commissioner (Appeal) confirming the order of adjudicating authority, appellant has filed this appeal before Tribunal.
3. Ld. advocate submits that this difference is on account of three factors. Firstly the demand is based in income tax return which is prepared on the basis of accrued income but they paid tax on the basis of actual receipts because that was the legal requirement for service tax payment. He submits that two bills Nos.035 and 036 of dt. 31-03-09 for a total of Rs.1,15,630/- was received only on 02-05-09 in respect of which the appellant had shown an entry dt. 2.5.09 for Rs.1,12,774/- in their bank statement. The difference is on account of Tax Deducted at Source and canteen bill totaling to Rs.2856/-.
4. The second issue is that gross total receipts inclusive of service tax was shown in the IT return. The difference in value of service on this count is Rs.1,70,374/- which is service tax paid.This fact has been conceded by the Asst. Commissioner (Review) in their report C.No.IV/16/2011-Review dt. 22.1.2014.
5. The third issue is that an amount of Rs.24,548/- covered by bill No.323 dt. 29-03-08 and 325 dt. 31-03-08 received in the subsequent year was included in the financial year 2008-09.
6. Further he submits that disputed amounts other than the amount corresponding to receipt towards service tax payable were included in the ST-3 return for the year 2009-10 and service tax paid. However, these amounts were shown in the IT return for the year 2008-09 on an accrual basis and income tax was paid thereon.7. It is submitted that if the above factors are taken into account, there is no duty liability more than what has been paid. He submits that since tax liability along with interest has been paid before issue of SCN, no penalty should have been imposed.
8. This matter had come up for hearing on earlier occasion on 18-10-13 when Revenue was directed to verify whether the facts as stated are correct. Today, Ld. AR for Revenue submits a report C. No. IV/16/206/2011-Review dated 22-01-2004 of the Asst. Commissioner (Review)reading as under:-
"Please refer your letter in Appeal Nos. S/40008/2013 dt.11/12/2013 on the above subject. As requested, the detailed verification report as reported by the Assistant Commissioner, Madurai-I Division is submitted as under:
Point-1: Demand in the show cause notice, for the accounting year 2008-09 has been made based on the gross receipts figuring in the IT return:
Yes, this point is correct. As per the annexure to the Show Cause Notice, Taxable value has been taken as per the Income tax return only.
Point 2: The Gross receipts in the Statement of total income for the accounting year 2008-09 is as per Form 16A, which is Rs.14,85,516/-
The gross receipt has been taken from the profit and loss account filed to the Income tax department. The assessee did not produce any Form-16A (TDS certificate) for verification. However, they provided a copy of Form 26AS (Annual Tax Statement under Section 203AA of the Income Tax Act, 1961) taken from TRACES 9TDS Reconciliation Analysis and Correction Enabling System) of the Income tax portal. As per Form 26AS the gross amount paid has been shown as Rs.14,96,190/- and so it does not tally with the Profit and Loss account figure of Rs.14,85,516/-.
Point 3: The above amount of Rs.14,85,516/- is inclusive of Rs.15,047.50 and Rs.9500/- which pertains to the year 2007-08 and the other amounts in Form 16A is inclusive of Service Tax.
As per the TRACES entry both the aforesaid amounts, i.e., Rs.15047.50 and 9500/- have been paid to the assessee in the Accounting year 2008-09 only and it has been shown in the Profit and Loss account on receipt basis.
Point-4: In the Show Cause Notice, the demand has been wrongly made by including the Service Tax amount, asthe amount shown in IT return is inclusive of Service Tax amount that has been duly paid.
Yes, the assessee's claim is correct. The entire amount shown as receipt in the Profit and Loss account has been taken into account for demand of Service Tax. As there is no entry regarding payment of service tax in the Profit and Loss account and as there is no entry regarding liability of Service tax in the Balance sheet also, the entire receipt shown can be taken as cum-tax value.
Point-5: By excluding the amount relating to the year 2007-08 from Rs.14,85,516/- the taxable value is inclusive of Service tax @ 12.36% will be Rs.14,60,969/- (i.e. 145516-15047-9500)
The claim of the assessee is not correct. The Profit and Loss account has been maintained by the assessee on the 'receipt basis' only and service charges during the year 2008-09 was also on receipt basis only. Hence the service charge relating to the Financial Year 2007-08 received during theFinancial year 2008-09 should suffer service tax in the Financial year 2008-09 only. Hence this amount should not be deducted from Rs.14,85,516/- as claimed by the assessee.
Point-6: The taxable value, excluding service tax will be (1460969/112.36x100) = Rs.13,00,257/-
The claim is also wrong because of the reasons stated under point-5 and also because of the figures available in the Form 26AS provided by the assessee. The total receipt shown in the PandL account is Rs.14,85,516/-. If this is taken as cum-tax value, the taxable value is Rs.13,22,104/-. However, as per the Form 26AS the amount paid by the service receiver, i.e., TAFE during the Financial year 2008-09 is Rs.14,96,190/-. If it is taken as cum-tax value, the taxable value is Rs.13,31,604/-. As Form 26AS has been taken from the Income tax Portal, it should be taken as the authenticated figure and so the taxable value should be Rs.13,31,604/- and the service tax payable thereon works out to Rs.1,64,586/- (ST-Rs.159792/-, EC Rs.3,196/- and SHEC Rs.1598/-). Against this liability the assessee has paid Rs.1,61,397/- only. Hence the differential service tax yet to be paid by the assessee works out to Rs.3189 (ST Rs.3096, EC Rs.62 and SHEC Rs.31)
Point 7: The gross taxable value as per ST-3 returns for the year 2008-09 is Rs.13,05,150/- and therefore no differential service tax is payable:
As discussed above in point-6, the taxable value should be Rs.13,31,604/-. As Form 26AS has been taken from the income tax portal, it should be taken as the authenticated figure and so the taxable value should be Rs.13,31,604/- and the service tax payable thereon works out Rs.1,64,586/- (ST Rs.159792/-, EC-Rs.3196/- and SHEC Rs.1598/-). Against this liability the assessee has paid Rs.1,61,397/- only. Hence, the differential service tax yet to be paid by the assessee works out to Rs.3,189/- (ST-Rs.3,096/-, EC-Rs.62/- and SHEC-Rs.31/-)
The relevant PandL account, copy of Form 26AS are enclosed for ready reference.
9. The sum total of the verification report dated 22-01-2014 as I see it is that the differential tax amount due as per calculation of Revenue is Rs. 3189/- only. Further this is based on the presumption that appellant has been preparing his profit and loss account on receipt basis only and not on accrual basis. However this statement is in conflict with report given against Point No. 5. It is also not supported by TDS TRACES sheet sent along with the report because the heading for column 7 is Total amount Paid/ Credited. It is not Total amount Paid as Revenue is reading.
10. The Ld. AR further makes the following submissions :-
(i). He submits that these facts were not raised during adjudication proceedings or during proceedings before Commissioner (Appeals). He further submits that these details were not submitted even along with appeal papers.
(ii). He further reiterates the finding of the adjudicating authority, Commissioner (Appeals), verification report as given by the Joint Commissioner in the matter of tax liability.
(iii). He further submits that prayer of the appellant for waiver of penalty cannot be accepted because they have suppressed the fact of rendering services and even after commencement of the investigation they have not paid. They have not taken out registration. They have not come with clean hands. They have not furnished true details of amount received towards services rendered.
(iv). Therefore, Ld. AR submits that extended period of time for the demand is sustainable and penalty under section 78 is payable. He relies on the following decisions :-
1. CCE, MUMBAI Vs Kalvert Foods India Pvt. Ltd. - 2011 (270) ELT 643 (SC)
2. Mathania Fabrics VsCCE, JAIPUR 2008 (221) ELT 481 (SC)
3. Salasar Dyeing and Printing Mills (P) Ltd. Vs CCE Surat - 2013 (290) ELT 322 (Guj.)
4. Union Quality Plastic Ltd. Vs CCEand ST Vapi 2013 (294) ELT 222 (Tri.-LB)
5. AircellDigilink India Ltd. Vs CCE Jaipur 2004 (173) ELT 31 (Tri.-Del.)
11. Ld. AR submits that though the amounts were paid before issue of show cause notice, it was paid only after investigation was started and therefore there was suppression and hence penalties were proposed and imposed correctly. The Ld A. R. also argued that the appellant was initially taking an argument that the appellant was manufacturing tractors.
12. Ld. Counsel says that assessee is a small and individual service provider and not very conversant with the service tax laws. In this case, when the matter was pointed out by the department to TAFE, who in turn pointed out to the appellant, the tax liability was paid. There was some marginal delay because they were making efforts to get the amount from TAFE. He also submits that tax liability and interest as calculated by the Range Superintendent was paid before issue of SCN.
13. Regarding the allegation made by Ld. A. R. for Revenue that appellant misstated that he was assembling the tractors is not true. By statement dt.13-04-09 he had already accepted that he was doing Maintenance and Repair Service. He submits that he had paid service tax amount along with interest before issue of show cause notice and department ought not to have issued SCN under section 73(3). Show cause notice has been issued because of some confusion based on income tax return was generated. The factual position is that the Appellant paid appropriate service tax with interest on moneys received for the year period prior to 2008-09 with delay and was paying service tax liability for 2008-09 correctly on receipt basis.
14. I have considered submissions on both sides. I find that the dispute in the matter of service tax liability is only to the extent of Rs.51,054/- after adjudication and first appeal. After reconciliation by Revenue vide report dated 22-01-2014 the disputed tax amount is Rs.3189/- only. The reason given by appellant is that this liability is in respect of amounts received by the appellant in the subsequent financial year on which they paid tax in the subsequent financial year. Admittedly, there is some default on the part of the appellant in submitting reconciliation statement before the lower authorities though the basic reason for difference between figures in Income Tax return and ST-3 return was stated before the lower authorities. In the circumstances non-submission of reconciliation statement before lower authorities is not a sufficient reason for sending this matter involving such a small tax amount for another round of litigation.
15. I am satisfied that the submission of the appellant that the amount in question was received only in the year 2009-10 is correct. Therefore, the submission of the advocate that there is no differential tax liability over and above what is already paid is correct. Demand for differential duty as per the impugned order is set aside.
16. Now, I have considered submissions regarding penalty. I find that this is a case of ansmall entrepreneur working as an individual who did not have much leverage with TAFE in getting the service tax amount in time. Nevertheless, when the enquiry started, they paid the tax amount along with interest. Further, their contention that from April 08 they have been paying the service tax regularly should also be considered. Therefore, in the facts of the case, this is a fit case to waive penalty in exercise of the powers under section 80. This appellant and the facts of the case cannot be considered on the same footing as the various assessees mentioned in para 10 (iv) earlier. So the penalty under section 78 is waived. There is a penalty of Rs.5000/- imposed under section 77 of the Act for not taking out registration in time. It is proper to uphold this small penalty. Appeal is thus partly allowed by setting aside demand for tax in excess of Rs.Rs.5,20,274/- already paid by the appellant and the penalty imposed under section 78 of Finance Act, 1994.