By TIOL News Service
NEW DELHI, JULY 15, 2011: THE Counsel submits that at the initial stage of introduction of law for levy of service tax under Finance Act 1994 in respect of security services, there were several confusions about the gross value of the service to become measure of value for payment of service tax. Only because of the confusion there was a discrepancy between the return and the profit and loss account. While Revenue's claim is that entire value of payments received from the consumer of service shall be taxable, the appellant pleads bonafide belief that statutory payments like ESI , PF etc. received, not being consideration for the services, shall not be taxable. Similarly they plead that the profit earned on the activity shall not be taxable, so also certain other expenses. According to the appellant with the bonafide conception the appellant submitted the return and disclosed the receipts. There was no suppression of fact made by them in respect of the payment received, as it was furnished to the authorities in the course of adjudication. Only because the discrepancy was noticed by the department by comparing ST3 return with the profit and loss account, the adjudication was made. The appellant pleads that because of the bonafide belief they did not disclose the total receipts. It is also normal understanding that certain elements of recovery in respect of security services shall not form part of gross value on taxable service. Therefore, the appellant prays that the adjudication cannot sustain both on limitation as well as on merit.
The Tribunal observed,
There was difference in two sets of documents that were relied upon by the appellant. One such document was ST 3 return and the second one is its own balance sheet and profit and loss account. The authority recorded that the appellant failed to explain the difference. Therefore, the disclosure being found to be faulty, adjudication was completed on the basis of figures appearing in its financial statements. The authority did not give any concession on the statutory dues.
So far as the contention of the appellant in respect of time bar issue and also adjudication under section 73 is concerned, the appellate authority dealt with the issue and he found that one of the elements like suppression, which is essential ingredient in section 73 is present. Therefore, he held that the proceeding was well within time. When he found all these aspects, he made the appellant liable to pay penalty also. He did not give any concession in respect of penalty.
While the ST 3 return was statutory document under Finance Act 1994, the balance-sheet and profit and loss account were statutory documents under Companies Act 1956. Therefore, when the public documents bring the discrepancy, the onus of proof was on the assessee to come out with clean hand to prove its stand. So far as the valuation aspect is concerned, whether the statutory dues which form part of gross value of the service shall be included or excluded is not a prescription of law. But the consideration that shall contribute to render the services shall essentially form part of the gross value of the taxable service.
When there is no prescription of law in respect of the statutory liabilities of the service provider, we are handicapped to provide any sort of relief to the appellant in the matter of EPF and ESI contribution received and forming part of the gross value of the service provided.
The Adjudication order had directed penalty under section 76, 77 and 78 of the Finance Act 1994. So far as section 76 and 78 is concerned, looking at the lack of clarity experienced by the assessee at the initial stage of implementation of law, levy of penalty under section 78 would be appropriate to the extend permissible under the law, in view of the concessional provision existing in the statute book.
In view of the statutory provisions as well as judicial pronouncements, it would be proper for the appellant to get an opportunity to exercise the option to comply with the law, making payment of the demand that shall arise in consequence of this order within the statutory period so that the appellant may get concession of limiting the penalty to 25% of the tax. The authority shall examine these aspects and pass proper order, if there is penalty.
So far as the penalty under section 77 is concerned, we do not consider it proper to grant any immunity to the appellant because the authority noticed that the appellant never submitted the ST3 return in time. Therefore, the penalty imposed under section 77 is confirmed. So far as the penalty imposed again under Rule 77 for non-furnishing the documents is concerned, there appears no reason recorded by the appellate authority to confirm the order on such aspect. Therefore, the appellant gets relief for the order not being a speaking order for imposition of penalty of Rs.10 ,000 /-. Section 78 expressly provides that once penalty under section 78 is imposed no penalty shall be leviable under section 76. So penalty under section 76 is waived.
In the result, the appeal is dismissed except granting relief partly under section 78 subject to condition therein and complete waiver of penalty under section 76 of the Finance Act 1994.
(See 2011-TIOL-883-CESTAT-DEL in 'Service Tax')
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