Complete stay granted when demand not confirmed with due diligence.

PJ/Case Laws/2012-13/1517

Case:- ALLIANCE BUILDERS & CONTRACTOR LTD. Versus COMMR. OF C. EX., MEERUT-II

Citation:- 2013 (30) S.T.R. 69 (Tri. – Del.)

Brief Facts:-The appellants provide services of Construction of Residential Complexes. They are registered with Service Tax Department and have been paying service tax. When Revenue conducted audit of Bareilly and Rudrapur units of the appellants for the periods 2005-06, 2006-07, 2007-08 and 2008-09 it was found that there was a difference between gross receipts shown in the profit and loss account and the value of service rendered by them as declared in their service tax return. Since Revenue was of the view that the value of taxable services declared by the appellants in their return was not correct and there was short payment of tax, Revenue initiated proceedings for recovery of such short paid tax and the proceedings have culminated in the impugned order confirming tax amount of Rs. 67,20,597 along with interest and penalties under Sections 76 and 78 of the Finance Act, 1994. Aggrieved by the order the appellants have filed this appeal.

Appellant Contentions:-The Counsel for appellants submits the following main reasons for the difference in figures in profit and loss account and the figures in ST-3 return :

1.    Appellants have undertaken several housing projects and have sold complete houses which had been constructed on their own land. As no services were rendered to the customers in such situation appellant's activities were not liable to tax.
2.    The amount received from customers during a year is not likely to tally with the amount of sale booked in profit and loss account. Whereas sale is booked on the basis of work completed, the amount received from the customer is the amount on which service tax is paid.
3.    There was no liability for payment of service tax on the amount received prior to 15-6-2005.
4.    Amount of Rs. 15.03 crores recoverable from debtors as on 31-3-2009 is liable to be reduced from the amount of sale.
5.    No service tax was payable on the amount of Rs. 2.44 crores received towards sale of shops during 15-6-2005 to 31-3-2009.

The learned counsel also submits that the demand confirmed by impugned order is not supported by law and the adjudicating authority has not done due diligence in verifying facts and figures before confirming the demand and hence the appeals should be admitted without any pre-deposit of dues arising from the impugned order.

Respondent Contentions:-The Revenue submits that the adjudicating authority has considered the above submissions and conceded the contentions of the appellants wherever found correct. He invites attention to the table given in para 30 of the adjudication order reading as under :

SI. No.	Description	Amount
a.	Differential Value of taxable Service as per SCN	65,76,88,666/-
	Amount liable to be excluded along with reasons for its exclusion (As per details given below)
b.	Construction work done up to 15-6-2005 i.e. prior to date on which levy of Service tax was imposed on the Services rendered by the party.	Rs. 44,39,45,785/- (-)
c.	Advances received against sale of house, plot, shops which have been completely handed over to the Customers before 15-6-2005 i.e. prior to levy of Service Tax.	Rs. 2,27,20,528/- (-)
d.	Advances refunded to the Customers between 1-4-2005 to 15-6-2005	Rs. 11,78,966/- (-)
e.	Amount refunded against cancellation of booking after 15-6-2005	Rs. 1,85,01,188/- (-)
f.	Total amount (a to d)	48,63,46,367/-
g.	Balance amount after exclusion (a- f)	17,13,42,299/-
h.	Amount on which Service Tax liability has already been discharged subsequently.	(-) 65,73,335/-
i.	Total Value of taxable service (g-h)	16,47,68,964/-
j.	Amount liable for Service tax after allowing the abatement of 67% as per notification No. 18/2005-S.T., dated 7-6-2005 as amended vide Notification No. 1/2006-S.T., dated 1-3-2006	5,43,73,758/-
k.	Service tax @12% recoverable along with 2% Ed. Cess and 1% SHE Cess	67,20,597/-

Therefore the Revenue submits that the demand is rightly confirmed and the appellants may be asked to make reasonable pre-deposit.

Reasoning of Judgment:-We have considered arguments on both sides. We note that the calculations shown in the SCN or in para 30 of the adjudication order does not take into account the outstanding payments to be received as reflected in the balance sheet. This clearly shows that the amount is not confirmed with due diligence. There are also a few legal issues to be examined in this case. The amounts are confirmed with reference to figures shown in profit and loss account as per AS7 standards prescribed by the Institute of Chartered Accountants for maintaining accounts of Construction companies. This standard is for ascertaining the profit and loss of a construction company and does not straight away reflect the position of receipt of payments which is the relevant factor for paying service tax. Amounts received against taxable activities can be arrived at only if the accounts are examined diligently by a person having some knowledge about accounting methods which is not done in this case.
So in the facts and circumstances of the case we consider it proper not to call for any pre-deposit for admission of this appeal. So the requirement of pre-deposit of dues arising from the impugned order is waived for admission of appeal and there shall be stay on collection of such dues during pendency of the appeal.

Decision:-Stay granted.

Comment:- The substance of this case is that when the demand itself has been computed by the adjudicating authorities by ignoring the provisions of law, it will be unreasonable to order pre deposit as the assessee has a strong case in his favour.

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PJ/Case Laws/2012-13/1517

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