Confirmation of demand again when the same stands paid with interest on account of audit objection is not justifiable.

PJ/Case Laws/2012-13/1519

Case:- BHOGILAL CHHAGULAL & SONS Versus COMMISSIONER OF S.T., AHMEDABAD

Citation:- 2013 (30) S.T.R. 62 (Tri.- Ahmd.)

Brief Facts:-The appellant is engaged in providing taxable services under the category of "Business Auxiliary Services" as defined under Section 65(19) of the Finance Act, 1994 (hereinafter referred to as 'the Act') and holding service tax registration AADFB7806LST001. On the basis of the CERA audit, it was observed that the assessee had shown receipts as Rs. 2,46,22,757/- taxable value for the period from 2004-05 to 2006-07 in their Profit & Loss Account filed by them with the Income Tax return. It was observed that the income declared by appellants in their balance sheet filed with Income Tax department is higher than the income declared in their ST-3 returns for the years 2004-05 to 2006-07. The value realized as per balance sheets was Rs. 2,46,22,757/- whereas they had declared the value of Rs. 2,32,37,069/- in their ST-3 returns for the period from 2004-05 to 2006-07. Therefore, the appellants were liable for payment of service tax to the tune of Rs. 1,86,557/- on Rs. 13,85,688/- being the differential value between the Income Tax returns & ST- 3 returns (Rs. 2,46,22,757/- - Rs. 2,32,37,069/-) Thus, it was alleged that the appellants have contravened the provisions (1) Section 68 of the Finance Act, 1994 (32 of 1994) read with Rule 6 of the Service Tax Rules, 1994 as they have failed to make the payment of Service Tax to the tune of Rs. 1,86,557/- for the years 2004- 05 to 2006-07 to the credit of Government within the stipulated time-limit. A show cause notice, therefore, was issued to the appellants on 13-4-2009 which was adjudicated vide the impugned order. The adjudicating authority has confirmed the demand of Service tax amounting to Rs. 1,86,557/- under Section 73(1) of the Act; ordered recovery of the interest thereon under Section 75 of the Act and imposed penalties under Section 76 and Section 78 of the Act.

The appeal filed against this order has been rejected.

Even though the matter was listed only for considering whether the amount deposited is sufficient towards pre-deposit as a condition of hearing the appeal, after hearing both sides, it was found that the matter cannot be finally decided by the Tribunal at the time of final hearing also and it has to be remanded. Since the appellant has already paid the Service Tax amount worked out by Audit party, which includes the period in the present proceedings, the amount already deposited is sufficient and accordingly the appeal itself is taken up for final disposal.

Reasoning of Judgment:-In this case, the appellant got verified by Central Excise party of Accountant General and they found that during the period 2004-2005 to 2006-2007, the amount indicated as basic cost for the service provided in the ST-3 return was less than what was shown in the balance sheet and consequently there was a short payment of Service Tax to the tune of Rs. 1,86,567/-. Proceedings initiated have culminated in confirmation of demand of Service Tax with interest and imposition of penalty equal to amount of Service Tax. It was submitted during the hearing that after the audit was conducted by the CERA party, the officers of the Service Tax wing of the department also conducted the audit of the appellant's record and during the audit of record during the period from 2004-2005 to 2008- 2009 was verified by the audit party and they also did the reconciliation of the figures in the balance sheet and the figures shown in the ST-3 returns. A copy of the audit report was produced during the hearing and accordingly on verification of the audit report, it was found that the appellant was liable to pay an amount of Rs. 1,43,592/- for the period from 2004-2005 to 2008-2009 and this amount with interest was deposited and the fact that the amount has been deposited has also been mentioned in the audit report itself. The period covered by the CERA party viz. 2004-2005 to 2006-2007 is also covered by the audit party of the department and therefore it can be said that the department has conducted the verification of the correctness of the ST-3 returns filed and whatever deficiencies were found, the same has been made good by the appellant. Therefore, the demand confirmed by the lower authorities amounts to duplication of the demand in respect of the amount already paid by the appellant. On going through the records, it was found that both the lower authorities have not considered the audit report of Service Tax wing. Since they have taken a view that it was for the appellant to show that the Service Tax has been paid correctly by producing documentary evidence, which they have failed to do which is not a correct approach. Once the departmental audit officers have verified the records and conducted reconciliation of the balance sheet with the ST-3 returns and the period for which short levy was pointed out by the audit wing of Accountant General is covered by the verification done by the departmental officers, as pointed but by the appellant, the confirmation of demand amounts to duplication of demand for the same period in respect of which the Service Tax liability has already been discharged with interest after reconciling the balance sheet figures with ST-3 figures. There is no indication as to why the audit report and the worksheet prepared by the appellant for the purpose of audit is not acceptable to the lower authorities. Further, in view of the fact that the amount actually paid comes down and for the subsequent period also there was a short levy, the matter is required to be considered in the light of audit report and there has to be a specific observation as to why the same amount demanded as per audit report of CERA party should be confirmed if the same has already been verified by the department.
Accordingly, the impugned order is set aside and the matter is remanded to original adjudicating authority who shall adjudicate the matter afresh, after giving a reasonable opportunity to the appellant to present their case.

Decision:-Appeal allowed by way of remand.

Comment:- The essence of this case is that when the short payment pointed by the audit party was paid by the assessee along with interest, confirmation of short payment again by the adjudicating authorities requires consideration again.

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PJ/Case Laws/2012-13/1519

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