Whether sale of materials includible in taxable value of service?

PJ/Case Law /2016-17/3270

Case:-NEW JANATA STUDIO VERSUS COMMISSIONER OF C. EX. & S.T., LUCKNOW

Citation:- 2016 (42) S.T.R. 346 (Tri. - All.)

Brief Facts:-The appellant is before Tribunal against the order-in-appeal dated 15-3-2010 passed by the Commissioner of Central Excise & Service Tax, Lucknow. The appellants are engaged in photography business and running studio. Proceedings were initiated against them for non-payment of service tax under photography services during the period 2004-05. After due process, the original authority confirmed the demand of Rs. 43,000/- and imposed penalties under Sections 76, 77 and equal amount of penalty imposed under Section 78 of the Finance Act, 1994. On Appeal, the ld. Commissioner (Appeals) vide the impugned order, upheld the order of the original authority and rejected the appeal. Aggrieved by this, the appellant is before Tribunal.

Appellant’s Contentions:-The ld. Counsel for the appellant, submitted that case against the appellant is based on the Audit Report and on the basis of IT Return filed by the appellant. He submitted that they are running a small business and the levy of service tax was introduced of photography services in the year 2001. They have started business in the year, 2004 and they are not conversant with the legal provisions. However, they got themselves registered with the Service Tax Department in April, 2005. Regarding quantification of demand of service tax, the ld. Counsel while admitting liability of service tax for the impugned period, submitted that they had substantial income on simple sale of items, like, cameras, camera covers, film rolls etc. He drew attention to the profit and loss account for the impugned period, which categorically states the amount of receipts towards these sales.

Respondent’s Contentions:-The ld. AR for the Revenue, reiterated the findings of the impugned order and stated that despite repeated opportunities, the appellant did not provide documentary evidences to substantiate their claim regarding due sale of various items.

Reasoning Of Judgement-The tribunal find that the pure sales of material has no bearing to the service tax liability and cannot be added to the taxable value. This aspect was not examined by the lower authorities. Tribunal find that the appellants are liable to service tax during the impugned period on the value of services provided, but not on simple sale of various items, which are not part of taxable service provided to any person. With these facts in position, the demand requires re-working deducting the simple sale of items, which are not connected to any service rendered by the appellant. The service tax liability will stand reduced to that extent.

Regarding various penalties imposed by the lower authority, the ld. Counsel submitted that the penalties under Sections 76 and 78, cannot be imposed for the same offence. They find that various judicial pronouncements have clarified that imposition of both the penalties on the same issue, is not legally tenable. Accordingly, penalty under Section 76 is set aside. Penalty under Section 78, will stand to the extent of service tax liability re-worked as above. Penalty under Section 77 is also upheld.

Appeal is partly allowed as indicated above.

Decision:-Appeal partly allowed.

Comment:-The analogy of the case is that according to Section 67 of Finance Act, 1994 pure sale value of materials such as cameras, camera covers and film rolls are not to be added in taxable value of photography service as they did not form part of taxable service provided. Therefore, the demand raised against the assessee shall be reduced to the extent of service tax on the value of sale of items which are not connected to any service rendered by the appellant. It was also held that simultaneous imposition of penalty under section 76 and 78 is not tenable and so the penalty under section 76 was set aside.

Prepared By:- Neelam Jain

Comments

PJ/Case Law /2016-17/3270

Post a Comment

Query