Short Payment of service tax

PJ/CASE STUDY/2010-11/14

31 July 2010

PJ/Case Study/2010-11/14

Case Study

Prepared By:

Parag Ghate, B.Com and

Sukhvinder Kaur, LLB [FYIC]

Introduction:

In the case under study, the assessee was availing abatement on one of the service provided by it. But the Department did not take the said fact while checking the Service Tax return filed by the assessee and issued show cause alleging short payment of service tax and raising demand of short paid duty.

In the matter of The Indian Hotels Co. Ltd [Unit: Taj Hari Mahal]

[Order-in-Original No. 520/ST/2009-10-R dated 28.06.2010]

Brief Facts:

- The noticee is engaged in the Hotel business and are registered with the Service Tax Department. They were filing ST-3 returns regularly with the Department.

- On scrutiny of the ST-3 Return filed for the half year ending Sept., 2005 the Department alleged that there was short payment of service tax by a margin of Rs 155501/-.

- Show cause notice was issued to the noticee alleging that they had contravened the provisions of Section 66 & 68 of Finance Act, 1994 read with Rule 6 of Service Tax Rules, 1994. Demand was raised for paying the amount of service tax short paid alongwith interest. Penalty was also proposed to be imposed under Section 76.

Noticee’s Contention:

Before the Deputy Commissioner, the noticee raised the following contentions:

¨ That there was no short payment of service tax for the half year ending Sept., 05. But the Department has flatly calculated the service tax by applying the rate of 10.2% on gross amount received. The noticee is providing two types of services which are as following:

a. Mandap Keeper Service: On this service the noticee is availing the abatement benefit of 40%. Thus, the service tax leviable on this service will be at the rate of 6.12% and not @ 10.2%. The abatement is claimed under the provisions of Notification No. 21/2007-ST dated 26.06.2007.

b. Health & Fitness service: The other service provided by the noticee is the Health and Fitness Service on which the service tax @ 10.2% will be applicable.

¨ It was further contended that as per ST-3 Return for the period half year ending Sept., 05 the noticee had paid a total amount through Cenvat & cash whereas service tax liability is less than that amount. So, there is excess payment of service tax by small amount. This is due to approximation and rounding of the figures.

¨ In the end, it was contended that since there was no short payment of service tax, the show cause notice should be set aside.

Issue Involved:

The issued involved in this matter was whether there was short payment of service tax on behalf of the noticee?

Order of the Deputy Commissioner:

Ø The Deputy Commissioner held that there was no short payment of service tax as the Noticee was also providing the Mandap Keeper Services and had opted for the benefit of abatement as per provisions of Notification No. 21/97-ST dated 26.06.2007. The noticee was entitled to abatement at the rate of 40% as

(i) It was providing catering services.

(ii) It did not take credit of input/capital goods.

(iii) It had not availed benefit of Notification No. 12/2003-ST dated 20.06.2003.

Ø It was held that on checking ST-3 Return, it was noticed that the noticee had deposited the total amount through Cenvat & Cash. The utilization of Cenvat credit was checked and found to be in order. In fact, the noticee had made excess payment of service tax by small amount This excess may be due to approximation and rounding of the figures.

Ø Thus, it was held that there was no short payment of service tax.

Decision of the Deputy Commissioner: -

The proceedings initiated vide impugned show cause notice were dropped.

Conclusion:

Thus, the Deputy Commissioner rightly dropped the proceedings initiated by the Department by accepting the reasoning of the assessee. Such frivolous litigation can be avoided if the Department will be a little vigilant while scrutinizing the records of assessees and accepting the explanation given by the assessee.

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PJ/CASE STUDY/2010-11/14
31 July 2010

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