Whether difference between the assessable value shown in returns and the receipts in bank account is liable to service tax along with the interest irrespective of the nature of receipts?

PJ/Case Study/2013-14/59

CASE STUDY

Prepared by: CA Neetu Sukhwani &
Aashish Bohra

Introduction:-

M/S Choudhary Tours and travels, hereby referred as assessee is engaged in the activity of providing services relating to the “Rent a cab service” classified under section 65(91) of the finance act 1994. A show cause notice was issued to the assessee demanding the service tax along with the interest and penalty on the differences between the amount shown in ST-3 Return and the amount being credited in the bank account of the assessee for the period April 2007 to March 2012. Department was of view that there was contravention of sec 67, 68(1), and 70 of the finance act, 1994 read with Rules 6 & 7 of the Service Tax Rules, 1994 as there has been short payment of service tax on the said service of “Rent-a-cab Service” on account of the alleged difference in the assessable value on which service tax liability was discharged by the assessee.

CHOUDHARY TOURS AND TRAVELS V/S DEPUTY COMMISSIONER, CENTRAL EXCISE DIVISION, JODHPUR
[ORDER IN ORIGINAL -188/ST/2013 DATED 10.06.2013]

Relevant Legal Provisions:

Section 65(91)of Finance Act, 1994 as amended: “Rent-a-cab scheme operator” means any person engaged in the business of renting of cabs.

Section 65(105)(o)of Finance Act, 1994 as amended “Taxable service” means any service provided or to be provided to any person by a rent-a-cab scheme operator in relation to the renting of a cab.

Sec 67:Valuation of taxable services for charging Service tax –

1.Subject to the provisions of this Chapter, service tax chargeable on any taxable service with reference to its value shall,—

(i) in a case where the provision of service is for a consideration in money, be the gross amount charged by the service provider for such service provided or to be provided by him;

(ii) in a case where the provision of service is for a consideration not wholly or partly consisting of money, be such amount in money, with the addition of service tax charged, is equivalent to the consideration;

(iii) in a case where the provision of service is for a consideration which is not ascertainable, be the amount as may be determined in the prescribed manner.

(2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged.

(3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service.

(4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed.

Explanation.—For the purposes of this section,—
(a) “Consideration” includes any amount that is payable for the taxable services provided or to be provided;

(c) “gross amount charged” includes payment by cheque, credit card, deduction from account and any form of payment by issue of credit notes or
debit notes and

3. [book adjustment, and any amount credited or debited, as the case may be, to any account, whether called “Suspense account” or by any other name, in the books of account of a person liable to pay service tax, where the transaction of taxable service is with any associated enterprise.]

4 '67A. The rate of service tax, value of a taxable service and rate of exchange, if any, shall be the rate of service tax or value of a taxable service or rate of exchange, as the case may be, in force or as applicable at the time when the taxable service has been provided or agreed to be provided.

Explanation.— For the purposes of this section, "rate of exchange" means the rate of exchange service and referred to in the Explanation to section 14 of the
Customs Act, 1962.

Sec 68(1):Every person providing taxable service to any person shall pay tax at the rate specified in section 66 in such manner and within such period as as may be prescribed.

Section 73:- Value of taxable services escaping assessment
73. (1) where any service tax has not been levied or paid or short -levied or short-paid or erroneously refunded, the *[Central Excise Officer] may, within one year from the relevant date serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the persons to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice;

Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of-

(a)     fraud; or

(b)     collusion; or

(c)     willful misstatement ;or

(d)     suppression of facts; or

(e)     contravention of any of the provisions of this chapter or of the rules made there under with intent to evade payment of service tax,

by the person chargeable with the service tax or his agent the provisions of this sub-section shall have effect, as if for the words “one year”, the words “five years” had been substituted.

Explanation-where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or five years as the case may be.

Sec 73.(4) Nothing contained in sub-section (3) shall apply to a case where any service tax has not been levied or paid or has been short-levied or short-levied or short paid or erroneously refunded by reason of-
(a)     fraud; or
(b)     collusion; or
(c)     willful mis-statement ; or
(d)     suppression of facts ; or
(e)     Contravention of any of the provisions of this chapter or of the rules made thereunder with intent to evade payment of service tax.

Issue Involved:

The following issue was involved in this case:-

Whether difference between the assessable value shown in returns and the receipts in bank account is liable to service tax along with the interest irrespective of the nature of receipts?

Brief Facts:

·        The appellant is a service provider under the category of rent a cab services. Several payments were credited to the bank account of the assessee between April 2007 to March 2012. Department raised the demand of service tax along with interest and penalty due to the differences between the bank balance and the amount of taxable services shown in the ST-3 return. The differences were due to several entries like capital introduced, interest on investments etc.

·        The department on scrutiny of records provided by the assessee from time to time has observed that when comparing the amounts credited in their bank account and the amount shown as received in their ST-3 return, the assessee had appeared to have short paid service tax. The differences of amounts received as apparent from their bank statements, the amount shown in their balance sheet and shown in the ST-3 return was collected and compiled. A summon was issued to the assessee to appear on 11/12-08-2011 to tender his statements explaining the reason for the differences and to submit the relevant documents in their support. Assessee through their authorized representative submitted the reasons for the said differences found. Assessee also paid service tax amounting to Rs 69081 including the interest of Rs 18833. The service tax was paid on the amount received for the services provided to M/s Seoul Mirdha Hotels and resorts Pvt. Ltd and M/s Pawanputra travels. Photo copy of Challan and necessary documents were also submitted along with the reply to the show cause notice no. C.NO. V(ST)SCN/62/JDR/2012/1217.

·        In the reply to show cause assessee was of view point that the differences in the bank statements and the ST-3 returns pertains not to the receipts belonging to the services provided but for the ancillary matter related to the business such as interest received on investments, additional capital introduced by the owner, sale of any assets of the business etc. which is not leviable to service tax.

Assessee’s Contention:- The assessee made following contentions before the Adjudicating Authority:-

The demand of service tax has been raised on the basis of our Bank Statements and ST-3 returns, submitted by us. Your good office has summed up all the amounts shown in the deposit side of the bank statement and has compared the same with the figures shown in the ST-3 return, the differential amount is treated as taxable amount for raising the demand in the impugned show cause notice. This approach is totally erroneous. The ST-3 return is the presentation of amount received against the provision of “taxable service” which is subject to service tax under the provisions of Finance Act, 1994. On the other hand, the ‘deposit-side’ of bank statement is the summary of all the receipts received by a business entity. There may a couple of receipts besides the taxable receipts of service tax. Some of such receipts may be listed as follows:-
·        Interest received on the investments;
·        Additional Capital introduced by the owner;
·        Sale of any asset of the business, whether machinery, vehicle, scrap or old newspapers;
·        Interest received on the delayed payments;
·        Fresh Loans and deposits taken.

The above are few instances of the other receipts credited in the bank account. If the owner has invested in some shares and debentures or has given the loan to some other person; he will receive the interest/dividend on the same which will obviously be credited in the bank account. If any additional capital is introduced by the owner it will also be credited in the bank account. If any asset or miscellaneous material is sold off, it will also be credited in the bank account. Charging interest on the delayed payments is also a common phenomenon of any business; which is also credited in the bank account. If any fresh loan or deposit is taken, it will also be credited in the bank account. Thus, there may be a no. of other entries in the deposit side of the bank statement other than taxable receipts. However, ST-3 return is filed only in respect of taxable receipts. Since the receipts as given in above mentioned examples are not received in lieu of provision of taxable service, service tax cannot be levied on the same and as such these will also not form the part of the ST-3 return. Hence, there is always a difference between the deposit side of the bank statement and figures shown in the ST-3 return. As such, the contention of the impugned show cause notice treating these receipts as taxable and raising demand on the differential amount is not sustainable and is liable to be set aside.

In continuation to above it is submitted that we have already shown the reasons for difference between the figures of bank statement and ST-3 vide our letter dated 14.10.2011. We had also submitted the copies of our capital account which itself proves that the entries shown there are nothing but the capital introduction by us. These were submitted vide our letter no. PJ/S.TAX/C-8/1273/2274 dated 27.09.2012. In these letters it was duly submitted that these additional receipts in the bank statement were pertaining to the fresh capital introduced during the year. In this respect it is alleged in the impugned show cause notice that no evidence has been put forth for the sum being shown as received in the capital account are in fact short term loans or capital introduction as claimed by us. In this regard, it is submitted that all the amounts shown in the credit side of the capital account are treated as the capital introduction. When the capital is introduced, following entry is passed:-

Bank account               Dr.
            To capital account

(being additional capital introduced)

The amount of above entry is shown in the deposit side of bank statement and in the credit side of capital account. Thus, all the credits in the capital account make the increase in capital and all the debits in the capital account decreases the capital. The balance of capital account is taken to the liability side of the Balance Sheet. This is the general principle of accounting.

Further, when the loan is taken, the following entry is passed:-

Bank Account                           Dr.
            To Loan Account

(being loan taken)

The amount of above entry is shown in the deposit side of the bank statement and in the credit side of loan account. The balance of loan account is taken to the liability side of the Balance Sheet.

Further, if any amount is a receipt from normal business activity (here renting of cabs), it will be shown in the Credit side of the Profit and Loss Account. If the receipts are revenue receipts or incomes from business activities, these will be added to the income side of P&L Account and will be considered for calculating the Net profit or loss of the business during a particular year.

On the other hand, if the receipts are from any activity other than business activity, its account will show the balance at the end of the year and that balance will form the part of Asset / Liability side of the Balance Sheet. Since the receipts claimed as additional capital introduction are being added in the balance of capital account which is forming the part of liability side of the Balance sheet, it cannot be treated as an income from rent a cab business. Similarly, the deposits received as loans as shown in the deposit side of the bank statement are carried forward to the Balance Sheet at the liability side; these also cannot be treated as business income liable to service tax. If these incomes were business incomes, these would have formed part of the Profit and loss account rather than becoming the active part of Balance Sheet. As such, the contention of the impugned show cause notice is not tenable in demanding the service tax on the receipts other than receipts against rent a cab service. Thus, it is liable to be quashed.

In continuation to above it is submitted that in the impugned show cause notice, the demand has been raised on the differential amount of Rs. 85,53,892/- as per the table produced at para no. 2 of the show cause notice. This table is reproduced as follows for the sake of convenience:-

Year	As per Bank Statement	As per ST-3 return	Difference
2007-08	48,33,792	45,64,865	2,68,927
2008-09	74,41,628	63,62,822	10,78,806
2010-11	2,24,16,739	1,87,19,975	36,96,764
2011-12	2,47,46,207	2,28,66,207	18,80,000
	As per Balance Sheet
2009-10	2,44,95,602	2,28,66,207	16,29,395
TOTAL	8,39,33,968	7,53,80,076	85,53,892

Thus, the total difference between income shown as per bank statement/Balance Sheet and amount shown in ST-3 is alleged as Rs. 85,53,892/-. However, some of the figures taken in the above table are not correct. For eg., the show cause notice has taken the figures shown in the ST-3 return for the financial year 2009-10 and 2011-12, both as Rs. 2,28,66,207/- which is not correct. This is the amount relating to the financial year 2009-10. The figure shown in the ST-3 return for the year 2011-12 is Rs. 1,84,69,980/-. The copy of the ST-3 returns for half year ending on September, 2011 and half year ending on March, 2012 are enclosed herewith along with other documentsin support of this claim. Also, for the year 2009-10, the figures of Balance Sheet have been taken whereas in all the other years, receipts shown in bank statement are considered. Such a dual approach is not justified and it shows that the adjudicating authority was bent upon to issue the show cause notice irrespective of the fact that the difference is genuine and is due to generally accepted accounting practices. However, the impugned show cause notice has been unjust in considering the different figures like taking the figures of bank balances at some places and figures of balance sheet at other places while determining the liability in the impugned show cause notice. This is done where the figures shown in the ST-3 returns were more than the figures shown in the Balance Sheet/Bank Statement. The lower of the two figures have been considered in order to justify the issuance of show cause notice instead of adopting fair and standard practice. This shows that the notice issuing authority is bent upon to make out a case against us inspite of the fact that this is a genuine case totally favouring us. Thus, the impugned show cause notice is liable to be quashed and the proceedings initiated against us should be dropped.

In continuation to above, it is reiterated that the demand raised in the impugned show cause notice is not viable and incorrect and different figures are taken herein. However, all the corrected figures as per our accounts and bank statement are reproduced as follows:-

Year	Total amount in Bank statement as per Show Cause Notice	Actual amount received as per Bank Statement	As per ST-3 return	Actual difference between bank statement and ST-3 return
2007-08	48,33,792	48,33,792	45,64,865	2,68,927
2008-09	74,41,628	74,41,628	63,62,822	10,78,806
2009-10	2,44,95,602 **	2,51,77,532	2,28,66,207	23,11,325
2010-11	2,24,16,739	2,38,00,642	1,87,19,975	50,80,667
2011-12	2,47,46,207	1,84,69,980	2,01,37,313	-16,67,333
		7,97,23,574	7,26,51,182	70,72,392

** This is the amount of balance sheet.

The analysis of above table makes it ample clear that the actual difference between the figures of bank statement and ST-3 comes Rs. 70,72,392/- only instead of Rs. 85,53,892/- as alleged in the impugned show cause notice. Therefore, even if it is accepted for the sake of argument also that the difference amount is liable to service tax, then too, the demand should be recalculated on the amount of Rs. 70,72,392/- and the demand proposed in the impugned show cause notice should be reduced proportionately.

It is further submitted that as contended in the forgoing paras, out of the total amount received in the bank statement, some amount shown in the deposit side of bank statement was on account of capital introduction, unsecured loans, etc. We are giving the break-up of the total amount received in the bank statement as follows:-

Year	Total Actual amount received in Bank Statement	Amount received against taxable services	Amount received other than taxable services	Remarks
2007-08	48,33,792	45,02,791	25,000	Received from Saurabh Traders (sundry creditors) on 12.7.07
			75,000	Capital introduction on 7.8.07
			50,000	Capital introduction on 17.8.07
			25,000	Cash deposit on 17.10.07
			50,000	Received from Seoul Mirdha Hotel & Resorts (P) Ltd. on 1.11.07
			1,00,000	Received from Seoul Mirdha Hotel & Resorts (P) Ltd. on 10.3.08
			6,000	Received from Saurabh Traders (sundry creditors) on 28.3.08
	Total	45,02,791	3,31,000	48,33,792
2008-09	74,41,628	62,52,628	1,00,000	Capital introduction on 8.4.08
			30,000	Received from Seoul Mirdha Hotel & Resorts (P) Ltd. on 21.4.08
			50,000	Capital introduction on 8.5.08
			50,000	Received from Seoul Mirdha Hotel & Resorts (P) Ltd. on 9.8.08
			50,000	Received from Seoul Mirdha Hotel & Resorts (P) Ltd. on 1.9.08
			2,50,000	Cash deposit on 6.9.08
			1,00,000	Received from Seoul Mirdha Hotel & Resorts (P) Ltd. on 18.9.08
			59,000	Received from Seoul Mirdha Hotel & Resorts (P) Ltd. on 29.11.08
			50,000	Received from Seoul Mirdha Hotel & Resorts (P) Ltd. on 20.12.08
			75,000	Received from Saurabh Traders (Sundry creditors) on 5.1.09
			25,000	Received from Seoul Enterprises (sundry debtors) on 27.3.09
			3,50,000	Unsecured loan from Seoul Mirdha Hotel & Resorts (P) Ltd. on 27.3.09
	Total	62,52,628	11,89,000	74,41,628
2009-10	2,51,77,532	2,28,70,011	2,00,000	Received from Seoul Mirdha Hotel & Resorts (P) Ltd. on 17.6.09
			50,000	Capital introduction on 28.7.09
			50,000	Capital introduction on 1.8.09
			49,000	Cash deposited on 11.8.09
			51,000	Cash deposited on 12.8.09
			6,00,000	Unsecured loan from Seoul Mirdha Hotel & Resorts (P) Ltd. on 13.8.09
			80,000	Cash deposited on 5.9.09
			50,000	Cash deposited on 7.9.09
			1,22,425,	Received from Seoul Mirdha Hotel & Resorts (P) Ltd. on 18.9.09
			1,50,000	Capital introduction on 23.12.09
			2,50,000	Unsecured loan from Seoul Mirdha Hotel & Resorts (P) Ltd. on 29.12.09
			1,00,000	Unsecured loan from Pawan Putra Travels on 30.12.09
			2,50,000	Unsecured loan from Pawan Putra Travels on 7.1.10
			50,000	Unsecured loan from Seoul Mirdha Hotel & Resorts (P) Ltd. on 23.1.10
			1,50,000	Received from Saurabh Traders (Sundry creditors) on 20.2.10
			75,000	Received from Seoul Mirdha Hotel & Resorts (P) Ltd. on 17.3.10
			30,096	Received from Pawan Putra Travels on 31.3.10
	Total	2,28,70,011	23,07,521	2,51,77,532
2010-11	2,38,00,642	1,87,96,952	65,340	Received from Pawan Putra Travels on 19.6.10
			4,00,000	Capital introduction on 9.7.10
			10,00,000	Capital introduction on 6.9.10
			10,00,000	Capital introduction on 28.9.10
			8,00,000	Unsecured loan from Pawan Putra Travels on 4.10.10
			1,30,680	Received from Pawan Putra Travels on 11.10.10
			32,670	Received from Pawan Putra Travels on 10.11.10
			13,50,000	Capital introduction on 4.1.11
			25,000	Capital introduction on 14.3.11
			2,00,000	Capital introduction on 16.3.11
	Total	1,87,96,952	50,03,690	2,38,00,642
2011-12	1,84,69,980	1,65,04,279	14,602	Cheque return on 19.4.11
			16,792	Cheque return on 21.4.11
			30,000	Capital introduction on 23.4.11
			2,00,000	Received from Mukan Chand Bhansali (Sundry debtor) on 3.5.11
			5,00,000	Capital introduction on 9.7.11
			27,720	Cheque return on 19.7.11
			50,000	Cash deposited on 20.7.11
			11,737	Miscellaneous receipts from bank on 25.8.11
			50,000	Cash deposited on 6.9.11
			8,50,000	Capital introduction on 1.10.11
			2,00,000	Unsecured loan from Seoul Mirdha Hotel & Resorts (P) Ltd. on 18.10.11
			14,850	Cheque return on 5.11.11
	Total	1,65,04,279	19,65,701	1,84,69,980

The above table represents the details of receipts other than on account of taxable services. The analysis of above table makes it clear that we have received certain amounts from M/s Seoul Mirdha Hotel & Resorts (P) Ltd. and M/s Pawan Putra Travels to whom we had provided the vehicles which were further rented out by them. Initially, we were under impression that no service tax is payable by us as these two persons were already paying the same. However, later on we have paid the service tax on these receipts from M/s Seoul Mirdha and M/s Pawan Putra Travels in order to avoid the conflicts. Subsequently, we had come across a clarification issued by the Commissioner of Service tax wherein Notification issued under F.No. B.43/7/97-TRU dated 11.07.1997 issued by Ministry of Finance has been referred which stated that the no service tax is payable when one cab operator gives his cab to another cab operator. On the basis of this notification, we had filed the refund claim of service tax so paid amounting to Rs. 68,730/- for the period of April, 2007 to March, 2011. This refund has been granted to us vide order in original no. 1/2012-R(ST) dated 3.4.2012. This order is not further appealed and hence has become final and binding on the department. Therefore, the view taken by the department that no service tax is payable on the receipts from these two parties in case of sub-let of cabs, has become final and binding and it cannot be contradicted now. However, the impugned show cause notice has been issued once again for demanding the service tax on receipts from M/s Seoul Mirdha and M/s Pawanputra in contradiction to the view taken while sanctioning the refund of service tax already paid. It has been held in the case of Lumax Samlip Industries that once the order has become final, it is binding on the department and department cannot take stand contrary to that decision. This decision was cited as Commissioner of Service Tax, Chennai versus Lumax Samlip Industries [2007(6) S.T.R. 411 (Tri.- Chennai)]. This decision was confirmed by hon’ble Madras High Court which was reported at 2007 (8) S.T.R. 113 (Mad). This decision is also affirmed by the highest court of India and was reported at 2008 (11) STR J34 (Supreme Court).Therefore, once it is accepted while passing the refund order no. 1/2012-R(ST) that no service tax is payable on the aforesaid transactions, the impugned show cause notice cannot demand the same once again. Thus, the impugned show cause notice issued to demand the service tax on the receipts from M/s Seoul Mirdha and M/s Pawan Putra Travels is not sustainable and is liable to be set aside.

In continuation to above it is reiterated that no service tax is payable on the differential amounts as indicated in the table reproduced in the forgoing para so far as it relates to the receipts from M/s Seoul Mirdha and M/s Pawanputra Travels. Thus, the differential amount in the above table should be reduced by the total receipts from these two parties. Further, the amount remaining after deducting the said receipts from these two parties, is either on account of unsecured loans or capital introduction or cheque return, etc. and none of these remaining receipts are against the provision of taxable service. As such, it is proved that no service tax is payable on these receipts as alleged in the impugned show cause notice. In order to support this claim, we are enclosing herewith the following documents for all the five financial years i.e.,:-
·        Summary sheets showing the bifurcation of taxable receipts and other receipts as prepared from the bank statements.
·        Copies of relevant ledger accounts like capital account, unsecured loan accounts, etc.
·        Excel sheets showing receipt wise allocation of taxable receipts correlating them with the bill details and service tax paid thereupon.
·        Copies of bank statements.
·        ST-3 returns.
·        The analysis of all of these documents makes it ample clear that we have correctly paid the service tax and the impugned show cause notice demanding the service tax on the receipts like capital introduction, secured loans, etc. is void ab initio and is liable to be set aside.

It is further submitted that we have paid the service tax on all the taxable receipts as shown in the bank statements during the period in show cause notice. We have already enclosed the summary sheets showing the bifurcation of taxable receipts and other receipts as per details given in forgoing para. Further, the summary sheets showing the taxable receipts and their bill-wise allocation with service tax paid make it clear that the service tax has been paid in excess of what was actually payable. This may be understood with the help of following example taken from these excel sheets:-

SS. NNo.	Payment received date	BBill no.	Bill date	Gross amount	Received amount	TTDS	Service tax	EEd. Cess	Net on tax
11.	6.1.2011	33810	5.3.2011	11895.71	11776.71	1119	457	113.71	111425

The above example taken from the excel sheet for the financial year 2011-12 makes it clear that the invoice was raised as follows:-

Particulars	Amount (Rs.)
Taxable value	11425
Service tax	457
Ed. Cess	13.71
Total amount payable by the party	11895.71
Less: TDS	119
Net Amount received as per bank statement	11776.71

The analysis of above makes it clear that the amount taken in the show cause notice as per banks statement is Rs. 11776.71. On the other hand, the actual amount receivable from the party is Rs. 11895.71. Thus, the impugned show cause notice has considered improper amount while raising the demand. Further the amount so received was cum-tax but while raising the demand in the impugned show cause notice, the tax element has not been considered and the demand has been raised directly on the differential amount received in the bank statement. This is not correct approach and the impugned show cause notice has been issued by considering the incorrect figures. On the other hand, our genuineness is proved by the fact that we have already paid the service tax correctly. Further, as a general practice in the service sector, many times, there are deductions and actual amount received is mostly on the lower side than the invoice. We have however, not claimed those deductions and have paid the service tax on the actual amount as mentioned in the invoice. This also justifies the genuineness on our part and also clarifies that there was no intention to evade payment of tax. Therefore, the impugned show cause notice is not tenable and is liable to be set aside.

It is further submitted that all the facts and figures shown in the capital account, bank statement, etc. forms the part of final accounts to be submitted to the Income tax department which is also the part and parcel of the Ministry of Finance under which the Central Excise & Service tax Department works. The additions in the capital account are accepted by the income tax department simply on the basis of copy of bank statement and capital account. The bank statement proves that the amount was actually introduced and the capital account proves that the amount introduced is duly shown there. Thus, when one fact and figure is already accepted by the Income tax department, the same thing cannot be questioned by the other department working under the same Ministry of Finance. Therefore, when the fact of these receipts being a capital introduction are accepted by the Income Tax department, these cannot be doubted by your good office which is also a wing of the same Ministry of Finance. Therefore, it is ample clear that the additional receipts shown in the bank statement were nothing but capital introduction, unsecured loans, returned cheques, etc. Since these are not the taxable receipts, the demand of service tax thereupon is not sustainable and is liable to be quashed.

We further submit that it is alleged in the impugned show cause notice that we had wilfully and deliberately suppressed the facts with an intent to defraud mis-declared our total receipts. It is also contended that since we have been unable to provide any convincing evidence proving that the amounts claimed by us as non-taxable income were in fact non-taxable and were receipts as loans/ capital introduction.
Emphasis was laid on the decision made in the case of Commissioner of Service Tax, Chennai versus Lumax Samlip Industries [2007(6) S.T.R. 411 (Tri.- Chennai)], CC Chennai v/s M/s Flemingo (DFS) Pvt Ltd [2010-TIOL-60-HC-MAD-CUS], K. Harinath Gupta vs Collector of Central Excise, Hyderabad [1994 (71) ELT 980 (Tribunal], Rainbow Industries v/s. CCE [1994 (74) ELT 3 (SC), Pushpam Pharmaceuticals Company Vs. CCE, Mumbai reported in ( 2002-TIOL-235-SC- CX ) etc.

Reasoning of Judgement:- The issue to be decided is whether the difference between the receipts shown in the bank account and as shown in the ST-3 returns and Balance Sheet is the value of taxable services that have been suppressed and whether the same is leviable to service tax or not.

As the assessee is engaged in providing the taxable services under the category of "Rent-a-Cab Service", it is important to determine the nature of services taxable under the said service and whether the difference in the receipts shown in the bank account and that shown in the ST-3 returns and Balance Sheet could be attributable to as that amounting "taxable service" under the said category of "Rent-a-Cab Service."
Clause 91 of section 65 of the Finance Act, 1994 defines a "Rent-a-Cab Service" as any person who is engaged in the business of renting cabs. Sub clause (o) of Clause 105 of Section 65 ibid defines the "taxable service" of "Rent-a-Cab" as being to any person, by a rent-a-cab scheme operator in relation to the renting of a cab.
For the purpose of making a point with regard to taxability of the amount charged by one rent—a-cab operator for sub-letting Motor vehicle to another Rent-a-Cab Operator, the assessee has cited the clarification issued by the Commissioner of Service tax vide Notification issued under F.No. 43/7/97-TRU dated 11.07.1997 by Ministry of Finance. Relevant contents of which are reproduced below:

RENT-A-CAB SCHEME OPERATORS

As per Section 88 of the Finance Act, 1997, 'rent a cab scheme operator' means a person who is the holder of a licence under the Rent-a-Cab Scheme, 1989 framed by the Central Government under the Motor Vehicles Act, 1988. A person is granted a licence by the State Transport Authority under rule 6 of the scheme. a licence is granted to a person who interalia, maintains not less than 50 motor cabs having tourist permits issued under sub-section (9) of section 88 of the Motor Vehicles Act. The Rent a cab scheme operators, under the scheme are mandatorily required to maintain branch offices or sub- licensee offices in at least five cities of tourist importance with facilities for housing, maintenance and repair of vehicles.
Under the Rent-a-cab Scheme. 1989 the operator is required to maintain a register for each vehicle incorporating particulars as regards the hiring of the same in the format prescribed under the Scheme. Further, the operator under Rule 9 of the Scheme is required to collect hire charges from a foreign national or a non-resident Indian, only in foreign exchange.
The taxable service rendered by a Rent-a-cab scheme operator means any service provided to any person, by a rent a cab scheme operator in relation to the value of taxable service in relation to the service provided by a Rent a cab scheme operator to any person, shall be the gross amount charged by such operator from such person for services in relation to the renting of a cab and includes such rental.

The value of taxable service in relation to the service provided by a Rent a cab scheme operator to any customer, shall be the gross amount charged by such operator from such customer for services in relation to the renting of a cab and include the rental so charged. Any other charges billed to the customer such as processing charges, administrative fees, charges for providing extra accessories or providing other value added services such as a provision of driver etc. shall also be includible in the gross amount chargeable to service tax.

However service tax will not be payable in cases where a bill has been raised on a Rent a Cab Scheme operator by another rent-a-cab scheme operator who has sub-let the motor cab to the latter operator provided who pays service tax on the amount billed to his client for renting out the motor cab so obtained by him.

The Commissionerates of Central Excise may contact the jurisdictional State Transport Authority who is the licensing authority under the rent-a-cab scheme, 1989 to identify and register the rent-a-cab scheme operators for the purposes of service tax.

On perusal of the above provisions, the deputy commissioner finds that in the impugned show cause notice substantial receipts pertaining to the differential service tax liability are that of M/s Seoul Mirdha and M/s Pawanputra Travels to whom assessee had provided vehicles which were further rented out by them. There is no dispute as regard to the fact of payment of Service Tax by M/s Seoul Mirdha and M/s Pawanputra Travels to whom the vehicles were provided, hence, it is found that service tax is not liable to be paid by the assessee with regard to the receipts of amounts from M/s. Seoul Mirdha and M/s Pawanputra Travels as the said receipts have already been determined as not taxable vide C No. 01/2012-R(ST) issued under C. No. V(Rfd)18/ST/01/2012/4325 dated 03.04.2012.

As regards the remaining entries of receipts comprised in the demand, the explanations made by the assessee in their reply to the Show Cause Notice that the same pertain to capital contributions and other miscellaneous receipts that are not taxable are convincing and hence it is found that the same are not leviable to service tax under the category of "Rent-a-cab Service".

In view of the above discussion and evidences, I find that the difference in the receipts shown in the bank account and that shown in ST-3 returns and Balance Sheet occurs on account of receipts on account of sub-letting of Motor Vehicles to other Rent-a-Cab operators, Cheques returned, introduction of owner's capital into the business, and sundry loans received from the market or receipt of amounts lent to other parties (like Mukan Chand Bhansali's entry in year 2011-12). Further, it is found that the assessee have shown Rs.11,737/- as miscellaneous receipts from bank. On verification of the same from the bank statement, it is found that vide entry dated 25.08.2011 in the bank statement, an amount of Rs.11,737/- is shown on deposit side with narration “CH 522772 Rs. 3265/ and CH 506504 Rs 8472 reverse” it was found that same cheques were debited vide entries dated 20.07.2011 and 22.07.2011.thus the said entries cannot be said to be a consideration for taxable services.

From perusal of the copy of cash book for the year 2008-09 submitted by the assessee it was found that at page no. 6 of the said document, an amount of Rs 250000 Hs been withdrawn from the bank account no. BOB A/c 6579 on 04.09.2008 and the said amount remained in cash balance of the assessee which was re-deposited into the same bank account on 06.09.2008. This clearly supports the contention of the assessee that the entries of such cash deposits were not received as consideration of any service provided, hence, the same are not taxable value of any service provided. The deputy commissioner find no evidence to controvert the above submissions of the assessee. Therefore, he holds that the entries of cash deposit are not taxable.

The assessee has submitted that the amount actually received (till the period upto 30.06.2011) is most of the times lower than billed amount and they have paid service tax on billed amount. However, the assessee have submitted that there was excess balance in their bank account as relatable to provision of taxable service when compared to the ST-3 return and have admitted that there was excess taxable amount of Rs.3804/- in financial year 2009-10 & Rs.769771- in the financial year 2010-11 and accepted their liability to pay service tax on the said amounts. The deputy commissioner finds that the submissions made by the assessee are acceptable. Amount of Service Tax payable on the said amounts works out as Rs. 3328/-.

In view of the discussions held above, the deputy commissioner finds that the assessee has admittedly suppressed their Service Tax liability of Rs.33281- in respect of the financial years 2009-10 and 2010-11. It is therefore, held that the said amount of Service Tax of Rs.33281- is liable to be recovered from the assessee in terms of Proviso to Section 73(1) of the Finance Act, 1994 along with interest thereon in terms of Section 75 ibid. The assessee is also liable to penal action in terms of Section 78 ibid. However, the penalty proposed under Section 76 is not imposable in view of the provisions of Section 78(2) ibid.
It was found that the assessee vide their letter dated 31.05.2013 informed that they have deposited Service Tax of Rs.3.329/- vide GAR-7 Challan dated 31.05.2013. The same is liable to be appropriated to the Government account. It is found that the interest liability on the above said amount works out as Rs. 1636/-.

The assessee vide their letter dated 31.05.2013 informed that they have deposited interest of Rs.826/- vide GAR-7 Challan dated 31.05.2013. The same is liable to be appropriated to the Government account. However, the interest is short paid by Rs.8101-. The same is recoverable from the assessee.

Order of Central Excise and Service tax Department, Jodhpur: -

The Deputy Commissioner viewed that the demand raised in the above show cause notice substantially relates to the amount received from M/s Seoul Mirdha Hotels and resorts Pvt. Ltd and M/s Pawanputra travels. But it was observed that the above parties have paid the service tax therefore the same was not payable by assessee. Also the assessee produced the convincing evidence for the differences. The deputy commissioner thus ordered:
Ø Confirmed the demand of service tax of Rs 3328 including cess in respect of financial years 2009-10, 2010-11 in terms of sec 73(1) of the finance act, 1994.
Ø Interest amounting to Rs 1636.
Ø Dropping the demand of service tax of Rs 360193.
Ø Imposition of penalty of Rs 3328 under sec 78 of Finance act 1994.

Decision:-Major demand was dropped.

Conclusion:- It can be concluded from this case that all the receipts in the bank account of a service provider cannot be treated as wholly from the services provided and levied to service tax. For a receipt to be taxable to service tax, it should fall under the statutory definition of the taxable service. Therefore the demand could not be confirmed on the amount pertaining to capital introduction, interest etc. but was confirmed only on the taxable portion. If any demand is raised haphazardly, it would be liable to be quashed by the Adjudicating authority itself.

***********

Comments

PJ/Case Study/2013-14/59
15 June 2013

Post a Comment

Query

Comments

PJ/Case Study/2013-14/59 15 June 2013

Post a Comment

Query

PJ/Case Study/2013-14/59
15 June 2013