CESTAT, BANGALORE BENCH
Malayalam Communications Ltd.
Commissioner of Central Excise and Customs
FINAL ORDER NOS. 474 & 475 OF 2011
MISC. ORDER NO. 347 OF 2011
APPEAL NOS. ST/246 & 248 OF 2007
ST/CROSS/162 OF 2008
JULY 21, 2011
M. Veeraiyan, Technical Member
Appeal No. ST/248/2007 is by M/s. Malayalam Communications Ltd. against the order of the Commissioner No. 03/2007-ST (Commr.) dated 05.03.2007. Cross-objection 162/2008 is connected to this appeal.
2. Appeal No. ST/246/2007 is by the department against the same impugned order.
3. Heard both sides.
4. The facts, in brief, are that the appellant company engaged in providing services under the category of “broadcasting service” has taken registration on 06.08.2001. The appellant failed to pay the service tax payable by them even as per their returns and there were separate proceedings in that connection. The officers who visited the appellant company- premises noticed wide variation between the value of services as per the returns filed by the appellant company and the income reported in the balance sheets. Accordingly, a show-cause notice dated 16.11.2005 was issued requiring them to show cause why a sum of Rs. 1,98,49,417/- being service tax payable at the rate of 5% up to 13.05.2003 and 8% from 14.05.2003 should not be demanded along with interest and why penalty under section 78 of the Act should not be imposed for suppressing or concealing the value of taxable service realized by them. They filed reply to the show-cause notice in which they conceded that certain amount of service charges received by them has not been reflected in the Service Tax Returns filed from time to time and that the same was due to software crash. A detailed worksheet, year-wise, was submitted admitting differential service tax liability only to the tune of Rs. 18,20,057/-. It was also claimed the rates of tax have been wrongiy applied for certain period. The Commissioner deputed a team of officers to verify the veracity of the claim made by the appellant company in their reply. Based on verification report received, the Commissioner has confirmed a demand of service tax of Rs. 18,20,057/- along with interest and imposed equal amount of penalty under section 78. He also gave option to pay concessional penalty of 25% of the penalty imposed if the duty and interest were paid within 30 days.
5. The appellant company is challenging part of the demand of service tax and imposition of penalty. The department is aggrieved against the order of the Commissioner in reducing the demand of service tax substantially on the ground that verifications have not been properly undertaken while accepting the claim of the appellant company.
6. Learned advocate at the outset seeks permission to withdraw the cross-objection and the same is permitted to be withdrawn. His main grievance is that the Commissioner, while confirming the demand of service tax, failed to allow cenvat credit amounting to about Rs. 4,00,000/on input services on various grounds.
7. learned Departmental Representative, referring to the grounds of appeal, submits that the Commissioner has not quantified the value of time sales attributable to the period prior to 16.07.2001; that he has not verified the receivables shown under the sundry debtors to ascertain the correctness of amount realized, the amount written of, receivables pertaining to bills prior to 16-07.2001; and that he has not verified the ledgers of service tax payable and compared the same with sundry debtor ledger.
8. We have carefully considered the submissions from both sides and perused the records. We find that the show-cause notice has been issued demanding service tax amounting to Rs 1,98,49,417/-. The demand has been issued based on figures taken from income tax returns where undisputedly the incomes were shown on accrual basis and not on the basis of realization of amounts. The learned advocate pointed out certain amounts were not received by the appellant company from their clients due to disputes. He also submitted that service tax rate adopted in the show-cause notice for certain period was erroneous and same was not the rate prevalent on the dates when service was rendered. While the appellant company has admitted certain variation between the service charges as per returns submitted by them to the department and what was actual figures, they claimed that the demand was highly inflated on various grounds and submitted detailed worksheet, year-wise, claiming that the differential service tax payable was only Rs. 18,20,057/-. We find from para 25 of the order of the original authority that detailed verification has been got done by deputing a team of officers. The relevant portion of his finding is reproduced below:
“The verification report has been prepared on the basis of data and documents made available for inspection by the assessee. The report relates to the same period as that of the Profit and Loss and Annual report. The report quantified the short payment the short payment of service tax based on the actual monthly receipts after comparing the same with the ST3 returns filed by the assessee. As per the report, the audit scrutinized the invoices issued by the assessee, cash books, bank books, register of sales, individual client ledgers, TDS ledgers, financial statements etc. for calculating the monthly Service tax liability. In order to find the actual receipts each individual client ledgers were also subjected to verification. Since the assessee during the personal hearing made certain representation against the computation of tax liability by the audit team, a further verification of the accounts were carried out and the net tax liability of the assessee during period of the show-cause notice was ascertained. As per the report, the assessee made an excess payment of Rs. 1,04,300/- (Rs. 17,458/- + Rs. 21,635/- + Rs. 65,207/-) that was adjusted towards the dues of the subsequent period. Rule 6(3) of Service Tax Rules 1994 permits adjustments of excess tax paid in a particular month towards subsequent dues only if the tax collected is returned to the service recipient and the details arc furnished in the ST3 return filed by the assessee. In this case the assessee had not complied with the above requirements. Hence the adjustment carried out is not permissible as per Rule 6(3) of Service Tax Rules 1994. Hence it is to be added to the total figure computed by the verification team.”
8.2 At this juncture, learned advocate submitted that the verification was done by the team of the officers headed by the Deputy Commissioner by visiting the premises on several days. As against the detailed finding of the Commissioner, we find from the grounds in the revenue’s appeal bald submissions have been made to the effect that verification has not been cone properly without substantiating that there was really any lacuna in conducting proper variation. It is not the case of the department the Commissioner himself should have verified the records or that the officers deputed by the Commissioner have not done their job properly. We do not find material to support the submissions in the grounds of appeal of the department. Therefore the appeal by the department does not merit acceptance.
9. As far as the appeal by the appellant company is concerned, we find that it is not in dispute that the appellant company has not furnished correct amount of service charges in their returns to the department. It is also not in dispute that service tax demanded is in accordance with the claim made by the appellant supported by year-wise calculation charts which were got verified by the Commissioner by deputing a team of officers. We also note that the burden to prove the claim for benefit of cenvat by producing relevant documents is on the assessee. The Commissioner has allowed the benefit of cenvat credit wherever the documents were found to be satisfactory based on the report by the team of officers who verified the documents. Therefore, further claim for benefit of about 4 lakhs of cenvat does not deserve to be accepted. The claim that the failure to declare the correct amount of service charge was due to crash of the software is not convincing. It is also coming on record that even in cases where they have collected the service tax, the appellant company has failed to pay the service tax. Therefore, the order of the Commissioner in confirming the service tax demand of Rs. 18,20,057/- along with interest and imposing penalty is also justified.
10. In view of the above, we do not find any valid reason to interfere with the order of the Commissioner and, accordingly, the appeal by the appellant company as well as the appeal by the department are rejected. Cross-objection is also dismissed as withdrawn.