Merely because appellant did not make debit of the CENVAT Credit and did not make proper entries in the ST-3 return, confirmation of service tax demand not justifiable

In this case, the Service Tax demand has been confirmed on the ground that the service tax payable has not been debited in the CENVAT Credit account and it has not been reflected in the ST 3 return. In view of the fact that even in the cases of clandestine removal in Central Excise matters, while confirming the demand, the benefit of CENVAT Credit, subject to verification of records that proper documents are available and raw input/ capital goods have been received, the benefit of CENVAT Credit is allowed.

This being a technical ground that the appellant did not make debit of the CENVAT Credit and did not make proper entries in the ST-3 return, confirmation of service tax demand is not justifiable. Therefore, the matter is required to be remanded to original adjudicating authority, who shall verify the CENVAT Credit account of the appellant and if sufficient credit is available, deduct the same from the actual service tax liability after requiring the appellant to make the debit. It is the submission of the appellant that if this is done, no amount is payable. As regards liability of the payment of Rs.28,373/-, learned Chartered Accountant submitted that there was a circular issued by the Board stating that sub-contractor is not liable and only in September 2007, this instruction was reversed. However, these facts have not been brought before the lower authorities and have not been considered. Only submission was that the appellant is not liable in the capacity of sub-contractor.6. In view of the above discussion, the matter is remanded to the original adjudicating authority for fresh consideration of the issues in the light of above observations.

CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, AHMEDABAD
Appeal No. ST/431/2010
Application No. ST/S/1261/2010

Arising out of the Order-in-Appeal No.161/2010(STC)/MM/Commr.(A)Ahd Dated: 16.7.2010

Date of Decision: 10.11.2010

M/s Ad VISION

Vs

CST, AHMEDABAD

CORAM: B S V Murthy, Member (T)

ORDER NO.A/1825/WZB/AHD/2010
S/1287/WZB/AHD/2010

Per: B S V Murthy:

Demand of service tax of Rs.4,90,487/- has been confirmed against the appellant, who has provided advertising services during the period October 2004 to September 2005. Penalties under Section 76, 77 and 78 of Finance Act, 1994 have also been imposed.

2. Learned Chartered Accountant on behalf of the appellant submitted that in reality, there is no service tax payable and the demand has been confirmed because of the fact that while filing ST-3 return, mistakes were committed by the appellant’s clerk, who was not well conversant with the provisions relating to service tax and discharge of liability of service tax. For the period from October 2004 to March 2005, the CENVAT Credit of Rs.1,47,475/- was shown under Column 4 of ST-3 return, which relates to adjustment in terms of sub-rule 3 of Rule 6 of Service Tax Rules, 1997. In fact, this being CENVAT Credit amount available, should have been shown in Column 8b of Service Tax return and debit should have been made in CENVAT Credit account. Similarly, for the period April 2005 to September 2005, the CENVAT Credit taken was not at all shown in Column 8b and the value of taxable services realized, was wrongly shown and instead of showing CENVAT Credit amount, value of input taxable services was shown as value of break-up of taxable service realized. Because of this error, duty demand has been confirmed on the ground that the appellant had not discharged service tax liability by making debits in CENVAT Credit account. He submits that because of clerical error, the service tax cannot be demanded twice and the benefit of CENVAT Credit should have been allowed after examining the records maintained by the appellant and finding whether he is eligible or not. As regards demand of service tax of Rs.28,373/- he submits that this service was rendered as a sub-contractor and prior to September 2007, a sub-contractor was not leviable to service tax.

3. Learned SDR, on the other hand, submits that there is no evidence to show that actually the CENVAT Credit available has been debited by the appellant towards payment of Service Tax during the relevant month. Therefore, it cannot be said that what has happened is an error in preparation of return. Therefore, the demand for service tax and imposition of penalty is justified. He further submits that once the services have been rendered even in the capacity of sub-contractor, the service provider is required to pay the tax. The contractor who receives the services can avail the benefit of service tax credit. But. this in no way, would exempt the sub-contractor from payment of service tax.

4. I have considered the submissions made by both sides. Since the issue was heard in sufficient detail, with the consent of both sides, the appeal itself is taken up for disposal after dispensing with the requirement of pre- deposit.

5. In this case, the Service Tax demand has been confirmed on the ground that the service tax payable has not been debited in the CENVAT Credit account and it has not been reflected in the ST 3 return. In view of the fact that even in the cases of clandestine removal in Central Excise matters, while confirming the demand, the benefit of CENVAT Credit, subject to verification of records that proper documents are available and raw input/capital goods have been received, the benefit of CENVAT Credit is allowed. This being a technical ground that the appellant did not make debit of the CENVAT Credit and did not make proper entries in the ST-3 return, confirmation of service tax demand is not justifiable. Therefore, the matter is required to be remanded to original adjudicating authority, who shall verify the CENVAT Credit account of the appellant and if sufficient credit is available, deduct the same from the actual service tax liability after requiring the appellant to make the debit. It is the submission of the appellant that if this is done, no amount is payable. As regards liability of the payment of Rs.28,373/-, learned Chartered Accountant submitted that there was a circular issued by the Board stating that sub-contractor is not liable and only in September 2007, this instruction was reversed. However, these facts have not been brought before the lower authorities and have not been considered. Only submission was that the appellant is not liable in the capacity of sub-contractor.

6. In view of the above discussion, the matter is remanded to the original adjudicating authority for fresh consideration of the issues in the light of above observations. The appellant shall be given reasonable opportunity to present their case before order is passed.

7. Both the stay petition as also appeal gets disposed of in above manner.

(Dictated & Pronounced in Court)

NF