Custom, Excise & Service Tax Tribunal
M/S. Indian Oil Sky Tanking Ltd vs Commissioner Of Service Tax ... on 28 April, 2014
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL SOUTH ZONAL BENCH BANGALORE Final Order No. 20614 / 2014 Application(s) Involved: ST/Stay/26400/2013 in ST/26085/2013-DB Appeal(s) Involved: ST/26085/2013-DB [Arising out of Order-in-Original No.153/2012 dated 26/11/2012 passed by Commissioner of Service Tax , SERVICE TAX - BANGALORE ] M/s. Indian Oil Sky Tanking Ltd Fuel Farm Facility, Bangalore International Airport, Devanahalli, BANGALORE - 560300 KARNATAKA Appellant(s) Versus Commissioner of Service Tax BANGALORE-SERVICE TAX NULL 1ST TO 5TH FLOOR, TTMC BUILDING, above BMTC BUS STAND,DOMLUR BANGALORE, - 560071 KARNATAKA Respondent(s)
Appearance:
Mr. M. V. Sridhar, Consultants For the appellant M/s. KGS CESTAX ADVISORS LLP No.729/C, II Main, A Block, Vinayakanagar, Konena Agrahara HAL Post, BANGALORE 560 017. Mr. Ganesh Havanur, Addl. Commissioner (AR) For the respondent CORAM: HON'BLE SHRI B.S.V.MURTHY, TECHNICAL MEMBER HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER Date of Hearing: 24/04/2014 Date of Decision: 24/04/2014 Order Per : B.S.V.MURTHY
Appellant is a joint venture company of IOCL, Sky Tanking GmbH Germany and IOT Infrastructure and Energy Services Ltd. and are engaged in providing taxable services under the category of Business Auxiliary Service and Storage and Warehousing Service. During the course of audit of their records for the period from October 2009 to September 2011, it was noticed that on a reconciliation of balance sheet and ST3 returns, according to the Revenue, the appellant had short-paid service tax. The audit also took a view that the appellants had not paid service tax on Management Consultancy Service.
2. Proceedings were initiated resulting in confirmation of demand for service tax of Rs.12, 65, 52,066/- with interest.
3. An amount Rs.12, 44, 71,002/- is the demand for service tax arising because of difference between balance sheet and the ST3 returns. The learned consultant on behalf of the appellants submitted that in this case, the balance sheet was prepared following the accrual method whereas the ST3 returns are filed and taxes are paid after receipt of consideration. He produces complete worksheet which according to him would show that the appellants have paid service tax on the entire differential amount as and when the same was received from their customers. The learned DR would submit that this is required to be verified by the original adjudicating authority and therefore the matter may be remanded so that this can be verified for its correctness and if necessary, demand can be requantified. The learned consultant has no objection to this.
3.1 There is another aspect which according to the learned consultant, the Commissioner should not have taken up. This is the ground that after 10.5.2008 in the case of associated companies, the date on which debit entry/credit entry or book adjustments is made, tax is to be paid. He submits, by drawing our attention to the relevant paragraphs in the show-cause notice, that this issue had not at all been raised in the show-cause notice and therefore Commissioner has travelled beyond the show-cause notice by making observations on this aspect. We find this submission to be correct and therefore this issue cannot be raised at this stage and could not have been raised by the Commissioner. Therefore requantification effort would be limited to verification of correctness of payment of service tax based on date of receipt of consideration by the assessee.
3.2 The second issue involved is demand for Rs.20, 81,063/- on the ground that appellant had provided Management Consultancy Service. The learned consultant on behalf of the appellant submits that this demand has been made on the basis of auditors note in the annual report which reads as:
The company has been awarded the contract of operating Aviation Fuel Facility (AFF) and Into Plane (ITP) fuelling services at Delhi International Airport and has incurred Rs.2,02,04,503/- towards manpower consultancy and other charges, etc., This is shown under advances recoverable in cash or in kind as the same will be recovered from the new subsidiary when formed. The learned consultant submits that the new subsidiary was formed only on 30.3.2011 and is yet to take over the functions which it was supposed to take over. Till now, the appellants are themselves performing these functions in Delhi Airport. He submits that on the date of balance sheet i.e., as on 31.3.2010 no subsidiary had been formed and appellant had not earned any income chargeable to service tax. In the subsequent financial year 2010-2011, the subsidiary was formed and converted into a public limited company. However the amount which was proposed to be recovered from the subsidiary or the public limited company was not recovered and he draws our attention to the reply to the show-cause notice wherein they stated that by way of internal management decision, the expenditure incurred by them had been absorbed by the appellant themselves as an expenditure and the proposal to recover the amount has been dropped. Therefore no liability to service tax would be attracted. We find ourselves in agreement with this submission. The learned AR vehemently opposed this proposition and submitted that being a subsidiary / associated company, the note in the annual report for the year 2009-2010 in the appellants annual report has to be taken as book adjustment with the subsidiary and therefore tax becomes payable. We notice the fact that the subsidiary never came into existence in 2009-2010 and therefore during that year no book adjustment can be said to have been made. When the service recipient itself is not there, the question of book adjustment would not arise. Even for subsequent years also there is no evidence to show that appellant did recover this amount. Moreover the notes reproduced by us hereinabove, would show that what was proposed in Note 5 was also a proposal to recover expenses and not to recover consideration for services provided. Even assuming that such recoverable cost proposed to be recovered from the subsidiary are for the services rendered, if such amount is not realized and recovered and no book adjustment is carried out, liability for service tax would not arise. Other than a Note showing proposal to recover the cost from the subsidiary, there is no corresponding evidence either documentary or otherwise to show that there was either a book adjustment or recovery of cost. Having accepted the Note in the annual report that expenses already incurred and booked by the appellants in their accounts will be recovered in future date as correct, the subsequent assertion of the assessee that they decided not to recover cannot be rejected outright without any evidence to the contrary. In our opinion, there is no evidence to show that the appellants have recovered cost for the services rendered from the subsidiary or the public limited company which has been formed subsequently either documentary or otherwise. When the cost of services is not recovered question of levy of service tax also does not arise. Therefore, the demand on this count cannot be sustained and has to be set aside. In view of the above, the matter is remanded to the original adjudicating authority to verify the worksheet submitted by the appellant regarding payment of service tax on the amounts as and when received by the appellant.
(Operative portion of the order has been pronounced in open court) S.K. MOHANTY JUDICIAL MEMBER B.S.V.MURTHY TECHNICAL MEMBER rv 3