Custom, Excise & Service Tax Tribunal
Cce, Chandigarh vs M/S Arpit Advertising on 11 April, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL West Block No. 2, R.K. Puram, New Delhi 110 066. COURT NO. IV Date of Hearing : 11.4.2011 Service Tax Appeal No. 726 of 2007 [Arising out of the Order-in-Appeal No. 405/CE/CHD/07 dated 17.9.2007 passed by the Commissioner (Appeals), Central Excise, Chandigarh] Coram: Honble Ms. Archana Wadhwa, Member (Judicial) Honble Mr. Mathew John, Member (Technical) 1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Whether their Lordships wish to see the fair copy of the order? 4. Whether order is to be circulated to the Department Authorities? CCE, Chandigarh Appellant Vs. M/s Arpit Advertising Respondent
Appearance:
Appeared for Appellant : Shri K.K. Jaiswal, DR
Appeared for Respondent : Shri V. Kakaria, Advocate
CORAM: Honble Ms. Archana Wadhwa, Member (Judicial)
Honble Mr. Mathew John, Member (Technical)
Order No.dated.
Per Mathew John:
The Appellant is in the business of canvassing advertisements for newspapers and they get commission for such business. They were registered under The Service Tax Rules ,1997 for payment of service tax as an advertising agency. The Revenue received specific information that the Appellant was suppressing the value of services rendered by the Appellant. So they conducted some investigations including a search at the premises of the Appellant. Based on evidences gathered an SCN was issued to the Appellant which was adjudicated vide order dated 06-03-07. The operative part of the order is reproduced below:-
1. I confirm the demand of Service Tax amounting to Rs.13,23,058.34 and Education Cess of Rs.13,386.06, total amounting to Rs.13,36,444/- for the period from 1.4.2001 to 31.12.2005 sub section (2) of Section 73 of the Finance Act, 1994 by invoking extended period of limitation.
2. I confirm the recovery of interest under Section 75 of the Act for the confirmed demand of Rs.13,36,444/-.
3. Under Section 76 of the Act, I impose penalty equal to Rs.100/- for everyday during the period till the amount of Rs.13,36,444/- along with interest is paid by the assessee, subject to the conditions that penalty amount shall not exceed Rs.13,36,444/-.
4. Under Section 78 of the Act, I impose penalty of Rs.13,36,444/- for suppressing the value of taxable service. Provided that if the confirmed amount along with interest is paid within 30 days of the communication of this order, the penalty amount shall get reduced to Rs.3,34,111/- (25% of the confirmed Service Tax amount) under proviso to the Section 78 of the Act.
5. Under Section 77 of the Act, I impose penalty of Rs.1000/- for violation of Rule 7 of the Service Tax Rules, 1994 as the party did not submit correct periodic return to the department.
2. Aggrieved by the order the Appellant filed an appeal with Commissioner (Appeal).
3. The main grounds taken in appeal were the following:
(a) The nature of service has not been examined and its taxability not decided. The appellant is acting as mediator between newspapers and the person desiring to advertise. Such activity does not fall within the ambit of taxable service;
(b) The adjudicating officer has assumed that the payment of Rs. 1,32,24,390.86 shown in the balance sheet relates to commission/discount/incentive whereas this figure includes commission earned on other media activity which is not taxable.
4. Commissioner (Appeal) decided the matter by his order dated 18-09-2007. The operative part of the order is re-produced below:-
The appellant have submitted certificates dated 18.6.2007 and 3.7.2007 issued by Rampaul & Associates, Chartered Accountants, # 189 Sector 40-A, Chandigarh who have certified that an amount of Rs.6,63,048/- as detailed above has been deposited as service tax by M/s Arpit Advertising Chandigarh and by others on behalf of M/s Arpit Advertising Chandigarh and that the information has been compiled from the books and records as produced before them and found to be correct.
In the light of the above certificates issued by the Chartered Accountant I accept that the appellant have already discharged their service tax liability of Rs.6,63,048/- and the demand of service tax of that amount was wrongly confirmed. As discussed above, the taxable value of the services of advertising agencies rendered by the appellants during the period 2001-2002 to Dec. 2005 is held to be Rs.95,41,581/-. The service tax liability of the appellants is, therefore, ordered to be re-calculated on the taxable value of Rs.95,41,581/- and the appellants should discharge the service tax liability accordingly after making an adjustment of the amount of Rs.6,63,048/- already paid by them.
As regards the penalty imposed, I find that the appellants had taken the service tax registration and were paying service tax. An amount of service tax of Rs.6,63,048/- had been paid by the due dates. I, therefore, accept their submission that they did not have any intention to evade the payment of service tax. However, there has been delay in the payment of amount of service tax which the appellant would now be required to pay as per this order. Therefore, the penalty imposed under Section 76 on the amount required to be paid is upheld. The other penalties imposed by the Adjudicating Authority are set aside being not sustainable.
5. This order of Commissioner Appeals has been reviewed under section ---------of the -------------by the Committee of Commissioners and as directed by the Committee this Appeal is filed.
6. The ground for Appeal as recorded in the Order-in-review are as under:-
(i) Commissioner (Appeals) has erred in relying upon the certificate issued by the Chartered Accountant without verifying the facts. This certificate (enclosed as Annexure A) is ab-initio void as the figures in column 3 which relates to outstanding amount pending recovery due to legal cases pending in the Courts is the gross amount inclusive of Service Tax and no Commission which actually comes to Rs.1,07,406/-. Whereas, the fact is that Chartered Accountant while calculating the net taxable amounts has wrongly subtracted Rs.7,17,157.80 (instead of Commission of Rs.1,07,406/-). This has resulted in misleading the department by distortion of the figures. Commissioner (Appeals) has been misled while adjudging the case:
(ii) Commissioner (Appeals) has committed an error of judgment by accepting that Service Tax liability of the party has been paid on his behalf by some other agencies. Neither there is any legal provision nor any primary documentary verification has been done to verify the factum of payment of Service Tax in this regard:
(iii) Commissioner (Appeals) has not appreciated the in-congruencies in the alleged figures and documents and the figures submitted by the party in the re drawn chart based upon a Chartered Accountants certificate which has inbuilt inconsistencies as illustrated in para (i) above:
(iv) Acceptance of Chartered Accountant not supported by relevant primary documents, without looking into basic calculations and principles reflects that learned Commissioner (Appeals) has been misled by manipulation of the figures by the Chartered Accountant. Chartered Accountants certificate cannot be a sole document to vouch for the unlawful claims/deductions by the party. Commissioner (Appeals) has not looked into the authenticity and nature of figures shown in partys record. It was necessary to do such verifications. It has been held by the CESTAT in the case of Commissioner of Customs, Mumbai Vs. Eltech Enterprises reported as 1999 (112) ELT 877 (Tribunal) and Collector of Central Excise, Meeurt Vs. Moon Beverages Pvt. Ltd. reported as 1999 (111) EKT 712 (Tribunal). These cases also affirm that Chartered Accountants certificate needs complete verification, when elements of mens rea have also been established by circumstantial evidences. In this case the gravity of need of verification is further highlighted:
(v) Commissioner (Appeals) has again committed an error of judgment by adjudging that party was not having intention to evade. It is explicit from the facts and circumstances of the case that party was suppressing taxable value by resorting to colourful devices like Barter Agreement with M/s Kinetic Engg., Pune, Commissioner (Appeals) has completely ignored this fact.
7. The above background does not bring out the case quite clearly. This problem persists through the SCN, Order-in-Original, Order-in-Appeal, Order-in-Review and Appeal Memorandum.
8. Though the information received by the department was very specific, it is seen that the SCN proposed demand based on the figures reported in the balance sheet of the company under the Appellant for the period 2001-02 to 2004-05.
9. Para 7 of the SCN introduces anew hazy dimension of a barter agreement with M/s kinetic Egg. Pune. This para is reproduced to achieve as much clarity as possible in this case.
10. The Appeal paper has not enclosed the barter agreement. It is not clear what was the service being rendered to Kinetic Egg. Pune. But this confusion is not a hindrance in appreciating facts for the four financial years ending 2004-05.