Custom, Excise & Service Tax Tribunal
Span Structure vs Ce & Cgst Lucknow on 3 April, 2024
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
ALLAHABAD
REGIONAL BENCH - COURT NO.I
Service Tax Appeal No.70052 of 2020
(Arising out of Order-in-Appeal No.543-ST/APPL/LKO/2019 dated 13/11/2019
passed by Commissioner (Appeals) Customs, Central Excise & GST, Lucknow)
M/s Span Structure, .....Appellant
(8/14, Sector-8, Indira Nagar, Lucknow)
VERSUS
Commissioner of Central Excise &
Service Tax, Lucknow ....Respondent
(7-A, Ashok Marg, Lucknow)
APPEARANCE:
Shri T.K. Srivastava, Advocate for the Appellant
Shri Sandeep Pandey, Authorised Representative for the Respondent
CORAM: HON'BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL)
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
FINAL ORDER NO.70160/2024
DATE OF HEARING : 08 December, 2023
DATE OF PRONOUNCEMENT : 03 April, 2024
SANJIV SRIVASTAVA:
This appeal is directed against Order-in-Appeal No.543-
ST/APPL/LKO/2019 dated 13/11/2019 passed by Commissioner
(Appeals) Customs, Central Excise & GST, Lucknow. By the
impugned order Commissioner (Appeals) has upheld the Order-
in-Original No.210/AC/ST/Adj/CGST/LKO-III/18-19 dated
22.02.2019 wherein following has been held:-
ORDER
(i) I confirm the demand of Service Tax amounting to Rs.25,01,176/- (Rupees Twenty five lakh One Thousand One Hundred & Seventy Six only) including Cesses, for the service provided as detailed in the Show Service Tax Appeal No.70052 of 2020 2 Cause Notice dated 19.09.2018 upon the party and the said amount shall be recovered under the proviso to Section 73(1) of the Finance Act, 1994 along with interest at the appropriate rate payable under Section 75 of the Finance Act, 1994 read with Section 174 and 142 of the CGST Act, 2017. Since the party have already deposited the Service Tax amounting to Rs.25,00,000/-the same is liable to be appropriated.
(ii) I impose a penalty of Rs.25,01,176/- (Rupees Twenty five lakh One Thousand One Hundred & Seventy Six only) upon the party under Section 78 of the Finance Act, 1994 read with Section 174 and 142 of the CGST Act, 2017 for suppression of value of taxable service.
(iii) I impose a penalty of Rs. 10,000/- (Rupees Ten Thousand only) upon the party under Section 77 (1) (d) of the Finance Act, 1994 read with Section 174 and 142 of the CGST Act, 2017."
2.1 Appellant is registered with the Department from 29.05.2007 for providing taxable services under the category of 'Consulting Engineer Services'.
2.2 Investigations were undertaken by DGGI, Lucknow Zonal Unit, based upon the intelligence that appellant is engaged in providing taxable services and suppressing the value of taxable services, thus evading the payment of service tax.
2.3 During the search conducted on 07.04.2016 statement of Shri Omkar Verma, Proprietor of the appellant was recorded on the spot and Shri Verma in his statement stated that estimated liability of service tax amounting to Rs.25 Lakhs was due and submitted post dated cheques and challans amounting to Rs.25 lakhs.
2.4 After scrutiny of records and investigations, revenue was of the view that -
Service Tax Appeal No.70052 of 2020 3 the appellant has been providing services of 'Consulting engineer services' but has not raised the bills as stated in his statement. A As per Rule 3 of Point of Taxation Rules, 2011 when the invoice is not raised within the time specified in Rule 4A of Service Tax Rules, 1944 then the point of taxation shall be the date of completion of provision of service. As per Section 68 (1) of the Finance Act, 1994, every person providing taxable service to any person shall pay service tax at the rate specified in Section 66B in such manner and within such period as may be prescribed under Rule 6 of the Rules.
Thus, by not paying the service tax on these amounts appellant has not paid/short paid service tax amount in the manner as determined by Rule 3 of Point of taxation Rules, 2011, appellant has thus short paid the service tax of Rs.25,01,176/- by willfully suppressing the facts and have violated the provisions of Section 68 (1) of the Act read with Rule 6 of the Rules.
2.5 A show cause notice dated 19.09.2018 was issued to the appellant asking them to show cause as to why-
"(i) The Service Tax amounting to Rs. 25,01,176/-
(Rs. twenty five lakh one thousand one hundred seventy six only) including Education Cess, Secondary & Higher Education Cess & Swachh Bharat cess should not be demanded and recovered from them under proviso to Section 73(1) of the Finance Act, 1994 and service tax Rs 25 lakh deposited by them should not be appropriated against the said demand.
(ii) Interest on service tax not paid/short paid as mentioned above should not be demanded and recovered under section 75 of the Finance Act, 1994.
(iii) Penalty should not be imposed upon them under the provisions of Section 78 of the Finance Act 1994 for suppressing the facts and value of taxable service and Service Tax Appeal No.70052 of 2020 4 contravention of the provisions of the Act and Rules with intent to evade payment of service tax.
(iv) Penalty should not be imposed upon them under Section 77(1)(d) of the Act for not depositing Service Tax in due time as per Rule 6 of the Service Tax Rules, 1994 and Section 68 of the Act."
2.6 This show cause notice has been adjudicated as per the Order-in-Original referred in para-1 above. Aggrieved appellant has filed appeal before the Commissioner (Appeals) which has been dismissed as per the impugned order. Aggrieved appellant have filed this appeal.
3.1 We have heard Shri T.K. Srivastava learned Counsel for the appellant and Shri Sandeep Pandey learned Authorised Representative appearing for the revenue.
3.2 Arguing for the appellant learned Counsel submits that-
Appellant is providing services to various Government Departments and all the payments received by them are reflecting in Form 26AS of the Income Tax Act. Demand is barred by limitation as nothing was mis-
stated or suppressed. It is well evident from the record that balance sheet figures, ST-3 returns and figures and of Form 26AS and all were in conformity with each other.
The demand has been made by concealing those invoices on which service tax was already paid and deposited by the appellant. Yes to make the figure of Rs.25 lakhs as was stated by the appellant at the time of visit by the officers, no investigations were made against the persons/parties to whom these invoices were raised nor they confirmed the figures from Form 26AS. All the documents vis-à-vis balance sheet, form 26AS and ST-3 returns tallied. There was no short payment of service tax.
The pattern followed by the appellant for providing the service starts with proposition of work followed by offer Service Tax Appeal No.70052 of 2020 5 and if approved work starts and drawing & design are made in parts and after acceptance of drawing, bills are raised as per stages of construction. If project continues supervision & consultation on work continues and bills are raised in parts of the work undertaken. Sometimes work stop in midway on account of discontinuance of the project no bills are raised. Science appellant undertake the Government work bills are raised when service receiver is in a position to make the payment of bills and therefore bill are mostly raised after the consent of service provider. Particularly when the project is a long term continuous work and payments are made in part as per stage of work.
The conclusion that appellant has raised bogus bills is without any merits as most of the bills were raised for Government Departmental work/projects. This conclusion of the adjudicating authority is only in the presumption and false allegation.
The conclusion that all the works finalized during the period 20.06.2014 to 31.03.2016 and invoices were not issued, is wrong and baseless, inasmuch as in all completed work invoices are raised and taken in balance sheet and ST-3 returns and service tax paid. Since appellant has been paying the due service tax diligently, the demand cannot be sustained.
3.3 Learned Authorized Representative reiterates the findings recorded in the orders of the lower authorities.
4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument.
4.2 Impugned order records as follows:-
"5. I have gone through the case record. The impugned demand has been raised on the basis of data retrieved from the computer of the appellant. The service tax liability has been calculated on the basis of receipts from recipients of the service, as detailed under para 14 of the Service Tax Appeal No.70052 of 2020 6 SCN. As per rule 4A of the Service Tax Rules, 199, the service provider has to issue invoice/ bill on receipt of any payment towards the value of the taxable service. Thus, invoice/ bill has to be issued even for advance payments. However, in respect of the impugned value, no invoice/ bills were found to have been issued. The appellant claims that some bills were already issued, but details of such bills and value thereof have not been furnished in the grounds of appeal. The argument of limitation is not sustainable in view of the facts narrated in para 6.13 of the impugned order. In view of the above, I do not find any merit in the appeal and the same is dismissed."
4.3 From the above observations which are stated in the impugned order, it is evident that appellant has failed to issue invoice/bill on receipt of certain payments towards the value of taxable services, even in case where these payments were received as advance. Adjudicating authority has in the order in original recorded as follows:
"6.9 I further observe that party‟s contention that during investigation their taxable value was not reconciled with their Balance Sheet, Form 26AS vis a vis ST-3 Returns is also not acceptable as in the instant case the short payment was detected on account of several factors mentioned below, which have been duly accepted/ admitted by the party in their statement.
a. non issuance of invoices even after completion of services, b. non receipt of payments from their clients due to their financial crisis, resulting in non issuance of invoices though the services were already provided, c. raising the bills only when their clients/ architects ask for the same irrespective of the fact that services were provided much before, Service Tax Appeal No.70052 of 2020 7 d. receipt of payment in cash and non reflection of the same in the documents such as balance sheet, Form 26AS vis a vis ST-3 Returns, e. non issuance of invoices in all cases of advance received.
6.10 I further observe that the invoices in respect of all drawings/ works which were completed/ finished during the period 20.06.2014 to 21.03.2016 as detailed in Ann I of the SCN, should have been issued at the time of completion of services in terms of Rule 3 of Point of Taxation Rules, 2011, if the same could not be issued within the time specified in Rule 4A of the Service tax Rules, 1994. As such all these drawings/ works were completed/ finished during the period 20.06.2014 to 21.03.2016 as detailed in Ann I of the SCN and also admitted by the party in their statements that "depending on the convenience of their clients, they did not issue the bills inspite of completion of service." Thus I hold that the party has not raised the bills/ invoices in respect of the services provided by them and have not assessed service tax due on taxable service, consulting engineering service provided by them and not paid/ short paid the service tax including cess total amounting to rs 25,01,176/-, willfully suppressing facts and teherby, violated the provisions of Section 68 of the Finance Act, 1994 read with Rule, 6 of he Service Tax Rules, 1994 (here in after referred as "The Rules")."
4.4 The case as has been made out in the show cause notice is based on Rule 3 of Point of Taxation Rules, 2011, which reads as follows:-
"3. Determination of point of taxation- For the purposes of these rules, unless otherwise provided, 'point of taxation' shall be,-
(a) the time when the invoice for the service provided or agreed to be provided is issued:
Provided that where the invoice is not issued within the time period specified in rule 4A of the Service Tax Rules, Service Tax Appeal No.70052 of 2020 8 1994, the point of taxation shall be the date of completion of provision of the service.
(b) in a case, where the person providing the service, receives a payment before the time specified in clause (a), the time, when he receives such payment, to the extent of such payment.
Provided that for the purposes of clauses (a) and (b),-
(i) in case of continuous supply of service where the provision of the whole or part of the service is determined periodically on the completion of an event in terms of a contract, which requires the receiver of service to make any payment to service provider, the date of completion of each such event as specified in the contract shall be deemed to be the date of completion of provision of service;
(ii) wherever the provider of taxable service receives a payment up to rupees one thousand in excess of the amount indicated in the invoice, the point of taxation to the extent of such excess amount, at the option of the provider of taxable service, shall be determined in accordance with the provisions of clause (a).
Explanation - For the purpose of this rule, wherever any advance by whatever nam known, is received by the service provider towards the provision of taxable service, the point of taxation shall be the date of receipt of each such advance."
4.5 From the perusal of the above rule, it is evident that in case of continuous supply of service where part of service is provided determined particularly on completion of an event in terms of the contract leading to certain payment paid to the service provider then the date of completion of such event as specified in contract can be deemed incompletion of the service. Further, in case of receipt of advances towards provisional taxable service, the point of taxation should be the date of Service Tax Appeal No.70052 of 2020 9 receipt of such advances. In terms of the above provisions of Rule 3, appellant is required to pay service tax on completion of an event specified in the contract or also in case of advances at the time of receipt of advances even though invoices/bills would not have been raised at that time. From the facts of the case it is clear that appellant has failed to pay the service tax at the time when it became due. As per the said rule undisputedly when the appellant raised the invoice in respect of these i.e. on completion of the project or at any time, they were making proper accountal and payment of service tax for which reason there is no discrepancy noted in the balance sheet, ST-3 return and from Form 26AS. Nothing has been brought on record as to the effect that service tax in respect of these payments received have not been paid. Adjudicating Authority has in para 6.9 and 6.10 observed as follows:-
6.9 I further observe that party's contention that during investigation their taxable value was not matched with their Balance sheet, Form 26AS vis a vis ST-3 Returns is also not acceptable as in the instant case the short payment was detected on account of several factors mentioned below, which have been duly accepted/admitted by the party in their statement.
a. non issuance of invoices even after completion of services, b. non receipt of payments from their clients due to their financial crisis, resulting non issuance of invoices though the services were already provided.
c. raising the bills only when their clients /architects ask for the same irrespective of the fact that services were provided much before, d. receipt of payment in cash and non reflection of the same in the documents such as Balance sheet, Form 26AS vis a vis ST-3 Returns, Service Tax Appeal No.70052 of 2020 10 e. non issuance of invoices in all cases of advance received.
6.10 I further observe that the invoices in respect of all drawings/works which were completed/finished during the period 20.06.2014 to 21.03.2016 as detailed in Ann I of the SCN, should have been issued at the time of completion of services in terms of Rule 3 of Point of Taxation Rules, 2011, if the same could not be issued within the time specified in Rule 4A of the Service Tax Rules, 1994. As such all these drawings/works were completed /finished during the period 20.06.2014 to 21.03.2016 as detailed in Ann I of the SCN and also admitted by the party in their statements that "depending on the convenience of their clients, they did not issue the bills in spite of completion of service". Thus I hold that the party had not raised the bills/invoices in respect of the services provided by them and had not assessed the service tax due on the taxable service, consulting engineering service provided by them and not paid/short paid the service tax including cess total amounting to Rs. 25,01,176/-, willfully suppressing facts and thereby, violated the provisions of Section 68 of the Finance Act, 1994 read with Rule 6 of Service Tax Rule, 1994 (here-in- after referred to as 'the Rules')."
4.6 No evidence has been produced to show that appellant has not paid the service tax in respect of these transactions in the statement recorded on 07.04.2016, appellant has specifically stated as follows:-
Q-6. What are your terms & conditions for providing your services?
A. We used to tell our rates of services /work to the client & stages of payment with time like advance, on completion of drawing & on completion of project. Generally we use to take 10% to 25% of the total service charge as an advance, 65% - 80% of the total service charge on Service Tax Appeal No.70052 of 2020 11 completion of drawing & approval of drawing & 10% of the total service charge on completion of the project. Then after we used to start our work by taking note of required design/taking print of the email of the concern client & prepare our file for preparation of required design. We use to prepare design in duplicate & on completion of drawing, we use to hand over the same in form of hard copy & soft copy to the client. We used to contain a copy of the same in our record /file. After completing the design in most of the cases, we send the design to our client through our email Id spanstructures/@gmail.com. As on date there is record of 3836 primary email in my inbox & 4326 emails in my sent mail. I will provide copy of the same within 02 days.
Q-7. What procedure is adopted by you for issuance of the bill to the client?
A. On completion of drawing with approval & final submission of the same to the client, we use to raise the bill Bills & quotations proposals are also sent through email.
Q-8. Whether you issue bills to the client on receipt of advance & intermediary amount on completion of drawing, before completion of project? If yes, have you paid service tax on the same? If not, why have you not issued bills & have not paid service tax on the same?
A. If we get advance or stage wise payment, then we raise the bill & pay service tax accordingly.
Q-9. On perusal of the bills issued by you & resumed during search, only few of them are marked as advance payment or payment of stage-1?
A. Yes, I agree we have issued only few bills against advances received by us from our clients for initiation of our services & not from all. I agree with the lapse made Service Tax Appeal No.70052 of 2020 12 us, by not issuing the bills on advance in all cases, but it depends on case to case basis.
Q-13: Please see the print of bills & data taken out from your computer. Have you raised the bills in respect of given data to the concerned clients & if yes, have you paid service tax on the same? & if no, why bills are not issued?
A. In respect of few cases as shown bills are raised & service tax has been paid with issue of bills in the following quarter of the issue of bills. In other cases bill will be raised on finalization of work / drawing & tax will be paid accordingly.
Q-14. Please see & put your signature in token of the data print in respect of services provided to M/s. Arch En Design? Have you raised the bills for all data contained intc M/s. Arch En design on which Service Tax collection of Rs.15 Lacs approximately has been shown by you & service has already been provided by you at your end?
A. All the projects in list are not finanzed, few are finalized & bills are raised for which service tax has been paid. In other cases when drawing will be approved & finalized as per proposal, bills will be raised & service tax will be paid.
Q-20. Have you correctly & timely paid your service tax liability on bills issued by you?
A. Yes, I have correctly paid service tax for the bills issued by us & in case of delay I have paid service tax with interest. I hereby submit that I will find / ascertain the differential service tax liability for the bills which were not raised by us till date and on contravention of any rule of Service Tax rules will pay the same along with interest. I also submit that I will submit differential tax calculation along with supportive documents and payment particulars in due course. I also agree that if any shortage / suppression is noticed on the basis of records resumed Service Tax Appeal No.70052 of 2020 13 from the office premises, I will pay the service tax liability along with interest."
4.7 The entire case against the appellant is that they have not paid service tax at the time as determined under Rule 3 of Point of Taxation Rules, 2011. Even if the allegations made in the show cause notice and in the impugned orders are to be accepted but the service tax on the entire taxable value has been paid on finalization of the service contract with the Government Departments. There cannot be any short/nonpayment of service tax. On the point of taxation rules determined the time when the tax has to be paid and in case of any delay in payment of tax the defaulter is required to pay the service tax along with due interest as prescribed under Rule 3 of Point of Taxation Rules, do not create any service tax liability but only determines the time of payment of service tax. No exercise has been undertaken in the present case to correlate the payments received as advances, in case of completion of stage, even in case of continuous supply with final invoice issued on completion of the projects. Such a re-conciliation is necessary to determine the tax short paid, if any. In any case if the tax has been found to be paid against the entire value of contract/project undertaken by the appellant, there cannot be any further demand of service tax. In the case of Vodafone Digilink Limited [2020 (33) G.S.T.L. 244 (Tri. - Del.)] following has been held:
"31. Upon considering the rival contention, we find that there is absence of consideration for the period under dispute. In absence of consideration in terms of Section 65B(44) of the Finance Act, 1994 there is no service rendered. For a service to qualify as service for the purposes of Chapter-V of the Finance Act, 1994 it has to be an activity of service carried out by a person for another for consideration. Further, under the facts and circumstances of the case, we find that the point of taxation have not occurred in terms of Point of Taxation Service Tax Appeal No.70052 of 2020 14 Rules, 2011 and hence no liability to pay service tax arises as raising of an invoice is a condition precedent under Rule 3(a) of the said Rules. Admittedly, in the facts of the present case no invoice has been raised by the appellant on the alleged service receiver. Further, admittedly there was no contract of service entered into by the parties providing for any periodical obligation requiring the receiver of alleged service to make any payment. It was only after the matter of „usage charges‟ went before the Telecom Disputes Settlement & Appellate Tribunal (TDSAT), New Delhi and interim orders were passed in November, 2012 creating obligation on the receiver of the alleged service to make payment of 50% of the proposed charges, thereafter appellant have raised invoice charging service tax and thereafter on receipt of such consideration have complied with and paid the service tax. Further, in the facts and circumstances, we find that the show cause notice is also bad for invoking extended period of limitation as enquiry in the transaction under dispute had started in February, 2013 whereas the show cause notice was issued only on 31-3-2014 for the period under dispute April, 2011 to September, 2012. Further, it is settled legal position that where service is rendered free without charging any consideration the same does not attract service tax as upheld by Hon‟ble Supreme Court in Aptico Limited v. CST
- 2010 (20) S.T.R. 475 [affirmed in 2011 (23) S.T.R. J94 (S.C.)]. Accordingly, we allow this appeal and set aside the impugned order."
4.8 In the case of Firm Foundations & Housing Pvt. Ltd. [2018 (16) G.S.T.L. 209 (Mad.)] Hon'ble Madras High Court has held as follows:
"24. Rule 3(a) and (b) provides for the point of taxation to be either the point of raising of invoice [Rule 3(a)] or in a case where the service provider has received the payment even prior to the time stipulated in the invoice, Service Tax Appeal No.70052 of 2020 15 upon receipt of such payment [Rule 3(b)]. In the present case, no invoice is said to have been raised. However, the petitioner confirms that it has, in fact, received lump sum advances corresponding to several initial landmarks in the contract, even prior to the achievement of such landmarks. As per the provisions of Rule 3(b), the entire sum received thus becomes taxable upon receipt and according to Mr. Prabhakar, has been offered to tax.
25. Instead of such determination by application of the provisions of Rule 3, the respondent relies upon the P and L accounts to conclude that the amounts reflected therein have not been offered for service tax. The reporting of income in the P and L being irrelevant for the purposes of determination of service tax payable, the basis of the impugned assessment is erroneous.
26. It is a well settled position that when a statutory provision or rule addresses a specific scenario, such rule/provision is liable to be interpreted on its own strength and context and one need look no further to alternate sources to seek clarity in regard to the issue that has been addressed by the aforesaid rule/provision.
27. I am conscious of the fact, and indeed Mr. Sundar has repeatedly emphasized, that there is an alternate statutory remedy available in respect of the impugned order and as such there is no warrant for the interference of this Court in extraordinary jurisdiction under Article 226 of the Constitution of India. However, all relevant facts are on record. Both Learned Counsel concur on the position that the agreements that provide for the landmarks or stages of completion of work by the petitioner and consequential payments by the customers, is available with the Department.
28. The petitioner has also filed an Annexure tabulating the consideration actually received from the customers as a lumpsum as against the amounts that would be payable Service Tax Appeal No.70052 of 2020 16 in accordance with the landmarks under contract to illustrate that in almost all cases, the advance received is in excess of what would have been received, if the consideration had been received stage-wise. It is for the assessing officer to have examined the same and sought further information to his satisfaction in completion of the assessment.
29. In the facts and circumstances as I have noticed above, where the basis of the assessment is itself contrary to the provisions of the Finance Act, 1994 and the Rules, I am inclined to interfere.
30. The decisions of the CESTAT relied upon by Mr. Sundar are distinguishable since they have been rendered prior to the enactment of the Point of Taxation Rules and Rule 3 thereof. The judgments of the Supreme Court and of this Court relied upon have been rendered in distinguishable factual matrices. While there is no quarrel on the proposition that normally Courts will be slow in interfering in matters where the relevant statute provides for a statutory appeal, there is enough precedent available to support the view that Courts will interfere where the basis of the impugned order is palpably erroneous and contrary to law. [See State of HP and Others v. Gujarat Ambuja Cement Limited - (2005) 6 SCC 499 and Whirlpool Corporation v. Registrar of Trade Marks Bombay and Others - (1998) 8 SCC 1].
31. The petitioner is, admittedly, recognizing revenue under the „Project Completion Method‟ in terms of AS-7 issued by ICAI. We need not, in the present case, concern ourselves with the method followed for the preparation of financials as the same has no impact upon the Point of Taxation Rules. Suffice it to state that the AS provides a certain methodology for the computation of income from projects that is at variance with the method set out under Rule 3.
Service Tax Appeal No.70052 of 2020 17
32. Insofar as Rule 3 sets out a specific modus operandi in this regard, it assumes priority and is the only relevant factor to be taken into account in the determination of point of rendition and accrual of services for the purpose of imposition of service tax. The first issue is answered accordingly.
33. As far as the application of Rule 3 is itself concerned, Mr. Sundar insists that the materials in support of the petitioners‟ stand have not been produced and relies upon the finding in the impugned order to this effect at paragraph 13.5 thereof (extracted earlier). The petitioner has, admittedly, produced the agreements setting out the slabs for payment and an annexure tabulating the receipts, upon completion of each stage of completion of the project before the authorities. It was for the respondent to have looked into the same and called for further information if necessary to assess the receipts in line with Rule 3 of the Rules. Admittedly this has not been done and the respondent merely adopts the income reflected in the P and L account as the receipts for the purpose of service tax which is contrary to the method set out in Rule 3 for the determination of point of taxation and the quantification thereof.
34. In the light of the discussion above, the impugned order of assessment dated 21-4-2017 is set aside and the matter remitted to the file of the respondent to be re-done de novo strictly in accordance with the provisions of Rule 3 of the Rules and in the light of the observations made in this order after affording due opportunity to the petitioner, within a period of three (3) months from date of receipt of this order."
4.9 In such cases there can be demand for interest for the delayed payment of tax, as the service tax was to be paid at the time, which is statutorily prescribed as per the Point of Taxation Rules, 2011. In case of Oriental Service Tax Appeal No.70052 of 2020 18 Insurance Co. Ltd [2021 (55) G.S.T.L. 369 (Tri. - Del.)] following has been held:
54. The issue, therefore, that arises for consideration is when service is rendered and service tax is due but the appellant is not able to pay it until the accounts are squared up and thereby delays paying the service tax, than whether in such a situation the appellant is liable to pay interest on the delayed payment, considering that the delay is not on account of the fault of the appellant.
55. A similar issue comes up often in Central Excise matters when the transaction value of the goods is unknown, either partly or fully when the goods are cleared.
This happens with Government contracts which fix the price based on a formula, several elements of which (say cost of raw material or minimum wages of the labour) are not known at the time of clearance. Later, when they get the details, they pay the differential excise duty. The question whether interest needs to be paid even in such cases for the period when the excise duty is due and when it is actually paid was answered in the affirmative by a Constitution Bench of the Supreme Court in Steel Authority of India Ltd. v. Commissioner of Central Excise Raipur [Civil Appeal No. 2150 of 2012, decided on May 8, 2019] [2019 (366) E.L.T. 769 (S.C.)]. The observations of the Supreme Court are as follows :
"63. we are of the view that the reasoning of this Court in the order referring the cases to us (to this Bench) that for the purpose of Section 11AB, the expression "ought to have been paid" would mean the time when the price was agreed upon by the seller and the buyer does not square with our understanding of the clear words used in Section 11AB and as the rules proclaim otherwise and it provides for the duty to be paid for every removal of goods on or before the 6th day of the succeeding month. Interpreting the words in the manner contemplated by the Bench which Service Tax Appeal No.70052 of 2020 19 referred the matter would result in doing violence to the provisions of the Act and the Rules which we have interpreted. We have already noted that when an assessee in similar circumstances resorts to provisional assessment upon a final determination of the value consequently, the duty and interest dates back to the month "for which" the duty is determined. Duty and interest is not paid with reference to the month in which final assessment is made. In fact, any other interpretation placed on Rule 8 would not only be opposed to the plain meaning of the words used but also defeat the clear object underlining the provisions. It may be true that the differential duty becomes crystalised only after the escalation is finalized under the escalation clause but it is not a case where escalation is to have only prospective operation. It is to have retrospective operation admittedly. This means the value of the goods which was only admittedly provisional at the time of clearing the goods is finally determined and it is on the said differential value that admittedly that differential duty is paid. We would think that while the principle that the value of the goods at the time of removal is to reign supreme, in a case where the price is provisional and subject to variation and when it is varied retrospectively it will be the price even at the time of removal. The fact that it is known, later cannot detract from the fact, that the later discovered price would not be value at the time of removal. Most significantly, section 11A and section 11AB as it stood at the relevant time did not provide read with the rules any other point of time when the amount of duty could be said to be payable and so equally the interest. We would concur with the views expressed in SKF case (supra) and International Auto (supra)."
56. In CCE v. SKF India Ltd. [(2009) 13 SCC 461 = 2009 (239) E.L.T. 385 (S.C.)], the Supreme Court held as follows :
Service Tax Appeal No.70052 of 2020 20 "17. We are unable to subscribe to the view taken by the High Court in Rucha Engg. [First Appeal No. 42 of 2007, decided on 3-4-2007] It is to be noted that the assessee was able to demand from its customers the balance of the higher prices by virtue of retrospective revision of the prices. It, therefore, follows that at the time of sale the goods carried a higher value and those were cleared on short-payment of duty. The differential duty was paid only later when the assessee issued supplementary invoices to its customers demanding the balance amounts. Seen thus, it was clearly a case of short-payment of duty though indeed completely unintended and without any element of deceit, etc. The payment of differential duty thus clearly came under sub-section (2B) of Section 11A and attracted levy of interest under Section 11AB of the Act."
57. Although this is a service tax matter, the provisions are pari materia and if service tax is due on a date but is paid much later because data is not available with the assessee, interest has to be paid. Thus, the demand of interest from the appellant for the period post March, 2013 upto March, 2014 is justified."
4.9 In case of ICICI Pudential Life Insurance [2019 (28) G.S.T.L. 145 (Tri. - Mumbai)] following has been held:
"14. ..... In the present dispute the appellant has admittedly paid duty according to their own interpretation of the point at which the tax liability arises. The claim of the appellant is that the service commences with the acceptance of the proposal. While that may be so, the tax liability is required to be computed from the moment the consideration is received even if the contract of insurance specified the commencement of risk from a different date. Both before and after the notification of the Point of Taxation Rules, 2011, it is the date of payment that determines the performance of the service for discharge of tax liability. In view of this, the appellant has discharged Service Tax Appeal No.70052 of 2020 21 his duty liability belatedly; consequently the appellant is required to pay interest for the said delay. The provision of Section 75 of Finance Act, 1994 are unambiguous that the assessee is obliged to remit interest on delayed payment of tax. This is independent of the provision of Section 73 for recovery of tax. Accordingly, the interest liability of the appellant stands confirmed."
4.10 To undertake the exercises of re-conciliation, the matter needs to be remitted back to the Original Adjudicating Authority for recording specific findings in the matter.
5.1 Appeal is allowed by way of remand to the Original Adjudicating Authority. As the case is quite old, adjudication authority is directed decided the case in de-novo proceedings within three months of the receipt of this order following the principles of natural justice.
(Pronounced in open court on-03 April, 2024) Sd/-
(P.K. CHOUDHARY) MEMBER (JUDICIAL) Sd/-
(SANJIV SRIVASTAVA) MEMBER (TECHNICAL) akp