By TIOL News Service

MUMBAI, DEC 22, 2016: SCN dated 22/10/2008 was issued demanding service tax which was collected and not paid and on the amounts not included in valuation in respect of event management service.

The appellant submitted that service tax for the period 2003 to 2005-06 was not paid on account of financial crisis; that as and when the funds were available service tax payments were made even prior to initiation of investigation;that balance service tax liability of Rs.1.17crores could not be paid prior to investigation but was discharged before the issuance of the show cause notice along with interest liability; that they are contesting the demand only on the calculation part. That, on reimbursements received, law is settled that the same is not includible in the gross value Intercontinental Consultant & Technocrafts Pvt Ltd - 2012-TIOL-966-HC-DEL-ST, Kirloskar Pneumatic Co. Ltd - 2015-TIOL-538-CESTAT-MUM and Link Intime India Pvt Ltd - 2015-TIOL-1406-CESTAT-MUM.

The AR submitted that since appellant collected the service tax component from their clients and did not pay to the government, the demands are rightly confirmed; that the appellant is habituated in not discharging the service tax liability as for the earlier period of 2002-04 they discharged the service tax liability after the investigations were initiated; that in the appellant's own case in appeal No. ST/146/2008, Tribunal by final order dated 04/05/2016 set aside the penalty by invoking the provisions of Section 80 of the FA, 1994 and hence same provisions cannot be invoked again; that as expenses have not been proved to be contractual, same cannot be considered as reimbursement.

The Bench, while deprecating the submissions of the appellant, observed -

+ The appellant having collected service tax from their customers was duty bound to deposit the same with the Government of India. Having not done so, they have erred on the wrong side of law.

+ The appellant herein is repeating this infraction in not depositing the amount collected as service tax from their customers with the Government of India as can be ascertained from the fact that, for the earlier period, i.e. for the period 2002-04, an identical issue came up before the bench and the bench by an order dated 02/09/2016 took a lenient view and set aside the penalties imposed.

+ In the case in hand, we are afraid that we cannot do so for the simple reason that, for the subsequent period, the appellant should have been more diligent in depositing the service tax liability collected by them from their clients, having undergone identical investigation from the department. In view of the above we do not find any merits in the arguments put forth that the service tax liability having been discharged, penalties should be set aside.

+ After a period of almost two years, they cannot revise the returns stating that they have committed an error in the earlier returns.

+ As regards the service tax liability on the amount received as reimbursements for the food of the employees, while conducting the event management, transportation charges, we find from the debit notes that these amounts are collected at actuals and there is no markup. In our considered view, the issue now stands squarely covered by the decision of the Hon'ble High Court of Delhi in the case of Intercontinental Consultants & Technocrats Pvt. Ltd. (supra). Accordingly, we set aside the demand of service tax liability along with interest thereof and the amount of penalty imposed on them on this issue.

The appeals were disposed of.

(See 2016-TIOL-3293-CESTAT-MUM)