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ST - Appellant seeking detail of income head considered for taxable value is legitimate as without such detail neither SCN is justified nor it satisfies principles of natural justice: CESTAT


By TIOL News Service

MUMBAI, JUNE 14, 2018: APPELLANT is Co-operative Credit Society Ltd. engaged in providing Banking and Financial Services.

On scrutiny of the ST-3 returns and Profit and Loss Accounts, the jurisdictional authorities observed that the appellant paid an amount of Rs.64,03,284/- as Service Tax on the taxable value of Rs.5,33,61,913/-. But, as per Profit and Loss account, service tax amount of Rs.86,00,732/- was payable on the taxable value of Rs.7,12,46,826/- resulting in short payment of Rs.21,97,448/- for the period from 2005-06 to 2008-09.

The demand was confirmed by the original authority but in appeal, the Commissioner(A) extended the benefit of cum-tax benefits and thereby the demand was revised to Rs.13,10,200/-. Penalty u/s 76 was set aside but penalties u/ss 77 and 78 were upheld to the extent of the revised liability. Penalty u/r 7C of STR, 1994 was also upheld.

The appellant is before the CESTAT and submits that they have been discharging the correct tax liability from time to time and in the proceedings below have been enquiring with the original and appellate authority the ‘accounts head' under which the taxable value of Rs.7,12,46,826/- was attributed so as to demand the service tax, but none of the authorities disclosed the same. Inasmuch as without providing such information, confirmation of demand is in violation of principles of natural justice and, therefore, the demand is liable to be set aside, the appellant pleaded.

The AR reiterated the findings of the impugned order.

The Bench inter alia observed -

++ The show cause notice was issued on the basis of Profit and Loss account of the appellant but total taxable value shown in the show cause notice is Rs.7,12,46,826/-, however, the show cause notice has not given any bifurcation of this consolidated amount. It is obvious that appellant being a provider of banking and financial services is providing taxable and exempted service. Therefore it is necessary to show the individual account head and the amount of such account before ascertaining that whether all such accounts heads are on account of taxable service or otherwise.

++ It is clear that the appellant in the reply seeking the detail of income head considered for taxable value is legitimate and without such detail neither show cause notice is justified nor it is on the principles of natural justice. We are surprised that despite the appellant's request for providing detail, the adjudicating authority went on confirming the demand in an arbitrary manner.

++ It is also observed that the value of Rs.7,12,46,826/- is nowhere appearing in the profit and loss account. The same plea was made by the appellant before the Commissioner (Appeals) but he also conveniently ignored the same and arbitrarily followed the order of the adjudicating authority.

Concluding that the impugned order cannot be sustained, the same was set aside and the matter was remanded to the adjudicating authority.

(See 2018-TIOL-1836-CESTAT-MUM)