In Absence Of Service Recipient And Service Provided Service Tax Can't Be Demanded And Confirmed: CESTAT

The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that in the absence of such service recipient and service provided service tax cannot be demanded and confirmed.

The bench of Rachna Gupta (Judicial Member) and Hemambika R. Priya (Technical Member) has observed that it is the burden cast upon the department to show that the assessee has recovered the cost of service rendered. In the absence of such recovery, the question of levy of service tax does not at all arise. The book adjustment cannot be the ground to fix the liability.

The appellant is registered for rendering of taxable service under the category of Tour Operator Service/Business Auxiliary Services/Renting of Immovable Property services/services of sale of Space or time for advertisement/Business Support Services.

The department noted during audit of the appellant's record for the period 4/2010 to 3/2015 from the scrutiny of profit and loss account that under the head of Sundry Debtors an amount pending against Government Debtors for canteen stallis in the head of Private Debtors for casual contracts.

The Documents such as bills / invoices/ challans were issued against service provided by the RSRTC but same were neither included in the gross value of taxable services nor were shown in ST-3 Returns of the respective period by them. The appellant had also not deposited the service tax. Department formed an opinion that the appellant had since issued invoices/ Bills/ voucher to their service receiver in respect of the services provided to the respective parties but has not included the same in the gross taxable value of the respective period nor has paid service tax deliberately.

These facts came to the notice of the department only after audit of the records of the assessee was conducted by the AG audit, Jaipur. Had the audit not been conducted by the AG Audit, Jaipur, the fact of providing the taxable services and non-payment of service tax thereupon would not have come to the notice of the department and the liability of Service Tax would remain unearthed. A Service Tax was proposed to be recovered along with proportionate interest and the appropriate penalties. The proposal has been confirmed.

The assessee contended that the appellant has been established by Government of Rajasthan on 1.10.1964 under the Road Transport Act 1950. It has 5000 buses in its fleet and 56 depots across the State and 3 depots outside the State, i.e. Indore, Ahmedabad and Delhi. The State Transport Corporation is defined under clause 42 of section 2 of Motor Vehicle Act, 1988 'any service given to the State Transport Undertaking by way of giving on hire of the Motor Vehicle amount to carry passengers or exempted from service tax merely for the reason the appellant is not a merely business entity. The demand has wrongly been confirmed by the department.

The department contended that there is no infirmity in the Order under challenge. The appellant is a commercially interest driven authority irrespective it is State Transport Corporation. The activity of taking vehicles on hire is for commerce and industry use. The appellants are rightly held liable to pay the service tax under reverse charge mechanism.

The tribunal held that the amounts mentioned in the balance sheet as profit and loss amounts as unrealized receivable from the sundry debtors cannot be considered as value of service. There is no provision in the Act or the Rules to be disclosed as sundry debtors in the ST 3 Returns. Hence, demand cannot be confirmed by merely appreciating the difference between the profit and loss account/balance sheet and ST 3 returns.

Counsel For Appellant: Sameer Sood

Counsel For Respondent: Rajeev Kapoor

Case Title: Rajasthan State Road Transport Corporation Versus Joint Commissioner Of Central Excise And Service Tax, Jaipur

Case No.: Service Tax Appeal No. 51304 Of 2018

Click Here To Read The Order