1. The appellant is a security service agency (proprietary concern) providing security services under that two Commissionerate of Raipur and Bhopal, where they are separately registered. The issue in this appeal is whether impugned adjudication order passed by Commissioner, Raipur which also determines liability for their office at Nowrozabad within Bhopal jurisdiction, whether the demand to that extent is without jurisdiction, whether the appellant is entitled to cum tax benefit, whether the appellant is entitled to adjustment of the taxable value on receipt basis, as the demand pertains to the period prior to 01/04/2011 and further if penalty rightly is imposed under Sections 76, 77, 78 as well as late filing fee for returns under Rule 7C of Service Tax Rules, 1994.
2. Consequent to the investigations conducted by the Central Preventive by Raipur Commissionerate, show cause notice dated 18/10/2012 was issued invoking the extended period of limitation for the period 2007 - 2008 to 2010 - 2011 on the basis of consolidated figures shown in the balance-sheet. The liability of the appellant was worked out for service tax at Rs. 1,24,87,581/- with proposal to adjust the amount already paid Rs. 42,45,300/-, thus demanding service tax short paid at Rs. 82,42,283/-.
3. The show cause notice was adjudicated on contest confirming the proposed demand and short paid duty of Rs. 82,42,283/-. Further allowing adjustment of Rs. 30,69,516/- being the tax paid by the appellant with respect to their services provided under Bhopal Commissionerate, relating to the Nowrozabad office. Further, penalty was also imposed under Section 76 at the rate of Rs. 200/- per day or 2% of such tax, per month, whichever is higher, under Section 77, Rs. 10,000/- under Section 78, Rs. 51,72,767/- and further under Rule 7C of Service Tax Rules for late filing of returns Rs. 80,000/- was imposed being amount of Rs. 20,000/- for default of each return for the 4 returns, during the period in question.
4. Being aggrieved the appellant is before this Tribunal. The learned Counsel urges that it is admitted fact that the appellant have got work in two different states namely M.P., and Raipur, Chhattisgarh and they are separately registered and making compliance separately in the two states, which fall under different Commissionerate. As the show cause notice is issued by the Commissionerate at Raipur, the demand with respect to their services provided under the Bhopal Commissionerate, M.P. is wholly without jurisdiction, and the same is fit to be set aside. It is further contended that up to the period March 2011, service tax was leviable on the basis of receipt towards the services provided and not on billing basis or mercantile basis. The adjudication order erred in demanding service tax on the mercantile basis or billing basis. Secondly it is contended that the gross amount booked by the Revenue from the profit and loss account of the appellant, was the consolidated figure for both the units under Bhopal Commissionerate and under Raipur Commissionerate, being a proprietorship concern. The said gross amount included the element of service tax also charged in the bills. Accordingly the appellant is entitled for cum-tax benefit.
5. Lastly the Learned Counsel states that the appellant have disclosed the proper accounts maintained in regular course of business, and also disclosed the amount of gross billing, the receipts, the outstanding/sundry debtors, etc. in their final accounts being profit and loss account and balance sheet, which are duly audited by chartered accountant. The appellant have also reflected the amount of service tax payable on the liability side in the balance-sheet. That there is no case of suppression of facts from the Revenue. Further it is admitted fact that the whole demand is based on the records maintained by the appellant. In this view of the matter the Learned Counsel prays that penalty imposed under Section 78 is fit to be set-aside. So far as the penalty under Section 76 is concerned, the learned Counsel states that it is evident from the balance-sheet as on 31st of March each year, during the period in question, that there were heavy sundry debtors, mainly receivable from South Eastern Coal Fields Ltd. - a PSU, which was the main reason for their financial crisis, which has resulted in delay in deposit of service tax. In this view of the matter there is no deliberate default in payment of service tax liability. Accordingly the penalty under Section 76 is also fit to be set aside, there being a reasonable cause. So far penalty under Section 77 is concerned, the learned Counsel stated that there is no conscious violation of the provisions of this Act, nor non-compliance of any of the notices, the penalty may be set aside. As far as late fee imposed under Rule 7C of Service Tax Rules @ Rs. 20,000/- per return, the learned Counsel states that the same is highly excessive under the facts and circumstances and accordingly prays for reducing the said penalty of late fine.
6. The learned AR for Revenue Shri G.R. Singh, relies on the impugned order. He further points out from the findings in the impugned order and states that appellant had not taken up the issue of jurisdiction before the Adjudicating Authority. Secondly, in the show cause notice, where the service tax demand had been calculated, it is mentioned that service tax payable (as per actual security service receipts). Accordingly it is apparent that Revenue have given sufficient consideration towards the tax payable on receipt basis.
7. Having considered the rival contentions, we find that so far the demand raised in the impugned order relating to Bhopal Commissionerate, of the Amlai office of the appellant, in respect of services in the state of M.P. is concerned, the said demand hit for jurisdiction, and accordingly set aside. As regards the claim for cum-tax benefit, we are satisfied that the gross amount taken by Revenue for raising the demand, in the facts and circumstances, the element of services tax was included and accordingly we hold that the appellant is entitled to cum-tax benefit for calculation of service tax liability. So far the claim of the appellant is concerned, as regards reworking of the taxable value on the receipt basis, we are satisfied that tax demanded on gross value of bill raised, during the financial year, which is apparently erroneous, as tax was required to be demanded and/or calculated on receipt basis, as per applicable law till 31/03/2011. Accordingly, we set aside the gross demand raised and remand the matter to the Original Adjudicating Authority for recalculation of demand on receipt basis with respect to the services provided under the Raipur Commissionerate. As regards the penalties imposed, we find that there is no case for deliberate default on the part of the appellant as they have disclosed their turnover and liability towards service tax in their balance-sheet. On query from the bench as to why the returns for about two years were in arrears and not filed, the learned Counsel have explained that the website of the Department - ACES, does not accept filing of the return unless the service tax payable as per return have been deposited. Further the learned Counsel demonstrated that due to heavy sundry debtors and/or amount receivable for services rendered and/or bills raised on the receiver of service, a PSU, have led to financial crisis and/or shortage of funds in the hands of the appellant, resulting into default in payment of tax, but there is no deliberate default. Further there is no case by Revenue that there has been diversion of funds from the business of the appellant for non-business use. Accordingly we find that there is reasonable cause for default and as su
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ch we set aside the penalty under Section 78 as well as under Section 76 of the Finance Act. So far the other penalties are concerned under Section 77 and under Rule 7C of Service Tax Rules, these are set aside and remanded to the Adjudicating Authority for reconsideration upon redetermination of liability in accordance with law. We also make it clear that under the facts and circumstances, the demand for extended period is chargeable, as we have set aside the penalty only on the ground of their being genuine reason for non-payment of service tax demand. 8. Accordingly this appeal is allowed in part and remanded in part. The appellant is also directed to appear before the Original Adjudicating Authority within a period of 60 days from the date of receipt of this order and seek an opportunity of hearing and also submit the copies of relevant documents.