ORDER
S.L. Peeran, Member (J)
1. The appellants have challenged the confirmation of demands by Order-in-original No. 14/2005 dated 29.12.2005 by which the Revenue has proceeded to confirm demands on the basis of amounts shown as due from the parties in the Income Tax returns. The appellant’s contention is that these amounts have not been received from the parties and therefore, the amounts shown in the Income Tax Returns is on different basis and are in terms of the Income Tax Act; which requires to declare the amounts which are debts and required to be recovered from the parties. While Service Tax has to be discharged on the amounts already received. However, this plea has not been accepted.
2. The learned Counsel submits that the Tribunal has already considered this issue in the case of Tempest Advertising (P) Ltd. v. CCE, Hyderabad by Final Order No. 1521/2006 dated 15.9.2006 and has clearly given a finding based on its earlier ruling rendered in the case of BPL Ltd. v. CST, Bangalore by Final Order No. 1065/2006 dated 19.6.2006 that Service Tax cannot be demanded based on the amounts due from the parties as disclosed in the Income Tax returns. It is also the appellant’s case that they are discharging the Service Tax as and when they are recovering the amounts and therefore, the confirmation of demands is not justified. It is also submitted that they have not taken any credit on the amounts due to be paid by them. Therefore, the reply filed by the Commissioner before the Tribunal that they had deducted an amount of Rs. 2,18,972/- on account of input credit is an incorrect submission. The learned Counsel also submitted that they had furnished all the details in ST-3 returns and there was no suppression of value of taxable service vis-à-vis Income Tax particulars and therefore, the demands were also barred by time.
3. The learned JDR reiterated the impugned order and also relied on the written submission made by the Commissioner.
4. On a careful consideration, we notice that the issue involved in this appeal has already been decided by this bench in the above noted judgments. The findings recorded in Para 5 of the ruling rendered in the case of M/s. Tempest Advertising (supra) is recorded herein below.
5. On a careful consideration and perusal of the Order-in-Original, it is very clear that the Revenue proceeded to levy Service Tax on the basis of gross receipts shown in the Profit and Loss Account and the details shown in the Income Tax Returns. The details filed under Income Tax Returns are different from the returns that have to be filed in terms of the Service Tax. In the case of Service Tax, the tax is required to be calculated on total receipts and not on the amount still due from the customers. This position has been clarified in the cited case of BPL Ltd. The findings recorded in Para 2 is reproduced herein below.
2. We have heard both sides in the matter and have perused the records. T. Velu Pillai & Co., Chartered Accountants have issued certificate based on the verification of books of accounts of the appellant company, that till date the appellant did not receive payments towards the debit notes raised for various engineering services provided to M/s B.S. Refrigerators Ltd., and M/s B.S. Appliance Ltd., Bangalore. The appellants had been filing returns regularly and informing the department about the outstanding debit notes due to them. There is no dispute about this fact about the appellants not having received the services amounts including the tax from their customers and they had reflected these amounts under the heading sundry debtors. Section 68 of the Finance Act 1994 and Rule 6 of the Service Tax Rules does not permit recovery of the tax unless the payments are received. Both the Section 68 and Rule 6(1) are reproduced herein below:
Section 68: Payment of service tax – (1) Every person providing taxable service to any person shall pay service tax at the rate specified in Section 66 in such manner and within such period as may be prescribed.
(2) Notwithstanding anything contained in Sub-section (1), in respect of any taxable service notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in Section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.
RULE 6(1) Payment of service tax: The service tax shall be paid to the credit of the Central Government by the 5th of the month immediately following the calendar month in which the payments are received, towards the value of taxable services:
The tribunal has granted full stay by Stay Order No. 334/06 dated 24.3.06, in view of the fact that appellants have not received value of taxable services from their customers in terms of Section 68 and Rule 6(1) of Service Tax Rules. The service tax is not liable to be paid as the assessee has not received the payments towards the value of taxable service. The appellants have been filing returns and informing the department about the non-receipt of the value of services rendered by their customers and about the non-payment of the same. The department is aware of these facts as the returns have been filed. Therefore, the issue of show cause notice beyond the period of one year is barred by time. For the reasons stated above, the appeal is thus allowed with consequential relief if any.
5.1 The appellant’s contention is required to be accepted. The order passed by the Asst. Commissioner is correct and the same is upheld. The impugned order is not just and proper and hence, the appeal is allowed with consequential relief, if any.
4.1 In terms of the above order, Service Tax cannot be recovered based on the returns shown in the Income Tax Returns, as the provisions of Income Tax requires declaration of amounts still due from the debtors, while in the case of Service Tax, the same has to be paid when recoveries are made. The appellants have been paying the amounts as and when they are recovering the amounts. They have also not taken the credit as alleged by the Commissioner in his written submission before the Tribunal. Furthermore, there is no suppression of facts and demands are also time barred. Therefore, in terms of the above noted judgments, the impugned order is set aside and appeal allowed with consequential relief, if any.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)