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OIO No. 57/STC/AHD/ADC(JSN)/2012-13
BRIEF FACTS OF THE CASE:
1. M/s C.C. Chokshi & Co. (hereinafter referred to as "the said assessee") is a firm of Practicing Chartered Accountants, having their office at 'Heritage', 3rd Floor, Nr. Gujarat Vidyapith, Off Ashram Road, Ahmedabad-380014. They were engaged in rendering various services namely Practicing Chartered Accountants and Management Consultant’s Service. They are registered with the Service Tax Department under Registration No. AACFC2938DST001.
2. During the course of audit of the records of the party, it was observed that they were indulging in evasion of service tax by not fully discharging the service tax liability under the category of practicing chartered accountants. From the records related to accounts viz balance sheet etc., it was revealed that the party had collected fee under the head of income from their clients for the service of “Management Consultant’s Service/ Corporate Finance Service/ Solution Service rendered by them under the head of “Management Consultant”. As per their balance sheet, it was noted that they have received an amount of Rs. 6,90,94,874/- for the period from 1.4.2001 to 31.3.2005 on account of service namely practicing Chartered Accountants and Rs. 3,53,76,669/- on account of Management Consultancy service. Further, on scrutiny of their records, it was observed that there was difference in amount of fees collected as shown in their ST-3 returns as compared to the figures shown in the balance sheet for providing services under the category of "Practicing Chartered Accountant" for the period from 2001 to 2005. It was observed that the assessee had not paid any service tax towards management consultant service for the period from 2001 to 2005. As per the balance sheet, it appeared that the assessee had received an amount of Rs.6,90,94,874/- for the period from 01.04.2001 to 31.03.2005 on account of practicing chartered accountant service and Rs. 3,53,76,669/- on account of management consultancy service for the aforesaid period and hence, they were liable for service tax on the above taxable amount. The party had paid service tax on taxable value of Rs 5,09,04,489/- as per the ST-3 returns and had not paid service tax on the balance differential amount of taxable value of Rs. 1,81,90,385/- which works out to Rs.16,38,370/- at appropriate rate of service tax prevailed at the relevant time, under the category of “Chartered Accountant Service”. The party had also not paid any service tax on Rs. 3,53,76,669/- towards services rendered under the category of 'Management Consultant Service' which works out to Rs. 29,72,503/- at appropriate rate of service tax prevailed at the relevant time. Accordingly, they were issued with a Show Cause cum Demand Notice by the Additional Commissioner of Service Tax, Ahmedabad vide F No. STC/4-94/O&A/SCN/CCChoksi/2006 dated 19.10.2006 and were called upon to show cause as to why:
(i) Service rendered by them should not be considered as taxable. service under the category of “Practicing Chartered Accountant Service” and “Management consultant Service” as defined under Section 65 of the Finance Act 1994, as amended, and the amount of Rs. 6,90,94,874/- and Rs. 3,53,76,6691- received as payment fee recovered/ collected by them from their clients should not be considered as taxable value and differential Service Tax amounting to Rs. 16,38,370/- under the category of Practicing Chartered Accountant Service and Rs. 29,72,503/- under the category of Management Consultant Service for the period from 01.04.2001 to 31.03.2005 should not be charged, and recovered from them under Section 73(1) of the Finance Act, 1994, invoking the larger period of five years, as discussed in the Show cause referred above;
(ii) Interest as applicable on the amount of Service Tax liability of Rs 16,38,370/- and Rs. 29,72,503/- respectively should not be paid by them for the delay in making the payment, under section 75 of the Finance Act, 1994;
(iii) Penalty should not be imposed upon them under Section 76 of the Finance Act, 1994 for the failure to make the payment of Service Tax payable by them;
(iv) Penalty should not be imposed upon them under Section 77 of the Finance Act, 1994 for the failure to file prescribed Service Tax return within the stipulated time;
(v) Penalty should not be imposed upon them under Section 78 of the Finance Act, 1994 for suppressing the value of taxable services provided by them before the Department as discussed hereinabove with an intention to evade payment of Service Tax;
(vi) Penalty should not be imposed under provisions of the erstwhile
Section 75 A of the Finance Act, 2001 as much as they failed to
make application for registration under the category of
'Management Consultant Service' within the stipulated time.
3. The above referred Show cause was taken up for adjudication and the Order-In-Original bearing No STC/30/JC/Div II/08-09 from the file No. STC/4-94/O&A/SCN/CC Choksi/06 dated 10.11.2008 was issued. The OIO interalia confirmed the aforesaid demand and ordered that:
(i) The Services rendered by them as taxable service under the category of Practicing Chartered Accountant Service and Management Consultant Service as defined under Section 65 of the Finance Act 1994, as amended, and considered the amount of Rs. 6,90,94,874/- and Rs. 3,53,76,669/- received as payment/ fees recovered/ collected by them from their clients as taxable value and confirmed the non payment/ short payment of Service Tax amounting to Rs. 16,38,370/- (Rupees Sixteen Lakhs Thirty Eight Thousands Three Hundreds Seventy Only) under the category of Practicing Chartered Accountant Service and Rs. 29,72,503/- (Rupees Twenty Nine Lakhs Seventy Two Thousands Five Hundreds Three Only) under the category of Management Consultant Service for the period from 01.04.2001 to 31.03.2005 under Section 73(1) of the Finance Act, 1994, invoking the larger period of five years;
(ii) The party (M/s C.C. Choksi & Co.) was directed to pay the interest as applicable on the amount of their Service Tax liability for the delayed/non payment of service tax under Section 75 of the Finance Act, 1994;
(iii) Penalty of Rs. 200/- (Rupees Two Hundreds Only) per day or at the rate of 2% of the service tax amount per month upon them under Section 76 of the Finance Act, 1994, as amended, for the failure to make the payment of Service Tax payable by them. As the actual amount of penalty was to be depending on actual date of payment of service tax, however, as per Section 76 of the Finance Act, 1994 penalty was to be restricted to their service tax liability;
(iv) Further the penalty of Rs. 8,000/- (Rupees Eight Thousand only) was imposed under Section 77 of the Finance Act, 1994, as amended, on them for the failure to file prescribed Service Tax return within the stipulated time;
(v) Further, a penalty of Rs 92,21,746/- (Rupees ninety two lacs, twenty one thousand seven hundred forty six only) was imposed on them under the provisions of Section 78 of the Finance Act, 1994, as amended; and
(vi) A penalty of Rs. 1,000/- (Rupees one thousand only) was also imposed on the party under the provisions of erstwhile Section 75 A of the Finance Act, 1994 as they failed to make an application and obtain service tax registration under the category of “Management Consultant Service” within stipulated time.
4. Being aggrieved by the Order-In-Original No. STC/30/JC/Div II/08-09 issued from the file No. STC/4-94/O&A/SCN/CC Choksi/06 dated 10.11.2008, the assessee had preferred an appeal alongwith stay application before the Commissioner (Appeal-IV), Ahmedabad. The same was decided vide Order-In-Appeal No. 203/2009(STC)HKJ/Commr(A)/Ahd dated 3.8.2009 from File No. V2(ST)18/A-IV/2009. In the aforesaid OIA, the order portion of OIA reads as “In view of the aforesaid discussions, I hereby remanded back the impugned order to the adjudicating authority for proper quantification of service tax in term of para 7 above”. On going through the para 7 of the OIA, the same reads as under:
“I find that the appellants have contended the matter mainly on two issues, one is payment of service tax by their Vadodara Branch, which was separately registered and paid service tax on the services rendered by them and the other one is related to payment of service tax by their main contractor. I find that C.C. Choksi & Co. vadodara was functioning as an independent unit till 31.3.2004. They were independently providing services and discharging the liabilities of service tax thereon. With effect from 1.4.2004, C.C. Choksi & Co. vadodara was merged with C.C. Choksi & Co., Ahmedabad and the balance sheet, profit & loss account of the two units were consolidated to one after 1st April, 2004. The appellants have furnished copies of ST-3 Returns filed by their Vadodara branch, supported by the balance sheet showing taxable value and service tax paid separately for Vadodara branch for the year 2004-05 and at first hand I find that the adjudicating authority has confirmed the demand of the year 2004-05 including service tax liability discharged at Vadodara branch, which is not proper. The appellants had also produced a certificate from an independent C.A. to that effect. I am in the opinion that when the appellants hold separate registration for Vadodara branch and paid service tax separately, demand in relation to income by Vadodara branch for the year 2004-05 cannot be confirmed by the adjudicating authority. I, therefore, hold that the demand in this regard is not tenable and the total demand is required to be re-calculated accordingly. The recovery of interest under Section 75 and penalties under Section 76 and Section 78 vide impugned order is also required to be re-worked out accordingly. On this ground the matter needs to be remanded back for fresh decision”.
5. In view of the above, the adjudicating authority on remand, in OIO No. 23/STC-AHD/ADC(MKR)/2011-12 dated 22.07.2011, gave relief partly on the billed amount in respect of CA Service of their Vadodara office amounting to Rs. 76,31,290/- and applicable service tax of Rs. 6,84,487/-, and thereby confirmed the non payment/ short payment of Service Tax amounting to Rs. 9,53,883/- (Rupees nine Lakhs fifty three Thousands eight Hundreds eighty three Only) under the category of Practicing Chartered Accountant Service and Rs. 29,72,503/- (Rupees Twenty Nine Lakhs Seventy Two Thousands Five Hundreds Three Only) under the category of Management Consultant Service for the period from 01.04.2001 to 31.03.2005 under Section 73(2) of the Finance Act, 1994, and also confirmed the interest, and imposed penalties under Section 76, 77 and 78, and imposed a penalty of Rs. 1000/- under Section 75A of the Act.
6. Against the above order, the party again went in appeal in the Commission (Appeals) who vide OIA No. 23/2012(STC)/K.ANPAZHAKAN/Commr(A)/Ahd dated 23.01.2012 partly allowed the appeal of the assessee by deleting the total taxable value of Rs. 2,50,90,190/- { Value of Rs. 1,21, 81,471/- for Chartered Accountant Service + Value of Rs. 1,29,08,719/- for Management Consultant’s Service} pertaining to their Vadodara Branch, from the consolidated value of Rs. 10,44,71,543/-. In view of the above, the case has been remanded back to the adjudicating authority for proper quantification of Taxable value as well as Service Tax.
7. In the meantime, the appeal filed by the said assessee against the OIA i.e No. 203/2009(STC)HKJ/Commr(A)/Ahd dated 3.8.2009, has also been decided by the the Hon’ble CESTAT. The Hon’ble CESTAT vide Order No. A/510/WZB/AHD/2011 dated 03.03.2011 has also remanded the matter with the direction that
(i) A fresh decision may be arrived in the light of the law declared and also to verify the certificates given by the principal contractor as regards payment of service tax on the entire value, in respect of “Chartered Accountant Service”;
(ii) And also to re-decide the issue of Management Consultancy Service provided prior to 1.08.2002 in light of the law declared.
DEFENCE REPLY AND PERSONAL HEARING
8. The assessee submitted their reply vide letter dated 24.01.2013. In their reply they submitted as under :
1.
2.
· CLASSIFICATION OF SERVICE/ CERTAIN SERVICES RENDERED BY CHARTERED ACCOUNTANT NOT TAXABLE PRIOR TO 01.08.2002:
1.
The Central Board of Excise & Customs (hereinafter referred as ‘Board’) Circular No.ST-51/13/2002 issued from F.No.178/1/2002-CX.4 dt.7-1-2003 is reproduced below :
“I am directed to say that doubts have been raised regarding classification of certain services which appear to fall under two or more categories simultaneously.Some instances where such problems have arisen relate to Management Consultants v. Manpower Recruitment Services, Mandap Keepers v. Convention Services, Rent-A-Cab Scheme v. Tour Operators, Cargo Handling Services v. Storage and Warehousing Services, Architect v. Interior Decorator, Scientific and Technical Consulting Services v. Consulting Engineer, Practicing Chartered Accountants v. Management Consultants, etc.
2.The matter has been examined in the Board. It is hereby clarified that any service (transaction) can be taxed only once even if it appears to fall under two or more categories. Therefore, before levying service tax it is essential to determine under which category a particular service falls. It should be kept in mind that service tax is a tax on the service provided and is recovered from the service provider (in some cases even from the service recipient). The position is akin to Central Excise duty which is charged on manufactured goods. Just as Central Excise duty cannot be charged twice on the same goods under two separate chapters/headings/sub-headings of the Central Excise Tariff, so also Service tax cannot be charged twice on the same service (transactions). However, one service provider may provide more than one taxable service. In such cases, the service provider need only take one registration, but it shall be endorsed for all the taxable services and tax liability will have to be discharged for each of the taxable services separately.