The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that oral statements of service recipients cannot be accepted as admissible piece of evidence.
The bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that no cash receipts has been relied upon by the department, no financial flow back has been relied upon by the department for the collection of rent in cash, no rent agreement has been found by the department for the support of excess rent , no ledger entry in the books of accounts of the appellant found for so called excess collected rent.
The bench noted that none of the persons on whose statement reliance was placed by the department were cross-examined by the Ld. Commissioner in the present matter. Clearly, the Adjudicating Authority had failed to follow the requirement of Section 9D of the Central Excise Act 1944, which is applicable in Service Tax matters, regarding examination in chief of witness, therefore quantification of demand of service tax on the basis of statement of persons not sustainable.
DGCEI received an intelligence through the sources that M/s Sagar Builders Pvt. Ltd. has constructed the Commercial Complex known as Radha-Krishan Textile Market and after completion of the construction of said complex, they have sold number of shops and given number of shops on rent.
Officer searched the premises and noticed that there are some shops left unsold, belonging to the Appellant and are given on rent. The DGCEI initiated the investigation against the appellant and revealed that Appellant has given 228 shops on rent to various tenants.
The activity of renting shops fall under the taxable category of “Renting of Immovable Property” classified under the heading 65(105) (zzzz) of Finance Act 1994. It was contended that the Appellant collected the rent yearly basis in cash and suppressed the income generated from renting of shops. During the investigation, inquiries were made with some of the tenants, occupying shops in Radhe Krishan Textiles Markets and their statements were recorded.
A show cause notice was issued to the Appellant for recovery of Service tax of Rs. 70,86,927/- along with interest and penalty. In adjudication, the Commissioner confirmed the demand of Service tax and ordered for appropriation deposited by the appellant. He also imposed the penalty under Sections 76, 77 and 78 of the Finance Act, 1994.
The appellant contended that the Appellant has received the rent in excess of the rent booked in the books of accounts on the basis of four tenants’ statements out of total tenants of 238. The differential value and service tax has been demanded from the appellant. The service tax demands confirmed by the Commissioner are untenable and unjustified.
The tribunal held that before fastening the service tax demand, it was incumbent on the revenue to come up with tangible evidence to prove the suppression of taxable value and quantify the demand on the basis of documentary evidences.
The tribunal found that the appellant produced the details of rent received from each tenant and shops during the disputed period before revenue and Ld. Commissioner. However, department has calculated the demand of service tax on all the shops for whole periods without verifying the details that whether the said shops have been given on rent during the whole disputed period or not; whether shops have been given on rent or sale basis; what is the actual rent recoverable or received by the appellant; how many month occupant’s have been holding the shops as a tenant.
The tribunal concluded that there was no mala fide on the part of the appellant. Therefore, benefits of Section 80 should be extended for the appellant and penalties imposed by the Commissioner are set aside.
Case Details
Case Title: Krish Corporation Versus Commissioner of C.E. & S.T.-Surat-i
Case No.: Service Tax Appeal No. 10686 Of 2014-DB
Date: 26.11.2024
Counsel For Appellant: Vipul Khandhar
Counsel For Respondent: Rajesh Nathan
