COMMISSIONER OF CENTERAL EXCISE AND SERVICE TAX LARGE TAXPAYER UNIT Vs. SIFY TECHNOLOGIES LTD, CANAL BANK ROAD

JUDGEMENT

(1.) The instant appeal is directed against the final order No.41010 of 2016 dated 16.06.2016 passed by the Honourable Customs, Excise and Service Tax Appellate Tribunal, Chennai, whereby the Tribunal has set aside the order passed by the Appellate Authority penalty under Section 78 of the Finance Act, 1994, by invoking the provisions of Section 80 of the Finance Act, 1994.

(2.) Heard, Mr.V.Sundereshwaran, learned Senior Standing Counsel for CCEST and Mr.Raghavan Ramabadran, learned counsel for the respondent.

(3.) The respondent is registered with the service tax under Registration No.AAA CS 9032RST001 for various services namely, "Leased Circuit, On line Information, Internet cafe, Advertisement, Franchisee, 'Business Auxiliary Service', etc." Based on reports that the respondent is not paying appropriate service tax, their office was inspected. Investigations conducted revealed that the respondent is calculating their service tax liability based on the collection report for each month taking the total collection as the cum-tax value and are working the service tax backwards. It was noticed that the accounting system did not provide for the capturing of the amount of Tax Deducted at Source (TDS) recovery made by their clients from their invoices for the calculation of their service tax liability. For example, when an invoice is raised for say, X amount, their clients have been making payments less TDS for the purpose of Income tax, say Y amount, in respect of certain services thereby making a net payment of X-Y, say amount Z. Respondent has been taking this amount Z as the cum-tax amount and were calculating the service tax liability which was based only on the collections made during the month. The TDS was never reflected in their collection reports was never made a part of the reckoning for the purpose of service tax. The respondent did not pay the appropriate service tax on the TDS amount withheld by their clients.