2026-VIL-918-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Valuation – Cum-duty benefit – Appellant engaged in renting of immovable properties within temple premises received rental consideration without separately levying service tax – Demand of service tax on the gross amount received. The assessee claimed that the consideration should be treated as inclusive of service tax (cum-duty valuation) under Section 67(2) of the Finance Act, 1994 - Whether cum-duty benefit could be extended when service tax was not separately collected or invoiced – HELD - Where service provider does not separately collect service tax from customers, the consideration received is deemed inclusive of service tax - Service tax being an indirect tax, when consideration is received for services rendered without separately collecting tax, such consideration is deemed to be inclusive of service tax payable by the ultimate consumer. The provisions of Section 67(2) of the Finance Act, 1994 apply and provide that where the gross amount charged is inclusive of service tax, the value of taxable service shall be the amount which, after adding service tax, equals the gross amount charged. Since no evidence exists that the assessee separately collected tax but failed to pay it, the consideration must be treated as cum-duty – The impugned order denying cum-duty benefit is set aside - Levy of Penalty – Absence of mens rea – Penalty under Section 78 of Finance Act, 1994 for suppression of facts or wilful misstatement – HELD - For invoking penalty under Section 78, it must be established through clear and positive evidence that the duty was not paid due to fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade payment. The mental element introduced by the word "willful" requires examining the state of mind of the assessee. The mere detection of short payment during an inspection, without any corroborative evidence demonstrating conscious and deliberate intent to evade tax, cannot ipso facto justify penalty. The severity of penalty under Section 78 indicates that the conduct must be of a serious and blameworthy nature. The imposition of penalty under Section 78 is unsustainable and set it aside - Extended period of limitation – HELD - The law recognises that the ingredients for invoking extended period of limitation, namely suppression of facts, wilful misstatement, or intent to evade, are the same as those required for imposing penalty under Section 78. Mere failure to pay service tax without evidence of fraud, collusion, or wilful misstatement is insufficient to attract extended period. Since the conduct of the assessee did not constitute suppression of facts or wilful intent to evade, the demand arising from both show cause notices must be confined to the normal period of limitation only, and the demand beyond the normal period is set aside - Per AJAYAN T.V. [Member (J)]: The relief sought in the appeal is, in essence, confined to the grant of cum-tax benefit and to the setting aside of the penalty imposed. Nevertheless, the Ld. Advocate for the appellant had made his submissions at the bar on the issue of invocation of the extended period. The discussion contained in paragraphs 4 to 10 may not be strictly necessary for the determination of the issues arising from the appeal. At the same time, in agreement with the reasoning and findings recorded and also concur with the ultimate conclusion and the directions.
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