"CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL ALLAHABAD REGIONAL BENCH - COURT NO.I Service Tax Appeal No.70460 of 2023 (Arising out of Order-in-Appeal No.177/ST/ALLD/2021 dated 08.07.2021 passed by Commissioner (Appeals) Customs, CGST & Central Excise, Allahabad) M/s Eastern Distributors …..Appellant (Mohalla Chakla, Paharpur, Sadar Kotwali, Azamgarh-276001) VERSUS Commissioner of CGST & Central Excise, Varanasi ….Respondent (Azamgarh, H.No.89, Mohalla- Belaisa, Distt.-Azamgarh-276001) APPEARANCE: Shri Sanjay Kumar, Advocate for the Appellant Shri Santosh Kumar, Authorized Representative for the Respondent CORAM: FINAL ORDER NO.- 70635/2025 DATE OF HEARING : 27.05.2025 DATE OF PRONOUNCEMENT : 10.09.2025 The present appeal has been filed by the Appellant assailing the Order-in-Appeal No.177/ST/ALLD/2021 dated 08.07.2021 passed by Commissioner (Appeals) Customs, CGST & Central Excise, Allahabad. 2. The facts of the case in brief are that the Appellant M/s Eastern Distributors is a proprietary concern of Mr. Adeel Ahmad and is engaged in business as an Authorized dealer of Hero Motocorp Ltd1. That as an Authorized dealer of HMC Ltd. the Appellant is selling two wheelers manufacture by HMC Ltd. and providing free and paid services to customers. Apart from the Taxable Service receipts on two wheelers, the Appellant has also 1 HMC Ltd. HON’BLE MR. P.K. CHOUDHARY, MEMBER (JUDICIAL) Service Tax Appeal No.70460 of 2023 2 taxable receipts of commission from Insurance & Finance Companies for promoting their business. The Appellant is registered with the Service Tax Department and is paying service tax. 3. That the Appellant is providing services to the parties below and out of which few services are taxable and few are not taxable, the same are as under:- Sr. No. Name of Party Type of Payments 1. INDUSIND BANK LIMITED Incentive received is Taxable 2. SHRI RAM CITY UNION FINANCE LIMITED Incentive received is Taxable 3. ICICI LOMBARD GENERAL INSURANCE COMPANY LIMITED Insurance Commission is Taxable 4. HERO FINCORP LIMITED Finance Commission is Taxable 5. HERO MOTOCORP LIMITED Payment received is of Refund of Security, Incentive on Sales etc., which is not Taxable only liability is on Payments received against Service Coupons. 4. The details of amount received & service tax payable has been calculated on the amount reflected in Form 26AS statement. Accordingly, calculation chart of tax liability of service tax of the Appellant assessee is as under:- That receipts from all the Parties as per Form 26AS are taxable except the part of receipts from HMC Ltd., is exempted. The bifurcation of exempted & taxable receipts and detail of service Service Tax Appeal No.70460 of 2023 3 tax on the taxable amounts after taking due input credit of the taxes paid is as under:- Year Gross receipts as per 26AS Taxable Receipts S/T Payable Input ST. paid 2014-15 3288804 3426499 423315 20246 403270 2015-16 3950520 3717902 513310 69218 447183 2016-17 4047546 2956139 443871 33910 409961 2017-18 3253325 3996745 648788 11996 636792 Total 14540195 13314511 2029284 135370 1897206 5. Show Cause Notice2 dated 30.07.2019 was issued proposing to demand service tax and impose penalty as under:- “(i) An amount of Service Tax Rs.3,38,078/- (Rs. Three Lakhs Thirty Eight Thousand and Seventy Eight only) (including applicable cess) being Service Tax short paid during the period should not be demanded and recovered from them under Section 73(1) of the Finance Act, 1994; (ii) Interest at appropriate rate on the above demanded amount should not be demanded and recovered from them under Section 75 of the said Act ibid; (iii) Penalty should not be imposed on them under Section 78 of the Finance Act, 1994 as amended, for suppression of facts with intent to evade the correct value of taxable services and material facts before the department resulting into the short/not payment of Service Tax, and applicable Cess; (iv) Late fee should not be charged/recovered from them as per provisions of Section 70 of the Act read with Rule 7C of the Service Tax Rules, 1994.” 6. The Adjudicating Authority vide the Order-in-Original dated 23.01.2020 confirmed the demand as proposed in the SCN and imposed equal penalty under Section 78 and late fee of Rs.3,200/- under Section 78 of the Finance Act, 1994. Being aggrieved, the assessee filed appeal before the first Appellate Authority and the learned Commissioner (Appeals) upheld the 2 SCN Service Tax Appeal No.70460 of 2023 4 Order-in-Original and rejected the appeal before him. Hence, the present appeal before the Tribunal. 7. The learned Advocate appearing on behalf of the Appellant submits that the learned Commissioner (Appeals) has wrongly & illegally confirmed the denial of the valid Input Tax Credit of Rs.1,35,370/- ignoring the fact that the Appellant has duly paid the Service Tax charged on services obtained for business. The copy of all the bills and ledger A/C of all the years involved were submitted during the hearing and the learned Commissioner (Appeals) ignored the documents and denied the Input Tax Credit. The copy of ledger A/C with all the bills on which service tax was paid are enclosed as Annexure 5 to 8. In view of the above facts and submissions, the Input Tax Credit of Rs.1,35,370/- deserved to be allowed. The penalty of Rs.3,38,078/- imposed under Section 78 is arbitrary, and illegal. That the penalty under Section 78 of the Finance Act, 1994 is not imposable as there is no fraud, or collusion, misstatement or suppression of facts with intent to evade payment of service tax. The Appellant due to lack of knowledge in respect of the Commission from Insurance & Finance Companies, was taxable under Business Auxiliary Services, missed to inform the Department. There was sufficient Cenvat credit available and after meeting the payable service tax the Appellant was entitled to refund. There was no willful misstatement or suppression of facts with the intent to evade tax. In this respect it is pertinent to note that the Hon’ble Supreme Court has dealt with the issue as to what amounts to willful misstatement or suppression of facts in the case of Uniworth Textiles Ltd. vs. CCE, Raipur reported as 2013 (288) E.L.T. 161 (SC) wherein it has been held that mere non-payment of duties is not equivalent to collusion or willful misstatement or suppression of facts, otherwise there would be no situation for which ordinary limitation period would apply. Inadvertent non-payment is to be dealt with the normal limitation period and the burden is on the Revenue to prove allegation of willful misstatement or suppression. In view of the Service Tax Appeal No.70460 of 2023 5 above the penalty levied under Section 78 deserves to be cancelled and it is prayed that the appeal be allowed. 8. The learned Departmental Authorized Representative justified the impugned order and prayed that the appeal being devoid of any merits may be dismissed. 9. Heard both the sides and perused the appeal records. 10. I find that on the basis of third party data and Form 26AS statement, it was alleged that the Appellant had short paid service tax to the tune of Rs.3,38,078/- during the financial year 2014-15 to 2017-18 (upto June, 2017). The adjudication order was passed ex parte. It is the case of the Appellant that the demand confirmed by the Adjudicating Authority is illegal as all the receipts shown in Form 26AS statement also include exempted services. Input Tax Credit of Rs.1,35,370/- has been denied. It is their submission that the same was rightly claimed as per respective bills on which service tax was paid. The learned Advocate vehemently argued that the penalty imposed under Section 78 is illegal & unwarranted as there was no suppression of facts, or fraud, or collusion etc., with an intent to evade payment of service tax. The learned Advocate further submitted that most of the payments received as per Form 26AS statement are taxable except payment received from M/s HMC Ltd. under the heads of interest on security deposit, incentive on sales, payment of replacement value of parts under warranty and service tax payments reimbursed by M/s HMC Ltd. The Appellant has submitted various charts showing payments received from HMC Ltd. I find that the learned Commissioner (Appeals) has observed that there is difference between amount reflected in Form 26AS and value shown in the chart produced by the Appellant. He further observed that the Appellant failed to produce any evidence /details /documents to clarify the difference between the amount reflected in Form 26AS statement and taxable value shown in ST-3 returns for the corresponding period. 11. The learned Advocate has submitted certificates issued by their Chartered Accountant, one in respect of exempt taxable Service Tax Appeal No.70460 of 2023 6 services reflecting in Form 26AS statements and the other in respect of Input Tax Credit of service tax for the period under dispute. Both the certificates are reproduced as under:- Service Tax Appeal No.70460 of 2023 7 12. I find from the above certificates issued by the Chartered Accountant that Input Tax Credit of service tax paid on input services amounting to Rs.1,35,370/- has rightly being claimed by the Appellant. Further the demand raised on the basis of difference in figures of Form 26AS statements and ST-3 returns is not tenable, since in Form 26AS statements, the gross receipts are reflected showing both taxable and exempted services and in the ST-3 returns the Appellant has paid tax on the taxable Service Tax Appeal No.70460 of 2023 8 services after taking credit of the Input Tax Credit available to him. 13. I find that without further examining the reasons for difference in Form 26AS statement and ST-3 returns, Revenue has raised the demand on the basis of difference between the two. I note that Revenue cannot raise the demand on the basis of such difference without examining the reasons for said difference and without establishing that the entire amount received by the Appellant as reflected in Form 26AS statement being consideration for services provided and without examining whether the difference was because of any exemption or abatement, it is not legal to presume that the entire differential amount was on account of consideration for providing services. I, therefore, do not find the said SCN to be sustainable. In view of the same, I set aside the impugned order and allow the appeal filed by the Appellant with consequential relief, as per law. (Order pronounced in open court on - 10.09.2025) Sd/- (P. K. CHOUDHARY) MEMBER (JUDICIAL) LKS "