Per Jyoti Balasundaram
For reasons recorded below, we waived predeposit of service tax of Rs.48,90,540/- + education cess of Rs.97,811/- and penalties of Rs.49,88,351/- and Rs.100/- per day upto 17.4.2006 and Rs.200/- per day from 18.4.06 or 2% of the service tax and education cess and proceeded to hear and decide the appeal itself at this stage with the consent of both sides.
2. The case of the department is that the assessees herein who are manufacturers of automotive parts and accessories and registered with the Service tax department as a recipient of service and paying service tax on erection, commissioning and installation and consulting engineers services, paid tax on the net value which was arrived at after deducting TDS from the gross value while the gross amount was to be adopted for the payment of service tax. We find that the assessees had contended throughout the proceedings that they had correctly paid service tax on the gross value of taxable service namely 5% of the net sales value of the goods and that income tax was remitted for the purpose of compliance with the provisions of the Income Tax Act and the procedure for grossing up of amounts for the purpose of calculating income tax is as per Section 195A of the Income Tax Act and that the income tax remitted on the value of taxable service is over and above the amount charged by the service provider and does not form part of the amount payable as per the contract. In this connection, they rely upon a chart showing details of gross sale value on which service tax was paid and which shows income tax paid over and above the sale value.
The chart is reproduced herein below :-
3. However, the authorities below have not adverted to the submissions made on the basis of the above chart. Interests of justice require that the impugned order be set aside and the case remitted for fresh decision to the adjudicating authority. We order accordingly. The assessees are to be given a reasonable opportunity of being heard in their defence before fresh orders are passed.
4. The appeal is thus allowed by way of remand.