G.R. Sharma, Technical Member. - This is an appeal filed against the confirmation of demand of Rs. 5,44,561, charging of interest at the rate of 1.5 per cent per month and imposition of penalty.

2. The facts of the case in brief are that the appellants are holders of a certificate of registration in Form ST-2 under section 69 of the Finance Act. The appellants had undertaken to comply with the conditions prescribed in this Act and the Service Tax Rules, 1944.

3. On scrutiny of their records for the period from July, 1994 to March, 1998 during the course of audit, it was observed that the appellant had shown the value of taxable services amounting to Rs. 14,05,98,249 in their quarterly returns (except GPA Premium) instead of Rs. 15,29,41,258 actually collected by them. It was, therefore, alleged that the appellants had paid short service tax amounting to Rs. 6,17,167. Accordingly, a show-cause notice was issued to the appellant asking them to explain as to why service tax amounting to Rs. 6,17,167 along with interest at the rate of 1.5 per cent per month should not be recovered from them and why penalty should not be imposed. In the show-cause notice it was also alleged that the appellants had concealed material facts by not showing the actual premium collected and since the appellants had concealed the material facts from the department why the extended period of 5 years applicable under section 73A of the Service Tax Rules should not be applied to them and the demand confirmed. In reply to the show-cause notice, the appellants submitted that the system of insurance is subject to many controls and audits which at times result in some adjustments. Thus sometimes even after service tax is paid on GPA premium account, it is required to be transferred to premium on miscellaneous policies under general insurance resulting in excess payment under earlier head and short payment in the later. It was also contended that many a times particular receipts pertaining to Miscellaneous policies are posted to the GPA head and latter on during the course of audit when the actual nature is determined, they are transferred to their actual account namely fire or marine or Miscellaneous premiums. It was also pleaded that yearwise break-up was as under :

Year 1994-95:

That in the year 1994-95 during the period from 1-7-1994 to 31-3-1995, premium amount of Rs. 1,92,97,784 was received out of which Rs. 1,87,746 of marine insurance, Rs. 18,127 of motor insurance and Rs. 4,018 of Misc. insurance were not taxable as the same were premium of insurance policies issued prior to 1-7-1994, thus, on taxable premium of Rs. 1,90,87,793, service tax amounting to Rs. 8,05,305 had already been deposited and an amount of Rs. 1,49,085 is yet to be deposited.

Year 1995-96:

That during the year 1995-96, on the premium amount of Rs. 5,35,88,933 the tax payable was Rs. 21,79,445 out of which 18,99,721 was deposited and the difference amount remained Rs. 2,79,724 whereas in the audit report, difference was shown as Rs. 3,51,404 which was due to the reason that they had deposited tax amounting to Rs. 80,238 and Rs. 1,26,022 vide TR-6 challan Nos. 2/7-7-1995 and 4/14-9-1995 instead of Rs. 88,349 and 46,222 as shown in the audit report. Further, it was submitted that during the year 1995-96, on the GPA premium of Rs. 21,26,485 an amount of Rs. 1,06,324 on account of service tax was deposited in excess. If this amount was adjusted from Rs. 2,79,724 the tax liability remains Rs. 1,73,400.

Year 1996-97:

That during the year 1996-97, on the premium amount of Rs. 4,07,86,110 the tax payable was Rs. 20,39,303 whereas they had deposited Rs. 22,25,792 on account of service tax, which also includes Rs. 2,15,627 deposited on account of tax on GPA premium received from the police department, if this amount was adjusted in the service tax, they had made excess payment of Rs. 1,86,487 during the year 1996-97. Further, it was contended that during the year they had paid Rs. 16,37,584 as tax