2016 (11) TMI 1480 - AT - Service Tax

Security Agency Service - the Respondent, in respect of some of their clients, failed to collect Service Tax and deposit the same to the Govt. Exchequer - intent to evade duty - Held that - the concurrent finding of fact arrived at by the lower appellate authority that in absence of any plea of deliberate attempt to evade tax, a ground is made out for non-imposition of penalty under section 78 of the Act, is justified and does not suffer from any perversity or arbitrariness so as to call for interference - appeal dismissed - decided against Revenue.

Summary

Issues involved:
Appeal against confirmation of Service Tax demand, penalties under Sections 76 and 77 upheld, penalty under Section 78 set aside.

Analysis:
The appeal was filed by the Revenue against an order confirming a Service Tax demand of ?14,71,899 and upholding penalties under Sections 76 and 77, while setting aside the penalty under Section 78 of the Finance Act, 1994. The appellant Revenue argued that a show cause notice was originally issued demanding Service Tax of ?34,33,512 for the period from 2001-02 to 2005-06 under the category of "Security Agency Service," which was later confirmed by the Commissioner(Appeals) at ?14,71,899. On the other hand, the respondent assessee contended that they provided both taxable and non-taxable services to clients during the disputed period. They claimed that some clients refused to pay Service Tax, leading to the failure to collect and deposit the tax. The respondent believed they were required to deposit tax only when collected, and they promptly deposited any collected amount. The respondent argued there was no willful misstatement or suppression of facts, citing a Supreme Court judgment and requested the appeal's rejection.

The Tribunal noted that the respondent failed to collect and deposit Service Tax for some clients but accepted the explanation that there was no intention to avoid payment. The lower appellate authority found that the respondent had deposited ?13,58,599 before the show cause notice was issued. The authority acknowledged the respondent's belief that no tax was payable when customers refused to pay, leading to short payment of tax. Despite the principle that ignorance of the law is no excuse for penalty, the authority found no evidence of deliberate evasion and declined to impose a penalty under Section 78. The Tribunal upheld the lower authority's decision, stating that in the absence of deliberate tax evasion, the justification for not imposing a penalty under Section 78 was valid and not arbitrary. Consequently, the impugned order was upheld, and the appeal was rejected, with the respondent's cross-objection also disposed of.