2011 (2) TMI 15 - AT - Service Tax

Demand and penalty - Services of foreign based commission agents - penalties under Section 76, 77 and 78 of the Finance Act, 1994 - respondents did not suppressed the relevant information as held by the original authority - no service tax payable by the respondent as recipient for the period from 16.6.2005 to 17.4.2006 i.e. prior to introduction of Section 66A of the Finance Act, 1994 matter remanded to the original authority for fresh consideration

Summary

Issues:
- Liability of service tax on commission paid by the respondent
- Time-barred demand for specific periods
- Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994
- Power of remand of the Commissioner (Appeals) after the amendment of Section 35A(3)
- Investigation by different agencies and suppression of relevant information

Liability of Service Tax on Commission Paid:
The case involved a manufacturer of Oleoresin who exported products and utilized the services of foreign-based commission agents, paying a total sum of Rs. 25,62,777 as commission. The dispute arose when a show cause notice was issued alleging the recipient's liability to pay service tax of Rs. 3,10,446 along with penalties under various sections of the Finance Act, 1994. The Commissioner (Appeals) held that no service tax was payable for a specific period before the introduction of Section 66A, while for subsequent periods, the demand was deemed sustainable, and penalties under Section 76 were to be imposed. The matter was further contested based on the investigation and communication with different agencies regarding the alleged suppression of relevant information.

Time-Barred Demand:
The Commissioner (Appeals) found the demand for a particular period to be time-barred, which was contested by the department citing the failure of the respondent to disclose information and file returns within stipulated timelines. The department relied on legal precedents to argue against the time limitation imposed by the Commissioner (Appeals) and sought a reconsideration of the decision based on the alleged non-disclosure of relevant details.

Imposition of Penalties:
The original authority confirmed the demand and imposed penalties under Sections 76 and 77 of the Finance Act, 1994. However, the Commissioner (Appeals) modified the penalties and directed the original authority to calculate the duty liability, interest, and penalties under Sections 76 and 77. The department contested the remand of the matter for quantifying the service tax demand and penalties, citing legal limitations on the Commissioner (Appeals)'s power of remand post an amendment of Section 35A(3).

Power of Remand and Investigation:
The department argued that the Commissioner (Appeals) did not have the power of remand after a specific amendment, and thus, the remand for quantifying penalties was legally questionable. The advocate for the respondent highlighted investigations conducted by different agencies since 2006, indicating that relevant information was not suppressed. The Tribunal acknowledged the investigations but found practical difficulties in determining the actual delay in tax payment, leading to a remand of the matter to the original authority for fresh consideration.

In conclusion, the Tribunal set aside the orders of the Commissioner (Appeals) and the original authority, remanding the case for a fresh determination of liability, time-barred demands, and penalties, with specific directions for reconsideration.