2010 (3) TMI 712 - AT - Service Tax

Penalty Suppression of value of taxable service - demand was prior to 10-8-2008 and during that period, the maximum penalty to be imposed under section 77 of the Finance Act was only Rs. 1,000, whereas in the present case, a penalty of Rs. 5,000 had been imposed on the appellant - contention of the appellant that the appellant was not aware of the provisions of the Finance Act during the relevant period, the demand of Service Tax was made against the appellant in respect of manpower recruitment and supply agency with effect from 16-6-2005 and the service in question became taxable also with effect from 16-6-2005, and on the ground that they were not registered with the CE Authorities as service provider - Order set aside and the matter remanded to the Commissioner of Central Excise to decide the matter afresh regarding imposition of penalties

Issues:
1. Imposition of penalty under sections 77 and 78 of the Finance Act, 1994.
2. Applicability of penalty amount in relation to the period in question.
3. Interpretation of Board's Circular No. 97/8/2007-ST.
4. Consideration of section 80 of the Finance Act for penalty imposition.

Analysis:
1. The appellant contested the penalty imposed by the Commissioner of Central Excise, arguing that during the relevant period, the maximum penalty under section 77 was Rs. 1,000, while they were penalized Rs. 5,000. They highlighted the Board's Circular stating that no show-cause notice should be issued if the amount with interest is deposited without any intent to evade duty. The appellant claimed they were not aware of their liability for Service Tax as a manpower recruitment agency, and upon notification by the revenue, they promptly paid the due amount. The Adjudicating Authority had not imposed any penalty, but the Commissioner reviewed the decision and levied the penalty under sections 77 and 78 of the Finance Act.

2. The Tribunal noted that the penalty was imposed before the applicable date when the maximum penalty under section 77 was Rs. 1,000. The appellant's argument regarding the lack of suppression of facts and their immediate payment upon notification was considered. The Tribunal emphasized the relevance of the Board's Circular and section 80 of the Finance Act, which exempts penalties if reasonable cause for non-compliance is proven. As the appellant demonstrated prompt payment upon notification and lack of awareness of their tax liability, the Tribunal set aside the impugned Order and remanded the matter to the Commissioner for a fresh decision on penalty imposition after providing an opportunity for the appellant to be heard.

3. The revenue contended that the appellant, despite providing taxable services, was not registered with the revenue as a service provider and had not filed any returns, justifying the penalty imposition. However, the Tribunal found that the appellant's immediate payment upon notification and lack of intent to evade duty were significant factors. The Tribunal's decision to remand the matter for reconsideration by the Commissioner highlighted the importance of affording the appellant an opportunity to present their case before any penalty imposition.

4. In conclusion, the Tribunal's detailed analysis considered the timing of penalty imposition, the appellant's compliance upon notification, the relevance of the Board's Circular, and the provisions of section 80 of the Finance Act. By setting aside the penalty and remanding the matter for further consideration, the Tribunal ensured a fair opportunity for the appellant to address the penalty imposition issues and present their case effectively before the Commissioner of Central Excise.

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