2011 (10) TMI 58 - AT - Service Tax

Import of services - appellants were liable to service tax only with effect from 18.4.2006. - liability for the month June 2006 - substantial amount has been paid within the due date. The balance amount due for June 2006 along with interest stands paid on 5th August 2006 - appeal is disposed of by setting aside the penalties

Summary

Issues:
Service tax liability period, Appropriation of payment, Penalty imposition under various sections.

Analysis:

Service Tax Liability Period:
The case involved a show-cause notice proposing a service tax demand for services received from overseas agents related to export business. The original authority confirmed the demand and imposed penalties. In an appeal, the Commissioner (Appeals) held that the service tax liability arises only from 18.4.2006, when Section 66A was introduced in the Finance Act, 1994. The appellant argued that the service tax liability only arises from 18.4.2006, and the amount paid for the period before that date should not be payable. The appellant acknowledged the duty already paid and settled the amount due for June 2006. The Tribunal agreed that the service tax liability for the appellants arose from 18.4.2006, and the payment made before that date was not warranted. The Tribunal considered the timely payment for June 2006 and the excess payment for the period from September 2005 to December 2005, concluding that no penalty should be sustained.

Appropriation of Payment:
The proposal included the appropriation of a payment made by the appellants for the period after 16.6.2005. The Tribunal found that the payment of Rs. 21,295/- was not warranted, considering the service tax liability only arose from 18.4.2006. The Tribunal noted that even though the appellants did not claim a refund of the excess payment, it should be taken into account to assess any delay in the payment of service tax due for June 2006. The records showed that a substantial amount had been paid within the due date, and the balance amount due for June 2006 was paid with interest. Therefore, the Tribunal set aside the penalties imposed under various sections by invoking Section 80 of the Finance Act, 1994.

Penalty Imposition:
The original authority had imposed penalties under Section 78 of the Finance Act, 1994, and also under Sections 76 & 77. The Commissioner (Appeals) modified the penalty under Section 78 and upheld the penalties imposed under Sections 76 & 77. However, the Tribunal found that, due to the circumstances of the case, including the service tax liability period and payments made, it was not a fit case to sustain the penalties imposed under Sections 76, 77 & 78. Therefore, the appeal was disposed of by setting aside the penalties through the provisions of Section 80 of the Finance Act, 1994.