2011 (11) TMI 203 - AT - Service Tax

Period of limitation assessee collecting service tax from customers from 01.05.2001 registered themselves with the service tax authorities on 09.01.2003 - Commissioner (Appeals) reduced the quantum of penalty u/s 78 & set aside the penalty u/s 76 - validity of penalties on ground that assessee deposited service tax before issuance of show cause notice - Held that - It is a clear case of knowingly evading the service tax and even after collecting service tax not paying the same to the Central Government. Therefore, invocation of extended period of limitation for the demand of service tax is fully justified. Since it is a case of willful evasion of service tax and not depositing the amount collected as service tax, the penalty under Section 78 is also warranted. Inasmuch as a penalty under Section 78 is being sustained, there is no justification for restoring the penalty under Section 76 as sought for by the department. However, the Commissioner (Appeals) has clearly erred in reducing the penalty imposed by the original authority under Section 78 without any valid reasons. Therefore, such order is set aside and order of the original authority in this regard is restored. Decided partly in favor of Revenue.

Summary

Issues:
1. Appeal by M/s. Anagha Surface Transport Pvt. Ltd. against the order of the Commissioner (Appeals).
2. Appeal by the department against the same order.

Analysis:
1. The case involved an appeal by M/s. Anagha Surface Transport Pvt. Ltd. against the order of the Commissioner (Appeals) and a separate appeal by the department against the same order. The assessee had registered for Rent-a-Cab operator services but was found to have collected service tax from customers without paying it to the government. The matter had been remanded by the Tribunal for fresh consideration following principles of natural justice.

2. The original authority confirmed a demand for service tax along with penalties, which was appealed by the party. The Commissioner (Appeals) modified the penalties imposed by the original authority, leading to challenges from both the assessee and the department. The assessee contested the penalties imposed, claiming the show-cause notice was time-barred and that they had paid the service tax before the notice was issued.

3. After considering submissions from both sides and perusing the records, it was found that the assessee had knowingly evaded service tax by collecting it but not depositing it with the government. The invocation of the extended period of limitation for the demand of service tax was deemed justified. The penalty under Section 78 was upheld due to willful evasion of service tax.

4. The department sought the restoration of penalties as imposed by the original authority, arguing that the Commissioner (Appeals) should have sustained a penalty under Section 76 as well. The Commissioner (Appeals) was found to have erred in reducing the penalty under Section 78 without valid reasons, leading to the restoration of the original authority's penalty decision.

5. The appeals were disposed of by rejecting the appeal of the assessee and partly allowing the department's appeal by restoring the penalty under Section 78 to the amount imposed by the original authority.