2010 (8) TMI 709 - AT - Service Tax

Cable Operator Services - respondents paid the tax and interest on their commission - respondents had suppressed the fact of providing taxable services, had not paid the tax due nor filed the ST-3 Returns, with intent to evade payment of service tax - respondents had evaded service tax due deliberately - order vacated the demand of interest and penalties imposed on the respondents solely for the reason that they had discharged the service tax liability as well as the liability to applicable interest before the issue of show cause notice, orders are set aside and the appeals filed by the revenue allowed. - Interest and penalties confirmed.

Summary

Issues:
Appeals filed by revenue to vacate orders of Commissioner (Appeals) setting aside demand of interest and penalties imposed by original authority.

Analysis:
1. Tax Liability and Penalties: The respondents were engaged in providing 'Cable Operator Services' and failed to discharge their tax liability for the specified period. The Assistant Commissioner imposed penalties under sections 76, 77, and 78 of the Act for willful evasion of service tax, along with confirming the service tax due along with applicable interest. The respondents paid the tax and interest after the omission was pointed out.

2. Impugned Orders: The Commissioner (Appeals) vacated the demand of interest and penalties, citing precedents like Mass Marketing & Advertising Services (P.) Ltd. v. CCE and Shakthi Motors. The revenue challenged this decision, arguing that the cited precedents were no longer valid as per judgments like Union of India v. Rajasthan Spinning & Weaving Mills, which stated that payment before the issue of show cause notice did not absolve liability to penalty under section 11AC.

3. Revenue's Argument: The revenue contended that the penalties were justified as the respondents willfully evaded service tax, and payment before the notice did not exempt them from penalties under section 11AC. The revenue relied on judgments like CCE v. Machino Montell and CCE v. Toshi Auto Industries to support their argument.

4. Judgment: The Judge found that the original authority correctly imposed penalties for deliberate tax evasion, which were vacated by the Commissioner (Appeals) based on outdated precedents. As the cited decisions were no longer valid, the impugned orders were set aside, and the appeals by the revenue were allowed. The respondents had not disputed their tax liability, and the penalties under sections 76 and 78 of the Act were deemed appropriate.

In conclusion, the judgment reinstated the penalties imposed by the original authority, emphasizing that payment before the issue of show cause notice did not absolve the respondents from liability to penalties for willful evasion of service tax. The decision highlighted the importance of upholding current legal precedents and ensuring that penalties are imposed in cases of deliberate tax evasion.