2011 (9) TMI 511 - AT - Service Tax

Penalty by Commissioner as revisionary authority - Revenue demanded Service Tax & Interest on payment of commission to foreign parties during 9.07.04 to 31.03.06 - Held That - In view of UoI Vs. Indian National Shipowners Association (2008 - TMI - 32013 - HIGH COURT OF BOMBAY), prior to 18.04.06, no Service Tax liability arises as recipient of services. If that be so, question of imposition of penalty non-payment of Service Tax during the relevant period does not arise.

Summary

Issues:
Imposition of penalty on the appellant by the Commissioner as a revisionary authority.

Analysis:
The appeal was directed against Order-in-Revision No. 01/VDR-II/Service Tax/Shanpar/Commr/2010, where the appellant had paid commission to overseas parties during the period 09.07.04 to 31.03.06. Revenue authorities contended that the appellant was liable to pay Service Tax on these commissions under the reverse charge mechanism. The appellant paid the demanded Service Tax along with interest and sought leniency in penalties. The adjudicating authority confirmed the demand but dropped the penalty proceedings. However, the Commissioner, as a revisionary authority, revised the order and imposed penalties under Section 78 of the Finance Act, 1994.

The appellant referred to a judgment of the Hon'ble High Court of Mumbai and the subsequent dismissal of a Special Leave Petition by the Hon'ble Supreme Court, arguing that the recipient of services is liable to pay Service Tax only from 18.04.06, when Section 66A was incorporated into the Finance Act, 1994. The Commissioner, on the other hand, reiterated the findings recorded in the Order-in-Revision.

After considering the submissions, the Tribunal found that the issue revolved around the imposition of penalties by the Commissioner as a revisionary authority. It was noted that the appellant did not contest the Service Tax liability and interest, but the imposition of penalties was unwarranted. The Tribunal held that the law was settled by the judgment of the Hon'ble High Court of Mumbai, stating that prior to 18.04.06, no Service Tax liability arises for the recipient of services. Therefore, the imposition of penalties for non-payment of Service Tax during the relevant period was deemed unnecessary.

Consequently, the Tribunal set aside the impugned order-in-revision that imposed penalties under Section 78 of the Finance Act, 1994, and allowed the appeal.