2012 (6) TMI 361 - AT - Service Tax

Penalty - manpower recruitment and supply agency, maintenance and repairs of the building and cleaning services - they did not pay any service tax even though they were providing the taxable services Held that - penalty under Section 77 would be attracted. As regards penalty under Section 78, appellant had taken service tax registration in 2005, and subsequently they were regularly receiving payment from NMDC for the services provided, neither any service tax paid nor any returned was filed. Provisions of Section 78 are attracted. Appeal dismissed.

Summary

Issues:
1. Non-payment of service tax by the appellant for taxable services provided.
2. Imposition of penalties under Sections 76, 77, and 78 by the Department.
3. Appeal against the penalties upheld by the Commissioner (Appeals).

Analysis:
1. The appellant was engaged in providing taxable services to National Mineral Development Corporation (NMDC) but failed to pay the corresponding service tax despite receiving payments for the services rendered. The Department conducted an inquiry in 2007 and found that the appellant had not filed any returns or paid service tax, leading to a service tax liability of Rs. 5,16,821. A show cause notice was issued for recovery of the unpaid amount along with interest and penalties under Sections 76, 77, and 78.

2. The Jurisdictional Additional Commissioner confirmed the service tax demand, interest, and imposed penalties under the mentioned sections. On appeal to the Commissioner (Appeals), the penalties under Sections 77 and 78 were upheld, but the penalty under Section 76 was set aside. The appellant then filed an appeal challenging the penalties imposed.

3. During the hearing, the appellant argued that they were a small service provider and were under the impression that no service tax was payable as NMDC did not reimburse the tax amount. They claimed their ignorance and the belief that since NMDC did not pay service tax, they were not liable to pay either. The Department, however, contended that the appellant's registration in 2005 indicated awareness of their tax liability, and their failure to file returns or pay tax demonstrated lack of bona fide intention.

4. The Tribunal noted that the appellant did not dispute their service tax liability and upheld the penalty under Section 77 due to non-filing of returns. Regarding the penalty under Section 78, the Tribunal found that despite being aware of their tax liability and receiving payments, the appellant did not pay tax or seek clarification from the department. Therefore, the Tribunal concluded that the provisions of Section 78 were applicable, and the penalty was justified. Consequently, the appeal against the penalties was dismissed.

This judgment emphasizes the importance of compliance with tax obligations even for small service providers and highlights the significance of maintaining records, filing returns, and seeking clarification when in doubt about tax liabilities to avoid penalties under the relevant sections of the law.