2013 (1) TMI 48 - AT - Service Tax

Imposition of penalty u/s 78 - Penalty for suppressing, etc., of value of taxable services - Goods Transport Agency - Rule 2(1)(d)(v) - Paid commission to overseas service provider - Reverse charge - Service tax has been paid along with interest on pointing out by the department during the course of investigation - Held that - Following the decision in case of AMMAN STEEL CORPORATION(2011 (2) TMI 470 - CESTAT, CHENNAI) that if the appellant have paid the service tax they are entitled to take credit of the same. In that view, it cannot be said that by suppressing the fact that the appellants are going to get extra benefit on account suppression. Therefore penalty u/s 78 is not sustainable. In favour of assessee

Summary

Issues:
Challenge to imposition of penalty under Section 78 of the Finance Act, 1994.

Analysis:
The appellants, who are manufacturers and exporters, contested the penalty imposed under Section 78 of the Finance Act, 1994, specifically related to not paying service tax on services provided by Goods Transport Agency (GTA) and commission paid to overseas service providers. The Department highlighted the obligation to pay service tax under reverse charge mechanism, prompting the appellants to pay the tax and interest. The dispute centered on whether the appellants were aware of their tax liability for these services. The appellant argued a bona fide belief that they were not required to pay service tax for GTA and overseas commission under reverse charge mechanism, emphasizing their compliance with other tax obligations. They sought credit for the tax paid and claimed revenue neutrality, citing a precedent in Amman Steel Corporation Vs. CCE, Trichy. The appellant's stance was that suppression allegations were unfounded due to their prompt tax payment upon Department's notification.

The Department, on the other hand, contended that the appellants suppressed material facts regarding tax liability, leading to evasion detection challenges. They argued that as registered entities dealing with excisable and taxable services, the appellants should have been aware of their tax obligations, indicating a case of suppression. The lower authorities upheld the penalty, emphasizing the appellants' failure to pay service tax on GTA and overseas commission despite having service tax registration.

The Tribunal analyzed the case considering the payment of service tax with interest upon Department's notification during investigation. Referring to the introduction of reverse charge mechanism for service tax on GTA services and overseas commission, the Tribunal cited a precedent to support its decision. The Tribunal highlighted that the service tax payment entitled the appellants to claim credit, leading to a situation of revenue neutrality. Following the precedent's rationale, the Tribunal waived the penalty under Section 78 of the Finance Act, concluding that the suppression allegations were not sustainable. The appeal was disposed of in favor of the appellants based on the principles established in the referenced case law.