2013 (4) TMI 627 - AT - Service Tax

Penalty - Non-payment of service tax - Manpower Recruitment or Supply Agency Services Appellant contesting the imposition of penalties as he discharged the service tax liability along with interest before issuance of SCN. Held that - All these confusions may have created a situation wherein the assessee in this case may not be aware of exact service tax liability and also that the appellant being situated in a remote area of Gujarat, could have not been advised by the local authorities as well as could not have known by himself about the liability. All these findings fortify my views that this is a fit case for invoking the provisions of Section 80 of the Finance Act, 1994 for setting aside the penalties imposed by the lower authorities u/s 76 and 78. Thus, the penalties imposed by the lower authorities is set aside and appeal to that extent is allowed.

Summary

Issues:
1. Applicability of service tax on Manpower Recruitment or Supply Agency Service.
2. Failure to obtain service tax registration, file ST-3 return, and pay service tax.
3. Imposition of penalties under Section 76 and 78 of the Finance Act, 1994.

Analysis:
1. The case involved the appellant providing Manpower Recruitment or Supply Agency Service without paying service tax. The appellant realized a significant amount during a specific period, which fell under the service tax net as per the Finance Act, 2005. The appellant failed to register for service tax, file ST-3 return, and pay the due service tax amount. A show cause notice was issued for recovery of the outstanding service tax, interest, and penalties under relevant sections of the Finance Act, 1994.

2. The appellant contended that they overpaid the service tax due to confusion regarding small scale service provider exemption and the delayed show cause notice issuance. The first appellate authority upheld the original order, leading to the appellant's appeal. The appellant argued that they paid the service tax before the notice was issued, highlighting their lack of awareness due to their rural location and the evolving nature of service tax laws.

3. The judge considered the submissions and upheld the demand for service tax and interest. However, regarding penalties under Section 76 and 78, the judge acknowledged the confusion surrounding service tax liabilities for Manpower Supply services post its introduction in 2005. Given the appellant's remote location and lack of clarity from local authorities, the judge invoked Section 80 of the Finance Act, 1994, to set aside the imposed penalties. Consequently, the penalties under Sections 76 and 78 were overturned, providing relief to the appellant.

This detailed analysis of the judgment outlines the issues, arguments presented, and the judge's decision, emphasizing the legal aspects and reasoning behind the final ruling.