2013 (9) TMI 290 - AT - Service Tax

Laible for penalty on delayed service tax or not section 78 provides for imposition of equivalent amount of penalty on account of collusion, suppression, willful mis-statement of facts with intent to evade payment of service tax Held that - Appellant is not liable to any penalty in terms of Section 78 appellant had made a mistake in not including the TDS amount for the purpose of payment of service tax liability which shows that they do not have any intention to evade service tax - there should be a mens rea on the part of the appellant to evade tax there is no intention to evade service tax penalty waived appeal decided in the favour of the assessee.

Summary

Issues:
1. Liability for penalty under Section 78 of the Finance Act, 1994.

The judgment by the Appellate Tribunal CESTAT Mumbai involved an appeal and stay applications against an Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Pune -III. The case revolved around a company registered with the Central Excise department for service tax payment, which received technical services from abroad. The company failed to include the TDS deducted towards income tax in the value of the taxable service, leading to a service tax liability error. Upon audit discovery, the company paid the service tax liability and interest. A show cause notice was then issued proposing a penalty, which was imposed under Section 78 of the Finance Act, 1994. The company appealed the penalty imposition, leading to the current judgment.

The Tribunal noted that the company had discharged the service tax liability and interest before the show cause notice was issued. The main issue was whether the company was liable for a penalty under Section 78 of the Finance Act, 1994. Section 78 allows for a penalty in cases of collusion, suppression, or willful misstatement to evade payment of service tax, requiring a mens rea to evade tax. The Tribunal observed that the company's error in excluding the TDS amount did not indicate any intention to evade service tax, as it was a mistake rather than a deliberate act. Consequently, the Tribunal held that the company was not liable for a penalty under Section 78 and invoked the provisions of Section 80 of the Finance Act to waive the penalty.

In conclusion, the penalty imposed on the company was set aside, and the appeal was allowed by the Appellate Tribunal CESTAT Mumbai. The stay application was also disposed of in light of the decision regarding the penalty issue.