2013 (11) TMI 105 - AT - Service Tax

Goods Transport Service Duty Liability - Revenue found that the firm was receiving the services from various transporters under the category of Goods Transport Agency Service but had not paid any service tax Held that - There is no dispute with regard to the liability of Service Tax - Rule 2(1)(d)(v) of the Service Tax Rules, 1994 clearly defines that the person who pays or is liable to pay the freight will pay the service tax - the appellant are a Private Company and, they have paid the freight charges, therefore, they were liable to pay service tax. Penalty u/s 77 and 78 Held that - The appellant suppressed the fact of payment made to transporters with intent to evade payment of service tax - therefore they are liable for penal action under Section 76 and 78 of the Finance Act, 1994. Simultaneous Penalty u/s 76 and 78 - Whether penalty u/s 76 and 78 both can be imposed simultaneously Held that - Following Assistant Commissioner, Central Excise Vs. Krishna Poduval 2005 (10) TMI 279 - Kerala High Court - the penalty can certainly be imposed on erring persons under both the Section 76 and 78, especially since the ingredients of the two offences are distinct and separate - there was no reason to interfere with order Decided against Assessee.

Summary

Issues:
- Liability for service tax on freight charges paid to transporters
- Imposition of penalty under Sections 76 and 78 of the Finance Act, 1994

Liability for Service Tax on Freight Charges:
The case involved M/s Sarvotam Italia Marble appealing against an Order-in-Appeal passed by the Commissioner, challenging the imposition of penalty for not paying service tax on freight charges paid to transporters. The appellant accepted the service tax liability but contested the penalty, claiming exemption under Notification No. 6/2005 -S.T. The appellant argued that they promptly paid the tax with interest upon realizing their liability, citing their belief in being exempt under the mentioned notification. The Revenue contended that ignorance of the law is not a valid defense and highlighted the appellant's failure to seek clarification from the Department regarding their tax liability. The Tribunal upheld the liability of the appellant to pay service tax as they had paid the freight charges, affirming the findings of the Adjudicating Authority and the Commissioner (Appeals).

Imposition of Penalty under Sections 76 and 78:
Regarding the imposition of penalties under Sections 76 and 78 of the Finance Act, 1994, the Commissioner (Appeals) extensively discussed the issue. It was noted that the appellant failed to pay the required tax and did not disclose this information to the department. The Commissioner emphasized that the appellant should have approached the appropriate authorities for clarification if there was any confusion regarding their tax obligations. The failure to pay the correct service tax and disclose relevant information was considered as an attempt to evade payment. The Tribunal affirmed the penalty imposed under Sections 76 and 78, citing a Kerala High Court decision that penalties can be imposed simultaneously under both sections since the offenses have distinct elements. The Tribunal upheld the decision of the Commissioner (Appeals) and rejected the appeal, concluding that there was no justification to interfere with the impugned order.

In summary, the Tribunal upheld the liability of M/s Sarvotam Italia Marble to pay service tax on freight charges and confirmed the imposition of penalties under Sections 76 and 78 of the Finance Act, 1994, based on the appellant's failure to pay the correct tax amount and disclose relevant information to the tax authorities.