2013 (12) TMI 623 - AT - Service Tax

Imposition of penalty - Demand of service tax - Exemption under Notification No 6/2005-S.T. dated 01.3.2005 - Goods Transport Agency Service - Held that - person who pays or is liable to pay the freight will pay the service tax. I find that the appellant are a Private Company and, admittedly, they have paid the freight charges, therefore, they were liable to pay service tax - appellant had not paid the appropriate tax which was required to be paid by them and they also did not disclose the said facts in any manner to the department. If they had any confusion, they should have approached the jurisdiction Range officer or any other service tax officer. It was the liability of the appellant to pay the proper service tax within the stipulated time period and to disclose all relevant information to he department, which was not done by the appellant in the instant case. Had the investigation not conducted the said short payment of service tax would not have been detected. Thus 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 - Decided against assessee.

Summary

Issues:
1. Liability of service tax on freight charges paid by a private limited company engaged in manufacturing marble slabs & tiles.
2. Challenge against the imposition of penalty on the grounds of eligibility for exemption under Notification No 6/2005-S.T.
3. Consideration of penalty under Sections 76 and 78 of the Finance Act, 1994.

Analysis:

Issue 1:
The case involved the liability of service tax on freight charges paid by a private limited company engaged in manufacturing marble slabs & tiles. The Central Excise officers found that the company had not paid service tax on the freight charges made to transporters for inward and outward transport during a specific period. The company accepted the service tax liability and paid the tax but challenged the penalty imposition. The Tribunal upheld the finding that the company, being a private limited company, was liable to pay service tax as per Rule 2(1)(d)(v) of the Service Tax Rules, 1994, as they had paid the freight charges.

Issue 2:
The company challenged the imposition of penalty on the grounds of eligibility for exemption under Notification No 6/2005-S.T. The company argued that they believed they were eligible for the exemption and promptly paid the service tax once they became aware of the liability. However, the Revenue argued that ignorance of the law is not an excuse and that the company did not seek clarification from the Department regarding their liability. The Tribunal upheld the penalty imposition, stating that the company failed to disclose relevant information and suppressed facts with the intent to evade payment of service tax.

Issue 3:
Regarding the imposition of penalty under Sections 76 and 78 of the Finance Act, 1994, the Tribunal relied on the decision of the Hon'ble High Court of Kerala to affirm that penalties under both sections can be imposed simultaneously. The Tribunal agreed with the Commissioner (Appeals) that the company's actions constituted suppression of facts and evasion of service tax, justifying the imposition of penalties under both sections. The Tribunal upheld the Commissioner's decision and rejected the appeal.

In conclusion, the Tribunal affirmed the liability of the private limited company to pay service tax on freight charges and upheld the imposition of penalties under Sections 76 and 78 of the Finance Act, 1994, based on the company's failure to disclose relevant information and intent to evade payment of service tax.