2007 (7) TMI 93 - AT - Service Tax

Penalty (Service tax) ST liability in the hands of recipient of services - department contended that Indian company liable to pay service tax on the service received by Indian Company from the foreign company under Online information & database retrieval Demand confirmed and penalty reduced

Summary

Issues: Liability of service tax on a Swiss company for services provided to an Indian company, penalty imposition, benefit of Section 80 of the Finance Act, 1994, under the 'Extraordinary Tax Payer Friendly Scheme'.

Liability of Service Tax:
The case involved a Swiss company providing services to an Indian company, leading to a dispute regarding the liability of service tax. The lower authorities held the Indian company liable to pay service tax as the Swiss company did not have an office in India. The demand for service tax and penalty was contested through appeals by both parties. The authorities demanded service tax from the Swiss company for services provided during a specific period when they did not have an office in India. The Managing Director of the Indian company was authorized to represent the Swiss company, and a penalty was imposed on them. The appellants did not deny their tax liability, challenging only the penalties imposed.

Benefit of Section 80 of the Finance Act, 1994:
The appellants claimed the benefit of Section 80 of the Finance Act, 1994, arguing that they were entitled to exoneration from penal liability. They contended that the tax amount was paid before the expiry of the 'Extraordinary Tax Payer Friendly Scheme.' The appellants believed they were not liable to pay service tax initially, leading to a delay in payment. They sought the benefit of Section 80 based on a bona fide belief and cited relevant tribunal decisions to support their claim. The appellants aimed to benefit from an amnesty scheme introduced by the Board.

Analysis and Decision:
Upon careful consideration of submissions, the Tribunal found the arguments of the appellants unconvincing. The benefit of Section 80 could not be claimed without proving a reasonable cause for the default in payment of service tax. The plea of a bona fide belief without substantial evidence did not constitute a reasonable cause for non-payment. The appellants did not avail themselves of the amnesty scheme and failed to show when they registered with the department. The Tribunal reduced the penalties by 50% but upheld the impugned order, emphasizing that the appellants, despite paying the tax amount, could not evade penalties due to admitted default. The appeals were disposed of with the modified penalty reduction.

In conclusion, the judgment addressed the liability of service tax on a Swiss company providing services to an Indian company, penalty imposition, and the applicability of Section 80 of the Finance Act, 1994. The Tribunal upheld the tax liability but reduced penalties, emphasizing the importance of proving a reasonable cause for default in tax payment to claim exoneration from penal liability.