2014 (4) TMI 362 - AT - Service Tax

Rectification of mistake - valuation - Penalty u/s 76 - Held that - for imposition of penalty under Section 76, no mens rea is required. Penalty is imposable if there is default or delay in payment of tax. Therefore, we do not accept the argument that we have committed the error in upholding the imposition of penalty under Section 76 of the Finance Act, 1994. Regarding cum-tax treatment - Held that - appellant should be given cum-tax treatment in respect of consideration received, this argument is also misplaced. The Hon ble Apex Court in the case of Amrit Agro Industries - 2007 (3) TMI 14 - SUPREME COURT OF INDIA in the context of Central Excise duty has held that unless it is shown by the manufacturer that he price of goods included excise duty payable, no question of exclusion of duty element will rise for determination of value under Section 4(4)(d)(ii) of the Central Excise Act, 1944 and one cannot go by general implication that wholesale price would always mean the cum-duty price. The same ratio would apply to the facts before us. The appellant has not led any evidence before us to show that price charged by them was cum-Service Tax - Rectification denied.

Summary

Issues:
Rectification of mistake in the order passed by the Appellate Tribunal regarding the classification of SIM cards/recharge coupons as goods or services, applicability of Service Tax, imposition of penalties under Section 76 and Section 78 of the Finance Act, 1994, benefit of cum-tax treatment in Service Tax calculation.

Analysis:

1. Rectification of Mistake - Classification of SIM cards/recharge coupons:
The Appellate Tribunal held that SIM cards/recharge coupons are classified as services, not goods, and thus subject to Service Tax. The appellant sought rectification, arguing that penalties should not apply based on a decision by the Hon'ble High Court of Kerala regarding a similar case. The Tribunal clarified that penalties under Section 76 are for default in tax payment without requiring mens rea and are based on delay, distinct from penalties under Section 78 for suppression of facts. The Tribunal's decision aligns with legal precedents and statutory provisions, upholding the classification of SIM cards/recharge coupons as services.

2. Penalties under Section 76 and Section 78:
The appellant contested the imposition of penalties under Section 76, citing a lack of mens rea and reliance on cum-tax benefits. However, the Tribunal emphasized that penalties under Section 76 do not necessitate mens rea and are imposed for delays in tax payment. Referring to legal interpretations by the Hon'ble Apex Court and the Hon'ble High Court of Kerala, the Tribunal reaffirmed the validity of imposing penalties under Section 76. Additionally, the Tribunal clarified the distinction between penalties under Section 76 and Section 78, emphasizing the separate criteria for their application.

3. Benefit of Cum-Tax Treatment in Service Tax Calculation:
The appellant argued for the benefit of cum-tax treatment in Service Tax calculation based on a Supreme Court decision. However, the Tribunal rejected this argument, stating that the appellant failed to demonstrate that the consideration received was inclusive of Service Tax. Citing legal precedents, the Tribunal emphasized that unless proven, the price charged does not automatically include Service Tax. The Tribunal concluded that the appellant's assertion of cum-tax treatment lacked evidentiary support and was inconsistent with their claim of engaging in goods supply transactions.

In summary, the Appellate Tribunal dismissed the rectification of mistake application, affirming the classification of SIM cards/recharge coupons as services subject to Service Tax, upholding penalties under Section 76, and rejecting the appellant's claim for cum-tax treatment in Service Tax calculation. The Tribunal's decision was based on legal interpretations, statutory provisions, and the absence of factual evidence supporting the appellant's contentions.