2014 (7) TMI 452 - AT - Service Tax

Penalty u/s 78 - Service tax and interest paid before issuance of SCN - whether penalty under Section 78 of Finance Act, 1994 is attracted upon the appellant or not - Held that - It is not coming out of the case records as to how much Service Tax received by the appellant was retained and for how long. This aspect has to be seen by the adjudicating authority whether the period of retention of Service Tax remitted by the service recipient to the appellant, was reasonable or not, for deciding the quantum of penalty. As this verification can be done only by the adjudicating authority, therefore, the matter is required to be remanded to the adjudicating authority - Decided in favour of assessee.

Summary

Issues:
Whether penalty under Section 78 of Finance Act, 1994 is attracted when appellant paid the entire Service Tax and interest before the issue of show cause notice.

Analysis:
The appeal was filed against the order passed by the first appellate authority. The appellant argued that no penalty should be imposed as the entire Service Tax, along with interest, was paid before the show cause notice. It was claimed that there was a misunderstanding with the service recipient regarding the amount of Service Tax to be remitted. The appellant cited various case laws in support of their argument. On the other hand, the Revenue contended that even if Service Tax was paid on a portion of the consideration, it was retained by the appellant for a significant period, indicating an intention to evade payment. The main issue revolved around whether penalty under Section 78 was applicable.

During the hearing, both sides presented their arguments, and the case records were examined. The appellant maintained that all Service Tax received from the service recipient was promptly deposited along with interest. However, the Revenue argued that the Service Tax was recovered but not deposited with the Revenue, justifying the penalty imposition. It was highlighted that the period of retention of Service Tax by the appellant needed to be assessed to determine the quantum of penalty accurately. Since this verification required adjudication, the matter was remanded to the adjudicating authority. The appellant was directed to provide all relevant documentary evidence regarding the receipt of Service Tax from the service recipient. The adjudicating authority was instructed to grant a personal hearing to the appellant during the remand proceedings.

Ultimately, the appeal was allowed, and the case was remanded to the adjudicating authority for further examination and determination of the penalty issue.