2014 (7) TMI 494 - AT - Service Tax

Extended period of limitation - photography services - Penalty u/s 76, 77 & 78 - CENVAT Credit - Held that - During the period 2006-07 and 2008-09, the respondents collected the service tax but did not pay the same to the department. Further, during the period they have not filed the service tax returns also. If the investigation was not conducted by the department and the statement had not been recorded on 13.12.2008, the facts of collection of service tax and not paying the same with the Government treasury would not have come into the knowledge of the department. In these circumstances, I hold that the respondents have suppressed the material facts of the collection of service tax from the customers and not paying the same with the department. - demand confirmed alongwith interest and penalty - Decided in favour of Revenue.

Summary

Issues:
- Appeal against the order setting aside demand and penalties
- Invocation of extended period of limitation
- Suppression of facts regarding service tax collection
- Adjudication of demand, interest, and penalties
- Arguments from both sides

Analysis:
The appeal before the Appellate Tribunal CESTAT MUMBAI involved the Revenue challenging an order where the demand against the respondent was set aside, along with penalties under Sections 76, 77, and 78. The case pertained to the period 2006-07 to 2008-09 when the respondent provided photography services but failed to deposit the collected service tax with the Government treasury and irregularly filed service tax returns. An investigation revealed the respondent's admission of collecting but not paying service tax due to financial issues. The adjudicating authority confirmed the demand, interest, and penalties, which were subsequently dropped by the learned Commissioner (Appeals), leading to the Revenue's appeal.

The Revenue contended that the extended period of limitation was applicable due to the respondent's failure to pay service tax despite collecting it, indicating an intention to evade payment. On the other hand, the respondent argued that they maintained proper records of service tax collection, as reflected in their accounts and balance sheet, negating any suppression of facts. The Tribunal considered both sides' submissions and noted the admitted failure of the respondent to remit service tax and file returns during the relevant period. The Tribunal held that the respondent suppressed material facts by not paying the collected service tax, which would not have been discovered without the department's investigation and the recorded statement. Consequently, the impugned order was deemed lacking in merit, leading to its reversal on appeal, thereby allowing the Revenue's appeal.

In conclusion, the Tribunal upheld the Revenue's appeal, setting aside the order that dropped the demand and penalties against the respondent. The decision highlighted the significance of remitting collected service tax and filing returns promptly to avoid accusations of suppression of facts and evasion, emphasizing compliance with tax obligations to prevent legal repercussions.