2014 (10) TMI 603 - AT - Service Tax

Penalty u/s 78 - erection, commissioning and installation services - Held that - During the impugned period, Service Tax was payable on receipt basis. Therefore the allegation of the ld. AR that the appellant has utilised the Service Tax is not sustainable in the facts that still the appellant has not received 100% remuneration of the services provided by them. We further find that the appellant have calculated the liability on accrual basis and paid Service Tax payable along with interest as pointed out by the department. In these circumstances, it cannot be said that they had mala fide intention to evade payment of service tax. Therefore, the appellants need immunity from imposing penalty under Section 78 of the Finance Act, 1994. Accordingly, we set aside the penalty under Section 78 of the Finance Act, 1994 - Decided in favour of assessee.

Summary

Issues: Appeal against penalty under Section 78 of the Finance Act, 1994.

Analysis:
1. Background: The appellants provided services to a company and faced penalties for not filing Service Tax returns during a specific period despite being registered with the Service Tax department.

2. Contention of Appellant: The appellant argued that they were unable to file returns due to technical issues, but promptly paid the Service Tax and interest upon notification by the department. They claimed no malicious intent to evade payment as they had not received full remuneration for their services.

3. Contention of Respondent: The respondent contended that the appellant's failure to file returns indicated a breach of statutory obligations, leading to a penalty under Section 78 of the Finance Act, 1994. It was argued that the appellant utilized the Service Tax, thus no immunity should be granted.

4. Judgment: The Tribunal noted that Service Tax was payable on a receipt basis during the period in question. As the appellant had not received full remuneration, the allegation of utilizing Service Tax was deemed unsustainable. It was observed that the appellant calculated liabilities on an accrual basis and promptly paid the due amount upon notification, indicating no malicious intent. Consequently, the penalty under Section 78 of the Finance Act, 1994 was set aside, granting immunity to the appellants.

5. Conclusion: The appeals were disposed of in favor of the appellants, with the penalty under Section 78 of the Finance Act, 1994 being reversed due to the absence of malicious intent and the timely payment of Service Tax liabilities upon notification by the department.