2015 (1) TMI 144 - AT - Service Tax

Penalty u/s 76, 77 & 78 - Business Auxiliary Service - reverse charge mechanism - Held that - Commission paid to overseas commission agents for promoting sale of their goods is clearly covered under the Business Auxiliary Service and so the appellants are liable to pay service tax under the reverse charge mechanism with effect from 18.4.2006 in terms of Section 66A of the Finance Act, 1994. There are no pleadings to contest this aspect and therefore no further elaborate discussion on this point is required. As regards the plea that only one penalty either under Sections 76 or under Section 78 should be imposed, we notice that, as has been conceded by the ld. AR, the adjudicating authority has imposed only one penalty under Sections 78 and 76 together. Thus in effect, there is only one penalty which is equal to the adjudicated service tax liability which therefore is to be treated to have been imposed under Section 78 - penalty under Section 78 will be reduced to 25% of the adjudicated service tax liability provided the adjudicated service tax liability (along with interest) and the reduced penalty (i.e. 25% of the mandatory equal penalty) are paid within 30 days of the receipt of this order - Decided in favour of assesse.

Summary

Issues:
1. Early disposal of stay application.
2. Confirmation of duty demand with interest and penalties.
3. Applicability of Business Auxiliary Service under reverse charge mechanism.
4. Imposition of penalties under Sections 76 and 78 of the Finance Act, 1994.
5. Request for reduced penalty under Section 78.
6. Benefit of reduced penalty not extended by lower authorities.
7. Judicial precedent regarding the benefit of reduced penalty.
8. Reduction of penalty under Section 78 to 25% of adjudicated service tax liability.

Analysis:
The judgment pertains to a Misc. application seeking early disposal of a stay application against an Order-in-Appeal confirming a duty demand of &8377; 20,31,636/- along with interest and penalties under Sections 76 and 78 of the Finance Act, 1994. The appellant had been making foreign exchange payments to overseas commission agents for export sales, falling under Business Auxiliary Service under reverse charge mechanism. The appellant argued that despite a writ petition pending before the Punjab & Haryana High Court, the adjudication proceeded. However, the appellant failed to make submissions before the adjudicating authorities, only contending against adjudication without merit.

The Tribunal noted that no higher judicial forum had directed against adjudication continuation, leading to the waiver of pre-deposit and consideration of the appeal. The Tribunal upheld the liability of the appellants to pay service tax under reverse charge mechanism for commission payments. The Tribunal observed that the adjudicating authority had imposed a single penalty under Sections 76 and 78, equivalent to the service tax liability, treating it as imposed under Section 78. The appellant sought the benefit of reduced penalty under Section 78, citing a Gujarat High Court ruling mandating the option for reduced penalty if not initially provided.

Consequently, the Tribunal allowed the appeal partially, reducing the penalty under Section 78 to 25% of the adjudicated service tax liability, subject to payment within 30 days of the order receipt. The judgment emphasized adherence to legal procedures, the imposition of penalties commensurate with liabilities, and the application of precedent in granting the benefit of reduced penalties.