2015 (2) TMI 348 - AT - Service Tax

Imposition of penalty under Section 76 77 in that situation intent to evade duty stands not proved. Consequently the appellant is entitled for the benefit of Section 73 (3) of the Finance Act 1994 as held by the Hon ble Gujarat High Court in the case of Tejas Agency (2014 (8) TMI 151 - GUJARAT HIGH COURT) wherein it was held that it is not a case of non-payment of service tax with intent to evade the payment of same and therefore question of applying sub-section (4) of Section 73 of the Finance Act 1994 and resultantly exclusion of application of sub-section (3) would not arise. In these circumstances we hold that the appellant is entitled for the benefit of Section 73(3) of the Finance Act 1994. Therefore the show cause notice was not required to be issued. Consequently the penalties confirmed in the impugned order as not required to be imposed on the appellant - Decided in favour of assessee.

Summary

Issues:
Challenge to penalties imposed on the appellant by the adjudicating authority.

Analysis:
The appellant availed External Commercial Borrowings (ECB) from Non-Residents and paid fees/charges to non-resident service providers for acting as "Mandated Lead Arrangers." These services were taxable under 'Banking and other Financial Services' as 'merchant banking services.' The appellant paid the service tax along with interest before the show cause notice was issued and took Cenvat Credit immediately. The appellant contended that there was no intent to evade payment of service tax due to confusion regarding reverse charge mechanism. The appellant relied on various decisions to support their argument.

The Revenue argued that the appellant's intent was to evade payment of service tax, as detected during investigation. The adjudicating authority imposed penalties on the appellant based on this intent. The Tribunal considered both sides' submissions and focused on whether the appellant had any intent to evade payment of service tax. The appellant's confusion regarding the payment, immediate payment on being pointed out by Revenue, and entitlement to Cenvat Credit were crucial factors.

The Tribunal found that the appellant's payment of service tax along with interest and entitlement to Cenvat Credit indicated a revenue-neutral situation. The appellant's confusion regarding the payment did not demonstrate an intent to evade service tax. Citing precedents, the Tribunal concluded that the appellant was entitled to the benefit of Section 73(3) of the Finance Act, 1994. Therefore, the show cause notice was not required, and the penalties imposed were set aside. The Tribunal emphasized the revenue-neutral nature of the situation and the absence of intent to evade duty.

In conclusion, the impugned order imposing penalties on the appellant was set aside, and the appeal was allowed with consequential relief, if any. The Tribunal's decision was based on the appellant's immediate payment of service tax, confusion regarding payment, entitlement to Cenvat Credit, and the revenue-neutral nature of the situation, leading to the absence of intent to evade service tax.