2015 (2) TMI 390 - AT - Service Tax

Delay in discharge of service tax liability - Penalty u/s 77 & 78 - Held that - No plausible reason or explanation stands submitted by the appellant for non-payment of service tax in respect of the services in question. When the appellant was registered with the Department and was aware of his liabilities and was also paying service tax in respect of other services, the non-payment of service tax in respect of the present disputed services can only be a clear mala fide on his part. The fact of non-payment has, admittedly, come to surface on account of investigations conducted by the Revenue. As such, the deposit of service tax along with interest, subsequent to the investigations made by the Revenue, cannot be said to be covered by the provisions of Section 73(3) of the Finance Act inasmuch as the same cannot be held to be a voluntary payment. An assessee is compelled to accept and deposit the tax liabilities after it has come to the notice of the Revenue on account of investigations conducted by them. Such a course of action adopted by the appellant cannot save him from the penalty provisions. - appellant is admittedly liable to penalty. However, as they have deposited the service tax along with interest prior to issuance of the show-cause notice, I reduce the penalty amount to 25% of the tax - Decided partly in favour of assessee.

Summary

Issues:
Service tax liability on sales commission paid to overseas agents, non-payment of service tax, imposition of penalties under Sections 77 and 78 of the Finance Act, 1994, contention of inadvertent non-payment, applicability of Section 73(4) of the Finance Act, imposition of penalty, reduction of penalty amount.

Analysis:
The judgment by Hon'ble Mrs. Archana Wadhwa, JJ., pertains to a case where the appellants failed to discharge their service tax liability concerning the sales commission paid to overseas agents on a reverse charge basis, despite being registered with the Service Tax Department and complying with their tax obligations for other services. The Revenue discovered the non-payment during investigations spanning from 2007-08 to 2011-12. The appellants admitted their liability and promptly paid the outstanding service tax amounting to Rs. 2,81,349/- and Rs. 88,665/- along with interest.

Subsequently, proceedings were initiated for imposing penalties under Sections 77 and 78 of the Finance Act, 1994. The appellants argued that the non-payment was inadvertent, without any suppression, misstatement, or fraud, and contended that penalties should not be imposed as they had paid the tax before the issuance of the show-cause notice. However, the Revenue invoked Section 73(4) of the Finance Act, emphasizing that non-payment due to fraud, misstatement, or suppression would not be covered under Section 73(3), thus justifying penalty imposition.

Upon evaluating the arguments, the learned AR representing the Revenue highlighted the appellant's awareness of their tax liability, given their registration and compliance with other services. The judge concurred with the Revenue, noting the lack of a valid reason for non-payment and considering it a deliberate act on the appellant's part. The judge emphasized that the tax deposit post-investigations did not qualify as a voluntary payment under Section 73(3), as it was prompted by the Revenue's findings. Consequently, the judge held the appellant liable for penalties but reduced the amount to 25% of the tax due, given the early tax payment.

In conclusion, the judgment underscores the importance of timely tax compliance, the consequences of non-payment even in the absence of fraud, and the distinction between voluntary payments and those prompted by investigative actions. The reduction in the penalty amount reflects a balance between penalty imposition and the appellant's proactive tax payment.