2015 (2) TMI 657 - AT - Service Tax

Payment of commission to overseas agents - Wether covered under 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 ibid. As regards the contention of the appellants that the benefit of reduced (25% of the mandatory equal penalty) under Section 78 ibid should be extended to them as the same has not been extended by the lower authorities. Following decision of Ratnamani Metal Tubes Ltd. 2013 (12) TMI 1397 - GUJARAT HIGH COURT - 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 partly in favour of assessee.

Summary

Issues:
1. Early hearing for disposal of stay application.
2. Confirmation of duty demand with interest and penalties under various sections of the Finance Act, 1994.
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. Consideration of reduced penalty under Section 78.
6. Benefit of reduced penalty not extended by lower authorities.
7. Legal precedent regarding the option for reduced penalty.

Analysis:
The judgment addresses the application filed for early hearing to dispose of the stay application against an Order-in-Appeal confirming a duty demand of Rs. 20,31,636/- along with interest and penalties under Sections 76 and 78 of the Finance Act, 1994. The case involves the appellant's payment of commission to overseas agents, falling under Business Auxiliary Service, subject to service tax under reverse charge mechanism. The appellant's contention of not being heard on merit before the adjudicating authorities is noted, with the appellant only objecting to the adjudication without substantive submissions. The tribunal observes that no higher judicial forum directed to halt the adjudication, leading to the waiver of pre-deposit and consideration of the appeal.

Regarding the liability under Business Auxiliary Service, the tribunal finds the commission payments to overseas agents taxable under Section 66A of the Finance Act, 1994. The imposition of penalties under Sections 76 and 78 is discussed, with the adjudicating authority imposing a single penalty equal to the service tax liability. The appellant's request for the benefit of reduced penalty under Section 78 is examined, citing a Gujarat High Court case where the court emphasized the option for reduced penalty to be given by the adjudicating authority.

In conclusion, the tribunal allows the appeal partially, reducing the penalty under Section 78 to 25% of the adjudicated service tax liability, provided both the service tax liability with interest and the reduced penalty are paid within 30 days of the order receipt. The judgment highlights the importance of granting the option for reduced penalty to the appellant as per legal precedents, ensuring fairness in penalty imposition under the Finance Act, 1994.