2015 (2) TMI 839 - AT - Service Tax

Penalty u/s 76, 77 & 78 - Manpower Recruitment or Supply Agency Service - Held that - In this case the appellant is engaged in the activity of jobwork on their factory on behalf of their principals. It is alleged that the appellant is providing Manpower Recruitment or Supply Agency Service during the course of Audit. Instead of litigate the matter; the appellant collected the service tax from their principals as whatever service tax paid by the principals is entitled to take CENVAT Credit. In these circumstances, it cannot be said that the appellant was having any intention to evade the payment of service tax. Therefore, when objection has been raised during the course of audit, service tax has been paid by the appellant and later-on interest was also paid to avoid litigation. In these circumstances, the show-cause notice was not required to be issued to the appellant as per Section 73(3) of the Finance Act, 1994. In these circumstances, the appellant is entitled for the benefit of Section 80 of the Finance Act, 1994. Accordingly, I set aside the order of imposition of penalty on the appellant. - Appeal disposed of.

Summary

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

Analysis:
1. Facts of the Case:
The appellant was engaged in job-work activities, including casting, breaking, finishing, material handling, and packing of C.I. casting and fittings for their principals. The issue arose when it was alleged that the appellant should pay service tax under "Manpower Recruitment or Supply Agency Service" category. The appellant collected service tax from their principals, paid it along with interest, and penalties were proposed under Sections 76, 77, and 78 of the Finance Act, 1994.

2. Appellant's Argument:
The appellant contended that their job-work activity was not eligible for service tax under the specified category. They believed in good faith that their activity was not subject to service tax as they paid the tax collected from their principals. The appellant argued that penalties under Sections 76, 77, and 78 should not be imposed, and the show-cause notice was not necessary under Section 73 of the Finance Act, 1994.

3. Revenue's Argument:
The Revenue argued that since the appellant did not dispute their service tax liabilities, the penalties imposed by the lower authorities were justified.

4. Judgment:
The Tribunal considered that the appellant's job-work activity was not intended to evade service tax. The appellant had paid the tax and interest promptly upon objection during the audit, showing a lack of intention to evade payment. As the show-cause notice was not necessary under Section 73(3) of the Finance Act, 1994, and the appellant was entitled to benefit under Section 80, the Tribunal set aside the penalty imposed on the appellant.

5. Disposition:
The appeal was disposed of in favor of the appellant, with the penalty being set aside.