2015 (8) TMI 65 - AT - Service Tax

Penalty u/s 76 & 78 - services of overseas commission agents - ST was paid before SCN - Held that - Commissioner (Appeals) has clearly noted in the impugned order that there was no suppression of facts with intent to evade service tax and the appellant itself informed the department about the liability. Further, the service tax was paid out of the Cenvat credit which was lying with the appellant and it was paid before the issuance of show cause notice. The impugned service tax was paid in cash also before the issuance of adjudication order in order to avoid disputes. Thus the bonafides of the appellant are abundantly demonstrated. In these circumstances the appellant claim at it initially thought that service tax was not payable on commission as the service was received outside India, though untenable, cannot be held to be malafide. - Section 80 ibid is clearly invokable for the purpose of setting aside penalty under Section 76 ibid - appellant paid the impugned service tax before the issue of Show Cause Notice and there was no suppression on its part as held by Commissioner (Appeals) - appellant paid the impugned service tax before the issue of Show Cause Notice and there was no suppression on its part as held by Commissioner (Appeals) - Decided in favour of assessee.

Summary

Issues:
Service tax demand confirmation, penalty under Sections 77 and 76 of the Finance Act, 1994, payment of service tax through Cenvat credit, payment of service tax in cash, bonafide belief of non-liability for service tax, interest and penalties imposition.

Analysis:

1. The appeal was filed against the confirmation of service tax demand of Rs. 36,68,635/- for the period April 2006 to March 2007 along with interest and penalties under Sections 77 and 76 of the Finance Act, 1994. However, penalty under Section 78, which was also imposed, was set aside. The appellant engaged overseas commission agents for export orders and initially did not pay service tax as they believed the service was not provided in India. Subsequently, they paid the entire amount of service tax from their Cenvat credit account and then in cash after receiving a Show Cause Notice.

2. The appellant argued that they paid the service tax out of Cenvat credit before the issuance of the Show Cause Notice, which is permissible as settled by judicial pronouncements. The Commissioner (Appeals) acknowledged that there was no intent to evade tax, and the payment was made in good faith. The appellant's belief of non-liability for service tax, although incorrect, was not considered as malafide due to the immediate availability of credit after payment.

3. The Tribunal noted that the payment of service tax before the Show Cause Notice was in compliance with Section 73(3) of the Finance Act, which allows payment based on self-ascertainment to avoid issuance of a notice. As there was no suppression of facts and the appellant informed the department about the liability, the imposition of penalties and interest was deemed unwarranted. The Tribunal allowed the appeal, considering the bonafide actions of the appellant and the legal provisions applicable in the case.

4. The Tribunal emphasized that the appellant's actions of paying the service tax out of Cenvat credit and in cash before the adjudication order demonstrated their good faith and compliance with the law. The payment made was akin to transferring money between pockets, as the tax paid was immediately available as credit. Therefore, the Tribunal invoked Section 80 of the Finance Act to set aside the penalty under Section 76 and deemed the levy of interest as misplaced in the circumstances presented.

5. In conclusion, the Tribunal found in favor of the appellant, considering their compliance with the law, lack of malafide intent, and the timely payment of service tax before the issuance of the Show Cause Notice. The Tribunal's decision was based on the legal provisions governing the payment of service tax, the appellant's bonafide belief, and the absence of suppression of facts, leading to the allowance of the appeal.