2015 (10) TMI 2099 - AT - Service Tax

Waiver of Penalty under Section 77 & 78 of Finance Act, 1994 Appellant contested that penalty cannot be imposed under Section 78 of the said Act and entire service tax & interest was paid before the issue of SCN Appellant had no intention to evade payment of service tax for imposing Section 78 penalty Revenue admitted that entire tax was paid before the issue of SCN Revenue stated further that imposing penalty under Section 77, intention to evade payment of service tax, is not required Held That - No intention to evade payment of service tax can be attributed on the part of the Appellant - Ingredient contained in Section 78 are not satisfied Appeal allowed Decided in favour of the assessee.

Summary

Issues:
Penalties imposed under Section 78 & 77 of the Finance Act, 1994, Service Tax demand, Payment of duty under reverse charge mechanism, CENVAT Credit eligibility, Intention to evade payment of service tax, Show cause notice validity, Applicability of Section 73(3) of the Finance Act, 1994.

Penalties under Section 78 & 77:
The appellant contested penalties of &8377; 1,05,659/- & &8377; 1,000/- imposed by the Adjudicating authority under Section 78 & 77 of the Finance Act, 1994. The appellant argued that no demand for duty was made in the show cause notice, citing a relevant case law. The appellant emphasized that the tax payment under reverse charge mechanism was made promptly upon identification of the issue. The appellant also highlighted eligibility for CENVAT Credit and the absence of any intention to evade service tax payment. The Revenue confirmed that the entire tax was paid before the show cause notice was issued.

Payment under Reverse Charge Mechanism & CENVAT Credit:
The appellant contended that the payment of service tax under reverse charge mechanism was made in compliance with Section 66A of the Finance Act, 1994, introduced w.e.f. 18/4/2006. The appellant asserted eligibility for CENVAT Credit and argued that no intention to evade service tax payment existed. The appellant stressed that no demand for service tax was included in the show cause notice, and the payment of interest post-show cause notice issuance was a procedural error.

Show Cause Notice & Intention to Evade Payment:
The Tribunal noted discrepancies in the payment timeline, observing that while service tax was paid before the show cause notice, interest payment occurred after the notice was issued. The Tribunal acknowledged the introduction of the reverse charge mechanism and the appellant's entitlement to CENVAT Credit. The Tribunal found no evidence of an intention to evade service tax payment and highlighted the absence of such allegations in the show cause notice. Consequently, the penalty imposed under Section 78 of the Finance Act, 1994 was set aside.

Applicability of Section 73(3) of the Finance Act, 1994:
The Tribunal analyzed the case records and concluded that the appellant had paid service tax and interest before the show cause notice, in line with the provisions of Section 66A of the Finance Act, 1994. The Tribunal emphasized that no demand for service tax was raised against the appellant within the extended period mentioned in the show cause notice. As the conditions stipulated in Section 78 of the Finance Act, 1994 were not met, the penalty imposed on the appellant was deemed unwarranted, leading to the allowance of the appeal to the specified extent.

This detailed analysis of the legal judgment showcases the arguments presented by the appellant, the Revenue's defense, the Tribunal's assessment of the payment timeline, the applicability of relevant legal provisions, and the ultimate decision to set aside the penalty imposed under Section 78 of the Finance Act, 1994.