2015 (11) TMI 522 - AT - Service Tax

Imposition of penalty - Malafide intention - Held that - Appellant have been making submission before the adjudicating authority and before the Commissioner(Appeals) that they did not have any intension to evade service tax as they have been making cash payment to their consultant, who was assigned the job for computing the service tax and depositing in the bank and also filing the return periodically. However, consultant has not deposited cash given to him as service tax in the bank and consultant defrauded the respondent when this fact came to the notice, the department has initiated investigation. - Therefore, it is not the appellant who has committed an offence of non payment of service tax, it is the consultant, who has defrauded them therefore there is reasonable cause for waiver of penalty under Section 78. - there is no reason to interfere in the findings of the Ld. Commissioner(Appeals) who has reduced penalty by proper application of mind. I, therefore upheld the impugned order and dismiss the appeal of the Revenue. - Decided against Revenue.

Summary

Issues:
1. Appeal against reduction of penalty under Section 77 and dropping of penalty under Section 78.

Analysis:
The Revenue filed an appeal against the reduction of penalty under Section 77 and dropping of penalty under Section 78 by the Commissioner(Appeals). The case involved the respondent charging and recovering service tax but failing to deposit it, leading to penalties. The Revenue argued that penalties should not have been dropped or reduced. On the other hand, the respondent claimed no malafide intention, attributing the non-payment to a consultant's fraud. The consultant's actions led to criminal proceedings and an FIR. The Commissioner(Appeals) found no evidence of collusion or willful misstatement by the appellant, leading to dropping of penalty under Section 78 and reduction of penalty under Section 77.

The Tribunal observed that the appellant had consistently maintained they did not intend to evade service tax, as they paid cash to their consultant for tax-related tasks. However, the consultant did not deposit the cash as required, leading to investigations and the initiation of criminal proceedings. The Commissioner(Appeals) found that the appellant's claim of payment to the consultant was not disproved, and no evidence of collusion was found. Therefore, the appellant was not held liable for penalty under Section 78. The Commissioner(Appeals) also exercised leniency in reducing the penalty under Section 77 due to the consultant's fraudulent actions, for which the appellant had reasonable cause. The Tribunal upheld the Commissioner(Appeals)'s decision, stating that there was no reason to interfere with the reduction of penalty, as it was done after proper consideration.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the dropping of penalty under Section 78 and the reduction of penalty under Section 77 by the Commissioner(Appeals). The decision was based on the consultant's fraudulent activities, which absolved the appellant of intentional wrongdoing. The Tribunal found the Commissioner(Appeals)'s reasoning sound and upheld the order accordingly.