2018 (2) TMI 1845 - Commission - Service Tax

Short-payment of service tax - additional liability towards Service Tax in excess of ₹ 3 lac - part amount was admitted and was paid alongwith cess and interest thereon - admission of the applications for settlement - adjustment of total amount of duty and interest from the amount already deposited - grant of immunity from payment of penalty as well as immunity from prosecution under Section 32K of the Act - applicant only disputed ₹ 37,391 and paid ₹ 2,997/-. Thus, the total disputed amount was ₹ 37,391/- - abatement at 75% or 30%? - N/N. 2/2013-S.T., dated 1-3-2013. Held that - From 1-3-2013 any unit would qualify for taxable amount of 25% if either the carpet area is less than 2000 sq. ft. or consideration is less than 1 crore; in other words, 30% taxable value would only be applicable when the carpet area is more than 2000 sq. ft. and consideration is more than 1 crore - In the present case, as is undisputed by the Department, the consideration is less than 1 crore on all the units on which the applicant was claiming the exemption and therefore, for the period from 1-3-2013 to 7-5-2013, they are duly eligible for claiming the exemption of 75% of the value and taxable amount would be 25%. Since during the period from 1-3-2013 to 7-5-2013, the exemption of 75% was given to residential units having carpet area less than 2000 sq. ft. or where even consideration is less than one crore and since the consideration received was less than one crore in the case of the applicant during the period from 1-3-2013 to 7-5-2013, the exemption notification is applicable to them and they have to pay tax on 25% of the amount charged. Accordingly, ₹ 37,391 demanded by the Department does not sustain. Penalty - Held that - The applicant has completely co-operated with the Department during the period of audit and accepted the non-paid amount which was apparently a result of non-comprehension of technicalities relating to reverse charge mechanism. The applicant has also co-operated with the Commission while pleading his case and the Commission is of the view that the applicant has made a full disclosure of his taxable amount and paid the tax immediately on detection without any delay. (The audit was conducted from 8-2-2014 to 11-2-2014 and non-payment was detected and the payment was made on 26-2-2014 i.e. barely within 15 days). Thus, the Commission is convinced that the applicant had no intention to evade tax and decides not to impose any penalty on the applicant. Prosecution - Held that - The Bench considers it a fit case for grant of immunity from prosecution to the applicant. Application disposed off.

Issues Involved:
1. Evasion of service tax.
2. Demand and recovery of service tax.
3. Interest on unpaid service tax.
4. Penalty for willful suppression of facts.
5. Penalty for non-payment of service tax.
6. Claim for immunity from penalty and prosecution.
7. Dispute over exemption eligibility under Notification No. 2/2013-S.T. and Notification No. 9/2013-S.T.

Issue-wise Detailed Analysis:

1. Evasion of Service Tax:
The applicant company, engaged in providing taxable services such as manpower recruitment, transport of goods by road, and construction of residential complexes, was alleged to have evaded payment of service tax amounting to ?12,13,407 (including cess). During an audit under EA 2000, the applicant accepted the evasion and voluntarily deposited ?11,73,019 (including cess) plus interest.

2. Demand and Recovery of Service Tax:
A show cause notice (SCN) was issued on 29-9-2015, demanding service tax of ?12,13,407 and proposing appropriation of ?11,60,980 already paid by the applicant. The applicant admitted liability of ?11,73,019 out of the total demand and requested for settlement, adjustment of duty and interest from the amount already deposited, and immunity from penalty and prosecution.

3. Interest on Unpaid Service Tax:
The applicant had paid interest amounting to ?2,34,997 before approaching the Commission. The total interest liability was settled at ?2,37,917, which was confirmed as paid by the applicant.

4. Penalty for Willful Suppression of Facts:
The Department argued that the applicant's contention of a bona fide mistake was not acceptable, as the evasion was detected during an audit, and the applicant did not pay the service tax immediately but only after a month. The Department suggested that the application was a cover-up for lapses and recommended that immunity from penalty should not be granted.

5. Penalty for Non-Payment of Service Tax:
The applicant contended that the non-payment was due to a procedural lapse and not an attempt to evade tax. They cited several case laws to support their claim that mere failure to discharge tax liability does not amount to evasion, and thus, penalty under Section 78 was not justified.

6. Claim for Immunity from Penalty and Prosecution:
The applicant requested immunity from penalty and prosecution, asserting that they had made a full and true disclosure, cooperated with the Department, and paid the tax and interest promptly upon detection. The Commission noted the applicant's cooperation and prompt payment and decided not to impose any penalty, granting immunity from prosecution.

7. Dispute Over Exemption Eligibility:
The applicant disputed the demand of ?40,388 under the head of construction of residential complex services, claiming eligibility for a 75% abatement as per Notification No. 2/2013-S.T. They argued that the Department had wrongly calculated the tax by giving only a 70% exemption. The Commission reviewed the relevant notifications and concluded that for the period from 1-3-2013 to 7-5-2013, the applicant was eligible for a 75% exemption, making the taxable amount 25%. Thus, the demand of ?37,391 did not sustain.

Conclusion:
The Commission settled the service tax liability at ?11,76,016 and interest at ?2,37,917, both of which were confirmed as paid by the applicant. Penalty was waived, and immunity from prosecution was granted. The order clarified that the settlement would be void if obtained by fraud or misrepresentation of facts.

Order:
- Service Tax: Settled at ?11,76,016.
- Interest: Settled at ?2,37,917.
- Penalty: Waived.
- Prosecution: Immunity granted.

Final Note:
The immunities from penalty and prosecution are subject to the provisions of Section 32K of the Act, and the order shall be void if obtained by fraud or misrepresentation.

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