2018 (4) TMI 1675 - AT - Service Tax

Penalty u/s 77 and 78 of FA - the appellant accepted his liability and deposited the entire service tax for the period 2008- 2009 to 2012-2013 - suppression of facts or not - Held that - Apart from the fact that the appellant had not approached the Revenue for his registration under the Service Tax Act, there is no positive evidence on record to indicate that such non-following of the tax regime by the appellant was with any malafide intention. The appellant was only a commission agent and there could be a bonafide belief on his part that such earning of commission would not amount to providing any taxable services. In the absence of any positive evidence to the contrary, the benefit of Section 80 can be extended to the appellant - penalties set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under Section 78 of the Finance Act, 1994 and penalties under Section 77 (1) (a) and Section 77 (2) of the Act.

Analysis:
The appellant, engaged in providing commission agent services, was found liable for service tax under business auxiliary services. Upon investigations revealing non-payment of service tax, the appellant accepted the liability and paid around &8377; 26 lakhs for the period 2008-2009 to 2012-2013. Show cause notices were issued by DGCEI and Jurisdictional Service Tax Authorities, leading to penalties imposed under Section 77 and 78 of the Act by the Original Adjudicating Authority. The Commissioner (Appeals) set aside the penalty under Section 76 but upheld the penalties under Section 77 and 78, prompting the present appeal.

The appellant argued lack of awareness regarding tax liability, believing commission receipts did not trigger service tax obligations. Despite promptly paying the due tax upon realization, penalties were imposed based on non-registration and non-filing of returns. The Revenue contended that penalties were justified due to the appellant's failure to register, file returns, and the Revenue discovering the facts independently. The Tribunal observed that while non-declaration constitutes suppression of facts, the absence of evidence indicating malicious intent warranted consideration. The appellant's status as a commission agent and absence of concrete proof of deliberate evasion led to a favorable view towards extending the benefit of Section 80 of the Finance Act.

The Tribunal acknowledged the appellant's non-registration under the Service Tax Act but emphasized the lack of conclusive evidence supporting intentional evasion. Recognizing the potential for genuine misunderstanding on the appellant's part regarding taxable services, the Tribunal highlighted the risk of rendering Section 80 redundant if penalties were imposed solely based on non-payment. Consequently, the penalties under Section 77 and 78 were set aside, while the demand for service tax with interest remained upheld and uncontested.

In conclusion, the appeal was disposed of with the penalties under Section 77 and 78 being revoked, citing the absence of concrete evidence indicating malicious intent on the appellant's part. The demand for service tax with interest was upheld, emphasizing the importance of considering individual circumstances before imposing penalties solely based on non-compliance.