2019 (3) TMI 1723 - AT - Service Tax

Business Auxiliary Services (BAS) - appellant receives sales commission for promoting sales and getting the sales affected for some manufacturers - imposition of penalty u/s 78 of FA - whether the appellant is entitled to redemption of 3% in the rate of interest, under Section 75 of the Finance Act? HELD THAT - Appellant have urged that admittedly the turnover of the appellant company for each of the financial year is less than ₹ 60 lakhs and accordingly they are entitled to reduced rate of interest by 3% as per proviso to Section 75. This being a ground of law, raised for the first time is allowed. Accordingly, it is held that the appellant is entitled to reduced rate of interest under Section 75 readwith proviso. Penalty u/s 78 - HELD THAT - The appellant is a lady and not much conversant with the service tax laws. However, she has maintained proper records of the receipt of sales commission by cheque, duly disclosed in the Income Tax record. Thus, there is no case of deliberate defiance of law or contumacious conduct as mis-statement of facts - penalty under Section 78 of the Finance Act set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty under Section 78
2. Entitlement to redemption of 3% in the rate of interest under Section 75

Imposition of Penalty under Section 78:
The appellant, engaged in Business Auxiliary Services (BAS), received sales commission from manufacturers, subject to Income Tax/TDS deductions. Following an audit at a service recipient's premises, the Department alleged liability for service tax under BAS. A show cause notice was issued for service tax payment, confirmed ex-parte with penalty under Section 78 and interest. The Commissioner (Appeals) allowed SSI benefit for some financial years, reducing duty liability but confirming the penalty at 100%. The Tribunal considered the appellant's turnover below &8377; 60 lakhs annually, entitling them to a reduced interest rate of 3% under Section 75. The Tribunal noted the appellant's compliance with tax laws, maintaining proper records and no deliberate defiance of law, leading to the setting aside of the penalty under Section 78. The appeal was allowed, and an additional ground was accepted.

Entitlement to Redemption of 3% in the Rate of Interest under Section 75:
The appellant's turnover being below &8377; 60 lakhs annually, they were entitled to a reduced interest rate of 3% as per the proviso to Section 75. The Tribunal acknowledged this ground raised for the first time and held the appellant eligible for the reduced interest rate. Additionally, the Tribunal found the appellant's diligent record-keeping and compliance with tax laws as factors supporting their entitlement to the reduced interest rate. Consequently, the appellant was granted the benefit of the reduced interest rate under Section 75, resulting in a favorable outcome in the appeal.