2019 (9) TMI 1394 - AT - Service Tax

Penalty - service tax paid on being pointed out, before issuance of SCN, but penalty was not deposited - license fee income received from the parties - commission income from Kashmir Government Emporium - suppression of facts or not - HELD THAT - As an admitted fact that an amount of ₹ 9,07,073/- was deposited by the appellant alongwith the interest vide GAR 7 challan dated 19th September, 2013. The show cause notice was issued on 23rd October, 2013. The payment thereof was made voluntarily by the appellant even before the issuance of show cause notice. In such circumstance, there appears no reason for imposition of penalty. Though the adjudicating authorities below have formed an opinion about apparent suppression of facts on the part of the appellant, but it is an acknowledgement on part of the original adjudicating authority about the submission of the appellants since beginning that no service tax was received on either of the income which have been allegedly made liable to service tax and that the appellant was under bonafide impression to not to be liable to pay any service tax thereupon - the moment the shortcoming and liability was brought to the notice of the appellant, the same has been discharged even prior to issuance of show cause notice. Thus, this is not the case of suppression of facts. Penalty set aside - the order appropriating the amount deposited by the appellant as a discharge of his liability towards impugned demand is hereby upheld - appeal allowed in part.

Summary

Issues:
1. Appellant's deliberate delay in pursuing the appeal.
2. Liability for service tax on license fee and commission income.
3. Imposition of penalties under Sections 76 and 78 of the Finance Act.
4. Deposit of service tax amount before issuance of show cause notice.
5. Allegation of suppression of facts by the appellant.

Analysis:
1. The judgment addresses the issue of the appellant's deliberate delay in pursuing the appeal. The record indicated repeated requests for adjournment by the appellant, reflecting a deliberate delay. Despite the absence of the appellant, written submissions were considered. The appeal had been pending since June 2018, leading the Member to proceed with adjudication.

2. The liability for service tax on license fee and commission income was a key issue. The appellant, a unit of a government enterprise, was found to have not paid service tax on income received. The original adjudicating authority imposed penalties under Sections 76 and 78 of the Finance Act. The appeal resulted in the dropping of the penalty under Section 76, with the demand for service tax confirmed at a reduced amount.

3. The judgment delves into the imposition of penalties under Sections 76 and 78 of the Finance Act. The Department argued for upholding the penalties based on the appellant's admission of liability and payment of the demand before the show cause notice. However, the Member found no infirmity in dropping the penalty, considering the voluntary payment made by the appellant prior to the notice.

4. Regarding the deposit of the service tax amount before the issuance of the show cause notice, the Member noted that the appellant had voluntarily paid a significant sum before the notice was issued. This timely payment was a crucial factor in determining the imposition of penalties, with the Member finding no grounds for penalty imposition due to the early settlement of the liability.

5. The judgment addressed the allegation of suppression of facts by the appellant. While the adjudicating authorities suspected suppression, the Member highlighted the appellant's consistent stance that no service tax was due on the income in question. The appellant rectified the liability promptly upon notification, indicating a lack of deliberate concealment. Consequently, the penalty under Section 78 was set aside based on the circumstances and facts presented.

Overall, the judgment set aside the penalty while upholding the appropriation of the deposited amount towards the liability. The appeal was partly allowed, emphasizing the importance of timely compliance and the genuine belief of the appellant regarding the tax liability, leading to a favorable outcome in terms of penalty imposition.