2019 (5) TMI 1962 - AT - Service Tax

Levy of penalty u/s 78 of FA - applicability of benefit of subsection (3) of Section 73 ibid - entire service tax liability along with interest in respect of the adjudged demands, have already been paid before adjudication of the matter - bona fide belief - intellectual property rights service - Reverse Charge Mechanism - it is claimed that the issue was was contentious and there was not wilful suppression - HELD THAT - The observations made in the impugned order regarding non-consideration of payment at the factory towards the service tax liability of head office is not legally sustainable inasmuch as the statutory levy has to be paid into the Central Government Account, irrespective of the fact from which office or establishment of the assessee, such payment has been made. However, it is found that the original authority has not considered payment of such amount by the appellant. Thus, under the circumstances, the matter should go back to the original authority for ascertaining the fact, whether such amount of Rs.26,548/- has already been paid by the appellant. Imposition of penalty under Section 78 ibid - HELD THAT - The submissions of the appellant that nonpayment of service tax within the stipulated time frame was not owing to the reason of fraud, collusion, wilful misstatement, etc., with the intent to defraud the Government Revenue are agreed upon - the ingredients mentioned in Section 78 ibid are not present in the case, justifying imposition of equal amount of penalty on the appellant - the benefit provided under sub-section (3) of Section 73 ibid should be available to the appellant inasmuch as the disputed amount of service tax along with interest was paid by the appellant much before issuance of the show cause notice and accordingly, proceedings cannot be initiated, especially for imposition of penalty. The impugned order, in so far as it has imposed penalty under Section 78 ibid on the appellant is set aside - the matter is remanded to the original authority for ascertaining the fact whether the disputed amount of Rs.26,548/- has already been paid, as claimed by the appellant and accordingly, decide the issue - appeal disposed off.

Summary

Issues:
Service tax demand confirmation, appropriation of service tax amount, penalty imposition under Section 78 of the Finance Act, 1994, payment of service tax liability, non-imposition of penalty, legality of payment at the factory, remand to original authority.

Service Tax Demand Confirmation and Penalty Imposition:
The appeal challenged an order confirming service tax demands on the appellant, along with interest, and imposing a penalty under Section 78 of the Finance Act, 1994. The appellant contended that the service tax liability and interest were paid before adjudication, seeking non-imposition of penalty under Section 78. The appellant argued that the delay in payment was due to a genuine belief in eligibility for an exemption and a contentious issue regarding the Reverse Charge Mechanism. The Revenue reiterated the findings of the impugned order. The Tribunal noted that most of the adjudged amount was paid before the show cause notice, except for a specific amount. The Tribunal observed that the non-consideration of a payment made at the factory towards the service tax liability of the head office was legally unsustainable. Therefore, the matter was remanded to the original authority to verify the payment of the disputed amount.

Non-Imposition of Penalty and Legal Considerations:
Regarding the imposition of penalty under Section 78, the Tribunal agreed with the appellant that the delay in service tax payment was not due to fraud or intent to defraud government revenue. The Tribunal found that the conditions for penalty imposition under Section 78 were not met, and the benefit of subsection (3) of Section 73 should apply since the disputed amount was paid before the show cause notice. Consequently, the penalty under Section 78 was set aside, and the matter was remanded to the original authority for further verification.

In conclusion, the Tribunal disposed of the appeal by setting aside the penalty imposed under Section 78 and remanding the matter to the original authority for verification of the disputed payment.