2018 (11) TMI 1927 - AT - Service Tax

Levy of penalties under Section 76, 77 and 78 of the Act - GTA Service - reverse charge mechanism - Service tax deposited before issuance of SCN - HELD THAT - The Ld. DR does not dispute the fact which is on record, that service tax amount has been duly deposited, either by the transport agencies or by the assessee for the remaining portion, well before the issue of Show Cause Notice though belatedly for which interest has also been paid. It is also not the case of the Revenue that they are seeking double payment of tax which stood deposited by the transport agencies as reimbursed and borne by the assessee manufacturers receiving transport service which fact has also been appreciated by the Ld. Commissioner in the impugned Original Order. When service tax amount has been deposited before the Show Cause Notice, no penalty should be imposed in view of the law as laid down by the Hon ble Karnataka High Court in case of COMMISSIONER OF C. EX., BANGALORE-II VERSUS PUSHPADEEP ENTERPRISES 2012 (10) TMI 496 - KARNATAKA HIGH COURT relied upon by the assessee, which is squarely applicable to the facts of the present case. There are also force in the argument of the assessee that in terms of the provisions of Section 80 of the Act, they are entitled to full waiver of penalty under Section 78 as well as Section 76 and 77 of the Act, inasmuch there was a reasonable case for non payment of tax as the very levy of service tax on GTA service under reverse charge was a new concept. Thus, there are no reason to burden the assessee with penalty under Section 78 of the Act and the same is therefore set aside - appeal of Revenue dismissed.

Summary

Issues Involved:
- Applicability of service tax on GTA service
- Imposition of penalties under Section 76, 77, and 78 of the Act

Analysis:

Applicability of service tax on GTA service:
The appeals involved the issue of service tax on transportation services by goods transport agencies (GTA service) under the reverse charge mechanism. The assessees, engaged in coke manufacturing, availed GTA services, leading to service tax liabilities. The law required specific recipients of GTA services to pay the tax directly to the government. The dispute did not concern the applicability of service tax on GTA service itself.

Imposition of penalties under Section 76, 77, and 78 of the Act:
During the period in question, the assessees reimbursed the service tax amount to the transport agencies instead of directly depositing it with the tax department. The Department raised demands on the assessees for service tax payment and imposed penalties under Sections 76, 77, and 78 of the Act. However, the assessees contended that they had paid the service tax before the issuance of Show Cause Notices, albeit belatedly, and had also paid applicable interest. The assessees argued that there was no fraud or wilful suppression, as all payments were duly recorded. They emphasized that double taxation should be avoided, as per CBEC instructions. The assessees also cited a High Court decision where penalties were set aside when the duty amount was deposited before the Show Cause Notice.

Judgment:
After considering both sides, the Tribunal found that the service tax amount had been deposited before the Show Cause Notice, with no evidence of seeking double payment. The Tribunal agreed with the assessees that penalties should not be imposed in such cases. Citing Section 80 of the Act, the Tribunal ruled in favor of the assessees, setting aside penalties under Sections 76, 77, and 78. Consequently, the appeals by the assessees were allowed, and those by the Revenue were rejected. The cross objections by the assessees were also disposed of accordingly.

This detailed analysis of the judgment highlights the issues of applicability of service tax on GTA service and the imposition of penalties under different sections of the Act, providing a comprehensive understanding of the legal proceedings and the Tribunal's decision.