2016 (4) TMI 155 - AT - Service Tax

Waiver of penalties levied u/s 76,77 & 78 of the Finance Act, 1994 - Provider of services of Manpower Recruitment or Supply Agency falling under Section 65 (105)(k) of the Finance Act, 1994 - Held that - appellant on advice of the Jurisdictional Asstt. Commissioner, on his visit to Range Office, agreeing with the Asstt. Commissioner, discharged the entire service tax liability along with interest. Appellant was assured that no further action will be taken if the payment of service tax along with interest is made. It is clear that the appellant paid entire service tax along with interest and opted the waiver of the show cause notice with clear intention that they do not want to contest payment which they have made with a clear view that no action should be taken against them. It is found that the appellant is a small time service provider without any higher education background. It is also found that on perusal of the invoices submitted by the appellant, it is observed that they have neither charged the service tax to their client nor collected any amount towards the service tax. The appellant paid the entire service tax and interest from their own pocket. So, this itself is a burden on the appellant. When the assessee discharged service tax alongwith interest before issuance of show cause notice penalty has been waived, therefore, when the appellant themselves after discharging the service tax liability along with interest, opted the waiver of show cause notice the case is clearly falls under the provisions of Section 73(3) of Finance Act and the appellant has made out a fit case for waiver of penalty. The penalties and fees imposed under Sections 76, 77, 78 and 70 of the Finance Act, 1994 by invoking Section 73(3) read with Section 80 are waived of. - Decided in favour of appellant

Summary

Issues Involved:
1. Non-payment of service tax for the years 2007-08 and 2008-09.
2. Imposition of penalties under Sections 76, 77, 78, and 70 of the Finance Act, 1994.
3. Application of Section 73(3) and Section 80 of the Finance Act, 1994 for waiver of penalties.

Detailed Analysis:

1. Non-payment of Service Tax for the Years 2007-08 and 2008-09:
The appellant provided 'Manpower Recruitment or Supply Agency' services to M/s. Godavari Bio-Refinery Pvt Ltd, which are taxable under Section 65(105)(k) of the Finance Act, 1994. During scrutiny, it was found that the appellant had not paid service tax for the years 2007-08 and 2008-09. Upon being informed by the jurisdictional Assistant Commissioner, the appellant paid the service tax amounting to Rs. 17,23,556/- along with interest of Rs. 3,41,869/- for the said years. The appellant acknowledged the lapse and requested waiver of the show cause notice (SCN), but a SCN was issued, and the demand for service tax and interest was confirmed.

2. Imposition of Penalties under Sections 76, 77, 78, and 70 of the Finance Act, 1994:
The appellant was penalized Rs. 6,55,945/- under Section 76, Rs. 17,23,556/- under Section 78, and a late fee of Rs. 2,000/- per return under Section 70 of the Finance Act, 1994 read with Rule 7C of Service Tax Rules, 1994. Additionally, a penalty of Rs. 5,000/- was imposed on M/s. P.S. Karde under Section 77 of the Finance Act, 1994. The appellant contested these penalties, arguing that they were a small-time service provider with limited education and no knowledge of service tax provisions. They claimed a bona fide belief that they were supplying water, not taxable services, and had not collected service tax from their client.

3. Application of Section 73(3) and Section 80 of the Finance Act, 1994 for Waiver of Penalties:
The appellant argued that since they paid the service tax along with interest before the issuance of the SCN, penalties should be waived under Section 73(3) and Section 80 of the Finance Act, 1994. They cited various judgments supporting the waiver of penalties in cases where the service tax and interest were paid before the SCN was issued.

The Tribunal considered the submissions and found that the appellant, a small-time service provider with limited education, had paid the entire service tax and interest from their own pocket without collecting it from their client. The Tribunal noted that various judgments consistently held that when the assessee discharged the service tax along with interest before the issuance of the SCN, penalties should be waived.

The Tribunal referenced several cases, including:
- Catalyst Capital Services Pvt Ltd: Penalty set aside due to no mala fide intention and late payment of service tax.
- EDC Ltd: Penalty not imposed when service tax and interest were paid before the SCN.
- Gupta Coal Field & Washeries Ltd: No SCN required if service tax and interest are paid before issuance.
- Sen Brothers: No penalty if service tax and interest are paid before the SCN.
- Endeka Ceramics India Pvt Ltd: No penalty due to lack of qualified staff and prompt payment of service tax.
- Avas Engineers: Waiver of penalties under Section 80 for voluntary payment of service tax and interest.

The Tribunal concluded that the appellant's case fell under the provisions of Section 73(3) and Section 80 of the Finance Act, 1994, and thus, the penalties and fees imposed under Sections 76, 77, 78, and 70 were waived. The service tax along with interest paid by the appellant was maintained, and the appeal was allowed in these terms.

Order Pronounced in Court on 19.02.2016