2016 (5) TMI 1244 - AT - Service Tax

Imposition of penalty - Section 78 of the Finance Act, 1994 - Banking and other Financial Services and Sponsorship Service - received from foreign firms who do not have any office in India - liable to pay tax under reverse charge - Held that - in the instant case the non-payment of tax was on account of bonafide belief and the Revenue had conducted Audits which would go to show that there was in fact no suppression of facts. On the other hand it is found that the judgement of the Tribunal in the case of Atwood Oceanic Pacific Ltd. -Vs- CST 2012 (12) TMI 425 - CESTAT, AHMEDABAD is more akin to the facts of the present case and therefore the Commissioner (Appeals) has rightly applied the said judgement for waiver of penalty under Section 78. Moreover a mere pendency of Civil Appeal in Atwood s case before the Supreme Court is no ground not to follow a binding precedent. One more aspect to be noted is that during the relevant period, Section 80 was in operation which does not figure in the Central Excise Act, where there is a discretion not to impose penalty when reasonable cause is shown. Therefore, the ends of justice would be met by upholding the order of the Commissioner (Appeals) for the reasons stated above. - Decided against the revenue

Summary

Issues:
1. Appeal against the penalty imposed under Section 78 by the Ld. Commissioner (Appeals) and its restoration.

Analysis:
The appellant contended that the respondent assessee received services from foreign firms liable for tax under reverse charge as per Section 66A of the Finance Act, 1994. The respondent paid the demanded service tax and interest before the show cause notice was issued, leading to the imposition of equal penalty under Section 78. The Ld. Commissioner (Appeals) set aside the penalty, prompting the Review Committee to direct the department to appeal before the Tribunal. The appellant argued that the penalty should stand as the demand was confirmed by invoking the extended period of limitation. However, the respondent's counsel emphasized that all taxes and interest were paid before the show cause notice, citing Section 73(3) and Section 80 to support the non-imposition of penalty. The issue revolved around the non-payment of tax under reverse charge and sponsorship services, with the respondent having paid the entire tax due, indicating no intention to evade payment.

The Tribunal found that there was no suppression of facts by the respondent, as all taxes were paid promptly, and the allegations in the show cause notice lacked specificity. The respondent had raised the plea of non-invocation of the extended period, and the imposition of penalty was deemed unsustainable due to the absence of willful suppression or misdeclaration. The Tribunal referenced the Supreme Court's ruling in the case of Pahwa Chemicals Pvt. Ltd., highlighting that mere failure to disclose information does not constitute suppression. The respondent's record was the source of all particulars, and the department's awareness of the respondent's activities through audits further weakened the case for suppression. The imposition of penalty was deemed unjustified in light of the respondent's belief that the tax was not payable, leading to the dismissal of the department's appeal.

The Tribunal distinguished the case from precedents where suppression was proven, emphasizing the absence of such findings in the present matter. While the Revenue cited judgments where suppression led to non-waiver of penalty, the Tribunal found these inapplicable due to the absence of suppression in the current case. The Tribunal upheld the Commissioner (Appeals)'s decision based on the precedent set by the Atwood Oceanic Pacific Ltd. case, where penalty waiver was granted. The presence of Section 80 during the relevant period, allowing discretion in penalty imposition for reasonable cause, further supported the decision to dismiss the department's appeal. The Tribunal concluded that justice would be served by upholding the Commissioner (Appeals)'s order, leading to the dismissal of the department's appeal.