2008 (11) TMI 120 - AT - Service Tax

Gross amount charged by the appellants i.e. commission reimbursement of expenses and incentive was leviable to service tax and deliberate attempt was made to avoid paying service tax by misdeclaring the C and F charges as reimbursement charges - hence penalties are imposable on the appellants separately u/s 76 and 78 for failure to pay service tax and for suppression of the value of taxable services - but in exercise of the powers u/s 80 to meet the ends of justice penalty is reduced

Summary

Issues:
Appeal against Order-in-Appeal dated 28-2-2008 passed by the Commissioner (Appeals), Central Excise, Pune III regarding evasion of Service Tax by M/s. Atul Sales Corporation, Pune for C & F services provided during 1-4-2000 to 31-3-2003.

Detailed Analysis:
1. Confirmation of Service Tax and Interest:
The Deputy Commissioner confirmed the service tax demanded in the show-cause notice and imposed interest and penalties under sections 76 and 78 of the Finance Act, 1994. The Commissioner (Appeals) upheld the confirmation of service tax and interest, as the appellants accepted the Order-in-Original. The appeal was confined to the penalty aspect.

2. Penalty Aspect:
The appellants contested the penalties imposed. The appellants cited case laws to support their argument, emphasizing on the overriding effect of section 80 on sections 76, 77, 78, and 79. The J.D.R. relied on other cases to sustain the penalties imposed, highlighting instances of suppression of material facts and non-payment of interest by the appellants.

3. Commissioner's Findings:
The Commissioner observed intentional evasion of service tax by misdeclaring C and F charges as reimbursement charges. The appellants were found to have played an active role in furthering the evasion of service tax. The Commissioner upheld the penalties imposed under sections 76 and 78, considering the deliberate attempt to avoid paying service tax.

4. Reduction of Penalties:
Considering the harshness of the penalties imposed, the Commissioner referred to judgments of the Bombay High Court and exercised discretion under section 80 to reduce the penalties to Rs. 40,000 under section 76 and Rs. 1,00,000 under section 78 to meet the ends of justice.

5. Final Decision:
The appeal was partly allowed, reducing the penalties imposed on the appellants. The judgment balanced the imposition of penalties with the need to ensure justice and compliance with tax regulations.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive understanding of the case and the decision rendered by the Appellate Tribunal CESTAT, Mumbai.