2016 (8) TMI 243 - AT - Service Tax

Waiver of penalty reverse charge mechanism short payment due to non-inclusion of miscellaneous charges like Hamali, loading/unloading, carting and octroi etc. no intention to evade service tax no other contraventions by appellant Held that - appellant has been able to show reasonable cause for non payment of service tax on due date. On pointing out short payment, admittedly paid the service tax along with interest. Penalty waived decided in favor of appellant.

Summary

Issues:
Appeal against Order-in-Appeal upholding service tax demand, waiver of penalty under Section 76 & 78 of Finance Act.

Analysis:
The appeal was filed against an Order-in-Appeal upholding a service tax demand of Rs. 3,21,351, which the appellant had paid along with interest. The appellant sought waiver of penalty under Section 76 & 78 of the Finance Act, 1994. The appellant, a registered dealer of steel items and recipient of transport services, admitted to a short payment of Rs. 1,52,985 due to the non-inclusion of certain miscellaneous charges in the service tax calculation. The appellant argued that there was no intention to evade tax as the discrepancy was discovered during an audit, and the short payment was rectified before the Adjudication Order was passed.

The appellant's representative contended that the appellant had paid the entire service tax amount, with only a portion being short paid, which was promptly settled along with interest before the Adjudication Order. It was highlighted that the appellant had been regularly paying service tax on reverse charge basis for GTA services but inadvertently omitted certain miscellaneous charges from the tax calculation. The appellant maintained proper records of all transactions, and the discrepancy was identified during an audit. The appellant demonstrated that there was a reasonable cause for the delayed payment of service tax, as the omission was unintentional and promptly rectified upon discovery.

The Assistant Commissioner representing the Revenue reiterated the findings of the impugned order, emphasizing the service tax demand upheld by the Commissioner (Appeals). After considering the submissions from both parties and reviewing the records, the Member (Judicial) observed that the short payment of service tax was rectified by the appellant before the Adjudication Order was passed. The appellant's belief that certain charges were not includible in the service tax calculation was deemed to be made in good faith, as evidenced by the proper recording of all transactions in the books of accounts. The Member (Judicial) concluded that the appellant had shown a reasonable cause for the delayed payment and, therefore, waived the penalty imposed under Section 76 and 78 of the Finance Act, invoking Section 80 of the same Act. The appeal was allowed, maintaining the payment of the short paid service tax along with interest.

In summary, the Appellate Tribunal CESTAT, Mumbai, in the case involving a service tax demand and penalty waiver appeal, found that the appellant had rectified the short payment of service tax before the Adjudication Order was issued. The Tribunal acknowledged the appellant's good faith belief regarding the inclusion of certain charges in the tax calculation, as evidenced by proper record-keeping and the prompt settlement of the discrepancy. Consequently, the penalty under Section 76 and 78 of the Finance Act was waived, and the appeal was allowed in favor of the appellant.