2016 (9) TMI 486 - AT - Service Tax

Imposition of penalty - Section 78 of the Finance Act, 1994 - Service tax not paid on Man Power Recruitment or Supply Agency - period involved is 2009-2010 and 2010-2011 - appellant paid service tax alongwith interest and 1% of service tax as penalty in terms of section 73(4A) of the Finance Act, 1994 as soon as it realized about the same - Held that - the provisions of section 73 (4A) came into force w.e.f 08.04.2011 and the show cause notice was issued to the appellant in 2013. Therefore, when the show cause notice was issued to the appellant the provisions of Section 73(4A) of the Act were in force, therefore, I hold that the appellant is entitled for the benefit of the said provisions. Moreover, the said provision does not specifically states that these provisions will apply to register dealer only. In these circumstances, I hold that penalty under Section 78 of the Act is not imposable of the appellant. As the appellant has already paid the penalty as per Provisions of Section 73 (4A) of the Act, therefore, impugned qua imposing penalty under Section 78 of the Act is set aside. - Appeal disposed of

Summary

Issues:
Penalty imposition under Section 78 of the Finance Act, 1994 for non-payment of service tax and applicability of Section 73(4A) of the Act.

Analysis:

Issue 1: Penalty imposition under Section 78
The appellant, a Man Power Recruitment or Supply Agency, was investigated for not paying service tax during 2009-2011. Initially, the appellant paid service tax, interest, and 1% penalty under section 73(4A) of the Finance Act, 1994. Subsequently, a show cause notice was issued for imposing additional penalty under Section 78 of the Act. The appellant contended that the adjudicating authority exceeded the show cause notice's scope by denying the benefit of section 73(4A) and alleging non-payment of service tax. The tribunal held that since the show cause notice was issued after the introduction of section 73(4A), the appellant was entitled to its benefits. As the appellant had already paid the penalty under section 73(4A), the imposition of additional penalty under Section 78 was set aside.

Issue 2: Applicability of Section 73(4A) of the Act
The Revenue argued that section 73(4A) was not applicable during the relevant period of investigation. However, the tribunal noted that the provisions of section 73(4A) came into force in 2011, before the show cause notice was issued in 2013. The tribunal emphasized that section 73(4A) did not specify applicability only to registered dealers. Therefore, the tribunal held that the appellant was entitled to the benefits of section 73(4A) and set aside the penalty under Section 78 of the Act.

In conclusion, the tribunal allowed the appeal, setting aside the penalty imposed under Section 78 of the Finance Act, 1994, based on the appellant's compliance with section 73(4A) provisions. The judgment clarified the applicability of section 73(4A) to the appellant and emphasized that the provisions were not limited to registered dealers.