2008 (10) TMI 144 - AT - Service Tax

Appellants had discharged the service tax liability along with interest before receipt of letter from department on waiver of Show Cause Notice - Commissioner (Appeals) is not justified in holding that provisions of Section 73(3) are not applicable therefore he is not justified in upholding the OIO imposing penalties on appellant - it is very clear that the provisions of Section 73(3) would be squarely applicable and the Revenue ought not to have proceeded against the appellants by way of issue of show cause notice

Summary

Issues:
1. Applicability of service tax on commission paid to agents outside India.
2. Invocation of longer period in the show cause notice.
3. Interpretation of Section 73(3) of the Finance Act.
4. Imposition of penalties under Sections 78 and 77 of the Act.

Analysis:
1. The appeal revolved around the payment of commission by the appellants to agents located outside India for the sale of goods in foreign currency. The Revenue alleged non-payment of service tax under "Business Auxiliary Service" category. The Original authority confirmed the demand, imposed penalties, and invoked a longer period in the show cause notice. The appellants had paid the service tax and interest even before the notice was issued. The Commissioner (Appeals) upheld the Original authority's decision, leading the appellants to challenge the order before the Tribunal.

2. The Tribunal noted that the appellants had promptly paid the service tax and interest upon receiving a letter from the Superintendent regarding the commission paid by agents abroad. Despite the timely payment, the Superintendent later directed compliance with Section 73(3) of the Finance Act, which the appellants had already fulfilled. The Tribunal found that the Revenue should not have proceeded with the show cause notice after the appellants had discharged their tax liability. Therefore, the invocation of Section 73(4) was deemed unnecessary, and the Tribunal concluded that the Revenue's actions were improper.

3. The Tribunal specifically addressed the interpretation of Section 73(3) of the Finance Act in the context of the case. It emphasized that the appellants had acted in good faith by paying the tax liability promptly and informing the Department about their beliefs regarding tax liability. The Tribunal determined that Section 73(3) was applicable in this scenario, and the Revenue's decision to issue a show cause notice post-payment was unjustified. Consequently, the Tribunal ruled that the impugned order was not legal and proper based on the provisions of Section 73(3).

4. Regarding the penalties imposed under Sections 78 and 77 of the Act, the Tribunal clarified that the appeal primarily challenged the penalties, not the leviability of service tax itself. As a result, the Tribunal set aside the penalties, indicating that the appellants' appeal was allowed on the grounds related to penalties only. The Tribunal's decision focused on the procedural aspects of the penalties and their imposition, rather than the underlying tax liability issue.

This detailed analysis of the judgment highlights the key issues, legal interpretations, and the Tribunal's conclusions in the case involving the payment of commission, invocation of longer period, interpretation of Section 73(3) of the Finance Act, and imposition of penalties under Sections 78 and 77 of the Act.