2016 (12) TMI 664 - AT - Service Tax

Whether the Commissioner (Appeals) has rightly deleted the penalty imposed under Section 77 and 78 and extended the benefit of Section 80 of the Finance Act, correctly? - Held that - I find that the issue is no longer res-integra in view of the ruling of Hon ble Allahabad High Court, in the case of H.M. Singh Vs Commissioner of Central Excise and Service Tax, 2014 (9) TMI 218 - ALLAHABAD HIGH COURT , wherein Hon ble High Court have taken notice that at the material time there was a general mass unawareness among the service providers on which the service tax was liable to be deposited particularly on the component of provident fund, received from the recipient of service to whom the Manpower Services were provided. The Hon ble High Court further held that under such facts and circumstances, there was no fraud, collusion, willful misstatement or suppression of facts or any contravention with any intent to evade the payment of tax - it was also held that mere failure to declare does not amount to willful suppression. There must be some positive act from the side of the assessee to find willful suppression - appeal dismissed - decided in favor of respondent-assessee.

Summary

Issues: Whether the Commissioner (Appeals) rightly deleted the penalty imposed under Sections 77 and 78 and extended the benefit of Section 80 of the Finance Act.

Analysis:
The appeal revolved around the deletion of penalties and the extension of benefits under the Finance Act. The respondent, a contractor providing various services, was issued a show cause notice for Service Tax for the period 2005-06 to 2009-10. The Order-in-Original confirmed the demand and imposed penalties under Sections 77 and 78. The Commissioner (Appeals) accepted the contention that the respondent had paid tax prior to the adjudication proceedings, showing a reasonable cause for non-deposit of Service Tax. The Commissioner also noted the unawareness of the respondent regarding charging Service Tax from service receivers. Consequently, the penalties under Sections 77 and 78 were deleted by extending the benefit of Section 80.

The Tribunal referred to a ruling by the Hon'ble Allahabad High Court in a similar case, emphasizing the general unawareness among service providers regarding tax liabilities. The High Court held that in the absence of fraud or willful misstatement, penalties could not be imposed. Citing a Supreme Court ruling, the High Court emphasized that willful suppression required a positive act from the assessee, which was not evident in this case. Therefore, the High Court deleted the penalty, a decision upheld by the Tribunal. The Tribunal found the facts of the present case aligned with the High Court's ruling, leading to the dismissal of the Revenue's appeal. The respondent was entitled to consequential benefits as per the law.