2017 (2) TMI 675 - AT - Service Tax

Imposition of penalty u/s 78 - Business Auxiliary Services - commission paid to foreign based agents - appellant has been under the bonafide belief that under N/N. 41/2007-ST dated 06.10.2007 maintained by N/N. 17/2008-ST dated 01.04.2008 services provided by commission agent engaged by the Indian exporter to cause sale of the goods exported by them were exempted - Held that - The department has not provided any evidence to prove any willful suppression and misstatement with an intention to evade payment of service tax on the part of the appellant. The facts on record indicate that there has been a bonafide mistake on the part of the appellant to treat the taxable services as exempted services - penalty u/s 78 cannot be imposed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against service tax demand and penalty imposition under section 78 of the Finance Act 1994.

Analysis:

1. Service Tax Demand and Penalty Imposition:
The appellant, Ms. HEG Ltd., appealed against an Order in Original upholding a service tax demand of ?1,33,27,894 and a penalty under section 78 of the Finance Act 1994. The appellant challenged only the penalty imposed. The appellant contended that there was no suppression on their part as they had provided all necessary export documents to the department. They also claimed a genuine mistake in citing the wrong exemption notification number, believing they were entitled to an exemption. The Department reiterated the findings of the lower Revenue Authority.

2. Legal Arguments and Case Laws:
The appellant relied on various case laws to support their case, including CCE Vs. Coca Cola India Pvt. Ltd., CCE Vs. Dinesh Chandra R. Agarwal, ETA Engineering Ltd. Vs. CCE, British Airways Vs. CC, and Jain Irrigation Systems Ltd. Vs. CCE. The appellant appointed foreign agents who provided services falling under "Business Auxiliary Services," deemed taxable under the Finance Act. The appellant mistakenly cited the wrong notification number but promptly paid the service tax dues upon being informed of the error.

3. Decision and Rationale:
After considering the submissions, case laws, and facts of the case, the Tribunal found that there was no evidence of willful suppression or misstatement by the appellant to evade service tax payment. The Tribunal noted the appellant's bonafide mistake in treating taxable services as exempted. Citing precedents like Dinesh Chandra, ETA Engineering Ltd., and British Airways Ltd., the Tribunal set aside the penalty imposed under section 78 of the Finance Act. The appeal was partly allowed based on the lack of intentional evasion of service tax.

In conclusion, the Tribunal's decision in the appeal involved a detailed analysis of the appellant's contentions, legal arguments, case laws, and the absence of evidence supporting willful suppression. The judgment emphasized the importance of bonafide mistakes and set aside the penalty imposed under section 78 of the Finance Act, providing relief to the appellant.