2017 (2) TMI 1045 - AT - Service Tax

Imposition of penalty u/s 78 - Banking & Financial Services received from the overseas service provider - tax was paid on being pointed out, appellant was under bonafide belief that tax was not required to be paid - Held that - the circumstances which tilts in favor of the Appellant is that there has been continuous litigation/disputes on the liability to discharge service tax liability on receipt of the services from overseas service provider - this is a fit case for invoking Section 80 of the FA, 1994 - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty under Section 78 of the Finance Act, 1994.

Analysis:
The appeal was filed against an order passed by the Commissioner (Appeals) of Central Excise and Customs, Vadodara, regarding the non-payment of service tax by the appellant for Banking & Financial Services received from an overseas service provider. The appellant paid the entire service tax amount along with interest after being pointed out by the department. A show cause notice was issued, and penalty under Section 78 of the Finance Act, 1994 was imposed. The appellant challenged the penalty imposition before the Ld. Commissioner (Appeals), who upheld the penalty but allowed a 25% reduction subject to certain conditions.

The appellant contended that they paid the service tax within six months of receiving the services, under a bonafide belief, due to ongoing disputes and lack of clarity on the applicability of service tax under reverse charge mechanism. The appellant referred to a decision by the Hon'ble Tribunal in a similar case to support their argument. On the contrary, the Revenue argued that there was no evidence to establish the appellant's bonafide belief in not discharging the service tax. They cited a judgment by the Tribunal in another case to support their stance.

After hearing both sides and examining the case records, the Tribunal considered whether the penalty under Section 78 of the Finance Act, 1994 was rightly confirmed. The Tribunal noted that the appellant had paid the service tax within a reasonable timeframe after correspondence with the Revenue, indicating no intention to evade payment. The Tribunal also acknowledged the continuous disputes regarding the service tax liability on services received from overseas. Referring to a previous decision, the Tribunal found the case suitable for invoking Section 80 of the Finance Act, 1994. As a result, the Tribunal set aside the penalty imposition, allowing the appeal in this regard.

In conclusion, the Tribunal found in favor of the appellant, setting aside the penalty under Section 78 of the Finance Act, 1994, based on the circumstances of the case, the timely payment of service tax, and the ongoing disputes regarding service tax liability on overseas services.