2017 (3) TMI 613 - AT - Service Tax

Imposition of penalty u/s 78 of FA, 1994 - non-payment of service tax on Erection commissioning and Installation services - extended period of limitation - Held that - there no evidence of mens rea as there is intention to evade payment of service tax - mere failure to take registration or mere non-filing of returns cannot be considered as suppression of facts - penalty waived invoking section 80 - appeal dismissed - decided against Revenue.

Summary

Issues:
Department's appeal against setting aside penalty under Section 78 of Finance Act, 1994.

Analysis:
The case involved an appeal by the department against the setting aside of a penalty under Section 78 of the Finance Act, 1994. The appellant, a sole proprietary concern, was issued a show cause notice for alleged non-payment of service tax on Erection commissioning and Installation services. The original authority confirmed the demand, interest, and imposed a penalty, which was later set aside by the Commissioner (Appeals), leading to the department's present appeal. The department argued that the penalty should not have been set aside as there was no finding of fraud, willful misstatement, or suppression of facts. The Commissioner (Appeals) had noted the invocation of the extended period due to the appellant's failure to file ST-3 returns despite collecting service tax. However, the Commissioner (Appeals) considered the appellant's argument that the non-payment was due to ignorance of the law and wrong advice from their accountant, leading to the conclusion that there was no mens rea for the alleged non-payment.

Upon review, the appellate tribunal found that the Commissioner (Appeals) had considered the grounds of appeal submitted by the appellant, who had paid a major part of the service tax before detection by the department. The appellant cited financial difficulties for the failure to pay the balance and pleaded ignorance of the service tax law, arguing against deliberate evasion of duty payment. The tribunal agreed with the Commissioner (Appeals) that mere failure to register or non-filing of returns did not amount to suppression of facts. The Commissioner (Appeals) also invoked the benefit of waiver of penalty under Section 80 of the Finance Act, leading to the dismissal of the department's appeal. The tribunal held that the Commissioner (Appeals) had appropriately exercised discretion under Section 80, and there were no grounds to interfere with the decision.

In conclusion, the appellate tribunal upheld the Commissioner (Appeals)'s decision to set aside the penalty under Section 78 of the Finance Act, 1994, based on the lack of evidence of intent to evade service tax payment and the invocation of the waiver of penalty under Section 80. The appeal by the department was dismissed, affirming the decision of the Commissioner (Appeals).