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2017 (4) TMI 945 - AT - Service TaxPenalty u/s 78 of FA, 1994 - GTA services - Scientific and Technical Consultancy services - appellant had utilised the services of a foreign service provider for management and maintenance service during the period 2007-08 to 2010-11 and paid an amount of ₹ 1,88,17,627/- to the foreign service provider - contention of the Department is that the assessee by not taking registration for Management and Maintenance or Repair services received from foreign service provider and by not disclosing the value of the said service in their returns are guilty of suppression of facts and are liable to pay penalty - reverse charge - Held that - suppression of facts cannot be alleged on mere non-declaration in the returns when the issue whether service tax is payable on the said services was contentious as several litigations were pending - In the case of Vijay Television (P) Ltd. Vs. CST, Chennai 2008 (7) TMI 232 - CESTAT CHENNAI it was held that mere non-declaration of details in the ST-3 returns cannot be a ground for invoking the extended period - penalty set aside. Penalty u/s 73(4A) and Section 77 - Held that - Since the appellant has not filed proper returns and had not taken registration for the said service, appellant is liable to pay penalty u/s 77 - Since the appellant has paid service tax along with interest before issuance of SCN, Section 73(3) would apply and therefore the penalty imposed u/s 73(4A) is set aside. Appeal disposed off - decided partly in favor of assessee.
Issues Involved:
1. Liability to pay service tax under reverse charge mechanism. 2. Imposition of penalties under Sections 77, 78, and 73(4A) of the Finance Act, 1994. 3. Applicability of extended period for issuing show cause notice. 4. Allegation of suppression of facts/willful misstatement by the assessee. Detailed Analysis: 1. Liability to Pay Service Tax under Reverse Charge Mechanism: The assessee utilized services from a foreign service provider for management and maintenance services during 2007-08 to 2010-11, paying ?1,88,17,627/-. The Department asserted that the assessee was liable to pay service tax on these services under the reverse charge mechanism, which the assessee had not registered for nor disclosed in their ST-3 returns. Upon audit, the assessee paid ?20,48,335/- towards service tax along with interest. 2. Imposition of Penalties under Sections 77, 78, and 73(4A) of the Finance Act, 1994: - Original Authority: Imposed a penalty of ?10,000/- under Section 77 and an equal amount of ?20,48,335/- under Section 78, with an option to pay a reduced penalty of 25% within 30 days. - Commissioner (Appeals): Set aside the penalty under Section 77 and modified the penalty under Section 78, applying Section 73(4A) instead, as the assessee paid the service tax promptly upon audit detection. - Tribunal's Decision: The Tribunal restored the penalty under Section 77 due to the assessee's failure to file proper returns and take registration for the said services. The penalty under Section 73(4A) was set aside, as the appellant had paid the service tax and interest before the issuance of the show cause notice, making Section 73(3) applicable. 3. Applicability of Extended Period for Issuing Show Cause Notice: The Department issued a show cause notice on 17.10.2012, invoking the extended period, alleging suppression of facts. The Tribunal noted that the issue of service tax liability under Section 66A was contentious during the relevant period, as settled by the decision in Indian National Shipowners Association Vs. Union of India [2009 (13) STR 235 (Bom.)]. The Tribunal held that mere non-declaration in ST-3 returns does not constitute suppression of facts, especially when the issue was contentious. 4. Allegation of Suppression of Facts/Willful Misstatement by the Assessee: The Department argued that the assessee's failure to disclose amounts in ST-3 returns and lack of registration indicated suppression of facts. However, the Tribunal found that the assessee maintained true and correct details of transactions, and the short levy was detected by the audit. The Tribunal referenced similar cases where penalties were waived due to the contentious nature of the issue and the assessee's bona fide belief. Conclusion: The Tribunal concluded that the penalty under Section 78 was not applicable due to the contentious nature of the service tax liability under reverse charge mechanism during the relevant period. The penalty under Section 73(4A) was set aside as the appellant had paid the service tax and interest before the issuance of the show cause notice, making Section 73(3) applicable. The penalty under Section 77 was restored due to the appellant's failure to file proper returns and take registration for the said services. The appeals by both the assessee and the Department were partly allowed, with consequential reliefs if any.
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