2017 (4) TMI 949 - AT - Service Tax

Imposition of penalty u/s 78 of FA, 1994 - It was revealed that respondents had actually received higher taxable value than that was disclosed in their returns. As it appeared to department that respondents were not co-operating a further search was conducted in their premises on 27.07.2006 and certain documents were recovered - Held that - the respondent has furnished details to the department only after repeated intimations. Even after that, the department was able to collect proper data for quantification of the demand of service tax only after conduct of search in the premises of the respondent and also after approaching the clients of the respondent. This itself is sufficient evidence to establish that the respondent is guilty of suppression of facts - The law laid u/s 78 of the FA, 1994 mandates imposition of equal penalty when suppression of facts are established. The adjudicating authority imposed penalty of ₹ 35 lakhs which in my view is in excess of that which is allowed in the said provision. However, the respondent is liable to pay equal penalty which is ₹ 32,87,607/- of the service tax confirmed in appeal no. 258/2009 and ₹ 12,26,432/- in appeal no. 259/2009 - appeal allowed - decided in favor of Revenue.

Summary

Issues:
Non-imposition of equal penalty under Section 78 of the Finance Act, 1994 by the department. Reduction of penalties by the Commissioner (Appeals) in response to appeals filed by the respondents.

Analysis:
The department filed appeals due to the non-imposition of equal penalty under Section 78 of the Finance Act, 1994. The respondents were involved in providing security agent services, security services, and manpower supply services. A search revealed discrepancies in the taxable value disclosed by the respondents compared to the actual value received. Two separate show cause notices were issued demanding significant amounts. The adjudicating authority confirmed demands, imposed penalties under Sections 77 and 78 of the Finance Act, 1994, and confirmed interest amounts.

In response to the orders, the respondents appealed before the Commissioner (Appeals) who reduced the penalties. The department contested this reduction, arguing that there was mens rea, suppression of facts, and non-cooperation by the respondents. The department believed that equal penalties should have been upheld due to the established suppression of facts. The absence of the respondent during the Tribunal proceedings was noted, and the matter was reviewed based on the records and submissions by the Ld. AR.

Upon detailed examination, it was found that the respondent did suppress facts, as evidenced by delayed submissions and the need for a search to collect accurate data. The Tribunal concluded that the respondent should pay an equal penalty to the confirmed service tax amounts. The impugned order was modified to impose penalties equal to the service tax confirmed, without altering the demands, interest, or other penalties. The appeals by the department were allowed, and the penalties were upheld.

This judgment highlights the importance of transparency and cooperation in tax matters, emphasizing the consequences of suppression of facts and the imposition of penalties under the Finance Act, 1994.