2017 (5) TMI 766 - AT - Service Tax

Penalty - Services rendered from abroad - payment of tax on being pointed out - Held that - In the case of Adecco Flexione 2011 (9) TMI 114 - KARNATAKA HIGH COURT , the Karnataka High Court has held that once the duty along with interest is paid before issue of SCN, in that case, SCN shall not be issued - in this case, the appellant had paid more service tax than it was required and he had a bona fide belief that he is not liable to pay service tax on Business Auxiliary Service and Goods Transport Agency and paid the same on being pointed out by the Department - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Applicability of service tax on services rendered from abroad prior to 18.4.2006
- Liability for service tax on Business Auxiliary Services and Goods Transport Agency services
- Imposition of interest and penalty under Section 78
- Validity of show-cause notice issuance post payment of service tax
- Interpretation of penalty provisions under Section 76, 77, and 78
- Judicial precedents on penalty imposition for delayed service tax payment
- Consideration of reasonable cause for non-payment of service tax

Analysis:
The appeal challenged an order modifying the original decision regarding service tax liability. The appellant, a partnership firm, engaged in exporting plywood and importing various products, faced allegations of evading service tax on Business Auxiliary Services (BAS) and Goods Transport Agency (GTA) services. The Commissioner (A) had modified the original order, reducing the liability for service tax on services rendered from abroad before 18.4.2006. The appellant contended that they had already paid service tax and interest before the show-cause notice was issued, questioning the necessity of the notice. The appellant argued for a reduced liability for BAS and GTA services, citing judicial precedents and interpretations of penalty provisions.

During the proceedings, the appellant's counsel emphasized that the Karnataka High Court's decision in the case of CCE & ST vs. Adecco Flexione supported their argument that no penalty should be imposed if service tax and interest were paid before the show-cause notice. Additionally, reliance was placed on the case of Kakinada Seaports Ltd. vs. CCE & ST to argue against penalty imposition for delayed payment during the initial period of new charging provisions. The appellant also referenced the case of CST, Bangalore vs. Vinayaka Travels to support the claim that no penalty should be imposed under Section 80 in the presence of a reasonable cause for non-payment of service tax.

In the final judgment, the Tribunal agreed with the appellant, stating that the penalty was not justified. Citing the Adecco Flexione case, the Tribunal held that since the appellant had paid more service tax than required and had a genuine belief in not being liable for certain taxes, the penalty was unwarranted. The appeal was allowed, and the penalty was set aside. The ruling highlighted the importance of paying due diligence to tax obligations and the significance of genuine belief in tax liability decisions.