2017 (5) TMI 1301 - AT - Service Tax

Penalty - supply of tangible goods service - reverse charge mechanism - The Only point on which the Revenue is aggrieved is that the adjudicating authority has refrained from imposing any penalty under various sections of FA, 1994, even though the demand itself has been confirmed on the basis of SCN issued invoking the proviso to section 73(1) - Held that - The supply of tangible goods service was introduced w.e.f. 16.5.2008. We note that the demand for service tax in this case has arisen for the periods immediately after the introduction of this service when the activities covered under these services were being debated and settled by various judicial forum - the respondent has disputed the classification of their activity under the supply of tangible goods service. However, during the course of investigation they were convinced and they have discharged the entire service tax liability along with interest - this is a fit case to waive all the penalties under the provisions of section 80 - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Classification of services provided by the respondent.
2. Service tax demand and penalty imposition.
3. Verification and adjustment of service tax payments.
4. Demand of service tax under reverse charge mechanism.
5. Imposition of penalty under various sections of the Finance Act.

Classification of services provided by the respondent:
The respondent supplied aircraft on chartered hire along with their crew. The department proposed service tax under the reverse charge mechanism for expenses in foreign currency. The Commissioner classified the supply under 'supply of tangible goods for use service' and confirmed a demand of ?15,40,30,674. The Revenue appealed, arguing that the penalty should be imposed as the demand was confirmed under the suppression clause of Section 73.

Service tax demand and penalty imposition:
The Commissioner reduced the demand without substantive evidence and allowed adjustment of cenvat credit. The demand under management, maintenance, and repair service was dropped due to lack of evidence. The Revenue contested the reduction and adjustment without proper verification. However, the Tribunal found no infirmity in the Commissioner's decision.

Verification and adjustment of service tax payments:
The Commissioner allowed the respondent to adjust the paid amount and cenvat credit. The Revenue objected to the lack of detailed verification but failed to challenge the figures in the returns. The Tribunal upheld the Commissioner's decision, stating that tax paid under a wrong category could be considered towards the liability under the correct category.

Demand of service tax under reverse charge mechanism:
The demand under management, maintenance, and repair service on a reverse charge basis was dropped as the Commissioner found no evidence of taxable services received from foreign providers. The Tribunal agreed with the Commissioner's findings based on record verification.

Imposition of penalty under various sections of the Finance Act:
The Commissioner refrained from imposing penalties under various sections, considering the respondent's voluntary payment of outstanding service tax and interest. The Tribunal upheld this decision, citing the principles of natural justice and waiver of penal action under Section 73(3) of the Act.

In conclusion, the Tribunal upheld the impugned order, rejecting the Revenue's appeal and emphasizing the respondent's compliance with service tax liabilities and the absence of grounds for penalty imposition. The judgment highlighted the importance of proper classification, verification, and compliance with tax regulations.