2017 (6) TMI 976 - AT - Service Tax

Non-payment of service tax - mode of payment - contravention of Section 68 of the FA, 1994 and Rule 6(2) of the STR, 1944 read with CBEC Circular No. 33/01/2001 dt. 29.01.2001 - It is because of the mode of payment, which was permissible earlier and which was not permissible from 01.11.2000, that the Commissioner has taken the stand that Service Tax has not been paid - Held that - reliance was placed in the case of COMMISSIONER OF CENTRAL EXCISE, ALLAHABAD Versus BSNL 2011 (11) TMI 517 - CESTAT, NEW DELHI , where it was held that if there is non-compliance by BSNL, the proper course was to intimate C.B.E. & C. and not to demand the tax again with interest and to impose penalties - the order of the Commissioner holding that amount already paid by BSNL is tantamount to non-payment of Service Tax and confirming the demand of Service Tax and interest thereon and imposing equivalent penalty is not a reasonable order and cannot be sustained - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Contravention of Section 68 of the Finance Act, 1994 and Rule 6(2) of the Service Tax Rules, 1944
- Demand for Service Tax for the period from October 2002 to September 2003
- Imposition of penalty under Section 76 of the Act

Analysis:

Issue 1: Contravention of Section 68 of the Finance Act, 1994 and Rule 6(2) of the Service Tax Rules, 1944
The case involved a Public Sector Undertaking, BSNL, which had not deposited Service Tax in the prescribed TR-6 Challans in the designated bank, Punjab National Bank, as required by law. The Revenue contended that the appellants were obligated to follow the prescribed procedure for payment. The Commissioner confirmed the demand and imposed a penalty under Section 76 of the Act based on the non-compliance with the statutory provisions. However, the Tribunal noted that the appellants had indeed paid the Service Tax to the DOT Cell through cheques, which was a permissible method earlier but not after a certain date. The Tribunal referred to a previous judgment where it was held that the payment method change was a procedural matter and not a substantive issue. The Tribunal concluded that the Commissioner's order holding the amount already paid as non-payment of Service Tax was unreasonable.

Issue 2: Demand for Service Tax for the period from October 2002 to September 2003
The demand for Service Tax for the specified period was based on the alleged non-compliance with the prescribed payment procedure. The Commissioner upheld the demand, considering the failure to pay through TR-6 Challans as a violation of the law. However, the Tribunal, following the precedent set in a previous case involving BSNL, determined that the method of payment, though not in accordance with the updated procedure, did not negate the fact that Service Tax had been paid. The Tribunal emphasized the need to verify the actual payment of tax dues rather than focusing solely on the irregular method of payment.

Issue 3: Imposition of penalty under Section 76 of the Act
In addition to confirming the demand for Service Tax, the Commissioner had imposed a penalty under Section 76 of the Act. The Tribunal found that the penalty imposition was based on the erroneous conclusion that the Service Tax had not been paid due to the payment method discrepancy. Relying on the previous judgment, the Tribunal held that demanding the tax again with interest and penalties without verifying the actual receipt of the tax dues was not justified. The Tribunal directed the Department to reconcile the book entries of the Service Tax paid through the DOT Cell with the help of BSNL authorities to ensure the tax had been paid into the designated account.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order and instructing the Department to verify the payment of the Service Tax with the necessary documentation provided by BSNL authorities.