2017 (7) TMI 27 - AT - Service Tax

Penalty - Consulting engineering services - short payment of tax - Held that - he appellant paid tax with interest on being pointed out - in the show-cause notice, there is no allegation of suppression or fraud or collusion or wilful misstatement and the delay in payment occurred on account of the fact that the appellant had sought legal opinion as the appellant had a doubt about the taxability of the impugned services - reliance was placed in the case of Tidewater Shipping Pvt. Ltd. vs. CST 2008 (3) TMI 47 - CESTAT, BANGALORE , where it was held that if the assessee cleared the service tax along with interest on his own, then no penal proceedings can be initiated against them and all the proceedings against the appellant are deemed to have been concluded. Once the appellant has paid the service tax along with interest due, then the penalty cannot be imposed as there was no mens rea on the part of the appellant to evade payment of service tax - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Partial allowance of appeal by Commissioner (A)
2. Short payment of service tax
3. Allegations of suppression or misstatement
4. Payment of service tax before show-cause notice
5. Legal opinion sought by appellant
6. Applicability of penalties

Analysis:

1. The appeal was directed against an order passed by the Commissioner (A) partially allowing the appeal. The appellant had made payments for technical services received, falling under consulting engineering services, to two entities. Short payments of service tax were identified, leading to a show-cause notice and imposition of penalties. The Commissioner (A) allowed the appeal partially, modifying the original order concerning a specific demand.

2. The appellant contended that the impugned order was unsustainable as it did not consider legal provisions and documentary evidence. The appellant had voluntarily paid the service tax and interest before any formal demand, citing amendments to the Finance Act, 1994, and seeking legal opinion. The appellant argued that there was no evidence of fraud or wilful misstatement, relying on legal precedents supporting their position.

3. The AR supported the findings of the impugned order, emphasizing the discrepancies identified by the anti-evasion wing of service tax. However, the appellant had promptly paid the outstanding amounts upon discovery, even before any formal notice. The appellant also rectified an omission in paying service tax on certain services rendered, demonstrating cooperation with tax authorities.

4. The Tribunal noted that the appellant had proactively rectified errors in service tax payments, paying the outstanding amounts promptly upon discovery. The delay in payment was attributed to seeking legal clarity on tax obligations. Citing a relevant legal precedent, the Tribunal concluded that penal proceedings were unwarranted as the appellant had paid the service tax and interest voluntarily, without any intent to evade payment.

5. Ultimately, the Tribunal set aside the impugned order, ruling in favor of the appellant based on the precedent cited and the absence of mens rea in the appellant's actions. The decision highlighted the importance of voluntary compliance and timely rectification of errors in tax payments to avoid penalties. The judgment emphasized the significance of cooperation and good faith efforts in resolving tax discrepancies.

This detailed analysis of the legal judgment showcases the issues involved, arguments presented by both parties, the Tribunal's considerations, and the final decision rendered in favor of the appellant based on legal precedents and principles of tax compliance.