2017 (7) TMI 196 - AT - Service Tax

Manpower and supply agency services - Penalty - invocation of section 80 - Held that - The appellants had not obtained any registration nor filed any return during the period and in these circumstances no leniency can be shown to the appellant. The appellant has sought invocation of Section 80. However, they have not made any ground for invocation of Section 80 or to establish their bonafide. In the absence of bonafide, Section 80 cannot be invoked - appeal dismissed - decided against appellant.

Summary

Issues:
1. Whether the appellants were liable to pay service tax for providing manpower services.
2. Whether the appellants' claim of being unaware of service tax obligations is justified.
3. Whether the penalty imposed on the appellants is justified.

Analysis:
1. The appellants argued that they were merely estate agents engaged by a company to provide manpower services, with the entire labor force organized and managed by the company itself. They contended that they were not highly educated and were unaware of the service tax applicability. The appellants did not charge or collect service tax from their clients but paid the entire amount along with interest once it was pointed out by the Revenue. However, the Tribunal found that the appellants failed to provide any evidence to support their claim that they were merely acting as dummies for the company. The Commissioner observed a close association among the appellants with high turnovers, making it difficult to believe they were ignorant of their legal obligations under the service tax law. The Tribunal upheld the decision that the appellants willfully suppressed material facts to evade service tax, justifying the penalty imposed.

2. The Assistant Commissioner argued that the appellants, being high net worth individuals with vast business experience, could not claim ignorance of the law. The Tribunal agreed with this assertion, emphasizing that the appellants' failure to register, file returns, or disclose their activities to the department indicated willful suppression of facts. The Tribunal noted that the appellants did not establish any bonafide grounds for invoking leniency under Section 80, leading to the dismissal of their appeal.

3. The Tribunal concluded that the appellants' argument of supplying services mainly on paper without any evidence to support it did not merit consideration. The failure to register, file returns, and disclose activities to the department was viewed as willful suppression of facts to evade service tax. As a result, the Tribunal found no merit in the appeal and dismissed it, upholding the penalty imposed on the appellants for non-compliance with service tax obligations.