2017 (7) TMI 525 - AT - Service Tax

Penalty u/s 77 and 78 - Banking and others Financial Services - Held that - the said SCN dated 08.06.2010 is not sustainable in respect of Service Tax amount of ₹ 25,06,459/- since the said tax was paid alongwith applicable interest before issue of SCN. Therefore, as provided under Sub-Section 3 of Section 73 of Finance Act, 1994, this SCN in respect of said amount is not sustainable - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Appellant availed Foreign Currency Convertible Bond and received services from foreign service providers.
2. Appellant received a show cause notice for non-payment of Service Tax on services received.
3. Original Authority confirmed the demand and imposed penalties under Sections 77 and 78 of the Finance Act, 1994.
4. Appeal made to Commissioner (Appeals) against the order.
5. Commissioner (Appeals) set aside the demand for legal services but upheld the penalty under Section 77.
6. Appellant appealed to the Tribunal challenging the penalties imposed.

Analysis:
1. The appellant availed Foreign Currency Convertible Bond and received services from foreign entities. The services included financial services from M/s Silverdale Services Limited and Bank of New York, as well as legal services from Fladgate Fielder, which had no office in India. The appellant was required to pay Service Tax under Reverse Charge Mechanism for the services received after a specified date.

2. The show cause notice issued to the appellant demanded the payment of Service Tax totaling a specific amount, which included charges for financial and legal services. The appellant contended that they had already paid a significant portion of the demanded amount before the notice was issued, making the notice unsustainable due to the provisions of Sub-Section 3 of Section 73 of the Finance Act, 1994.

3. The Original Authority confirmed the demand and imposed penalties under Sections 77 and 78 of the Finance Act, 1994. A penalty was levied for non-payment of Service Tax and interest. The appellant argued that no penalty could be imposed under the mentioned provisions for the payment of Service Tax and interest, citing relevant legal provisions and a precedent from a previous Tribunal decision.

4. The appeal was made to the Commissioner (Appeals) who set aside the demand related to legal services provided by Fladgate Fielder but upheld the penalty imposed under Section 77 of the Finance Act, 1994. The Commissioner reduced the penalty amount related to financial services but did not interfere with the penalty under Section 77.

5. The Tribunal, after considering the arguments presented by both parties and examining the records, found that the show cause notice for the Service Tax amount already paid by the appellant was not sustainable. The Tribunal, in view of the provisions of the Finance Act, 1994, set aside the penalties imposed under Sections 77 and 78, thereby allowing the appeal made by the appellant.