2017 (9) TMI 1438 - AT - Service Tax

Penalty - payment of tax with interest on being pointed out - Reverse charge mechanism - import of service under the category of consulting Engineer - Held that - the appellant on the basis of his own ascertainment or on the basis of the tax ascertained by the Central Excise Officers, had paid the tax with interest and informed the department by letter dated 25.11.2009. There is no material available on record of allegation of fraud, collusion etc. - the SCN issued after one Year is contrary to the provisions of law and the imposition of penalties is not justified - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of Service Tax, Interest, Penalty, Confirmation of demand, Appropriation of amount, Rejection of appeal.

Analysis:
The case involves a Joint Venture entity receiving services from an Australian company, a consulting engineer, without paying the required Service Tax under the Revenue charge mechanism. The Adjudicating Authority confirmed the demand for Service Tax, interest, and penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The Commissioner (Appeals) upheld the decision, rejecting the appellant's appeal.

Upon hearing both sides, the appellant's counsel argued that they promptly paid the Service Tax upon being notified during an audit by the Central Excise Department and communicated the same to the department. The appellant contended that the penalties imposed should be set aside.

The tribunal noted that the Spot Memo highlighting the liability to pay Service Tax was issued on 21.08.2009, and the appellant promptly paid the tax with interest and informed the department. However, a Show Cause Notice dated 31.12.2010 was issued, demanding tax for the period April 2006 to August 2009. Section 73(3) of the Finance Act, 1994 allows payment of Service Tax based on self-ascertainment or ascertained by a Central Excise Officer before receiving a notice. In this case, the appellant had paid the tax with interest and informed the department promptly, without any allegations of fraud or collusion. Citing relevant case laws, the tribunal found the delayed Show Cause Notice contrary to the law and unjustified penalties.

Referring to various decisions, the tribunal set aside the penalties imposed on the appellant and allowed the appeal, emphasizing that the penalties were not justified given the circumstances. The judgment was pronounced in open court on 06.06.2017.