2017 (12) TMI 683 - AT - Service Tax

Business Auxiliary Service - marketing services in relation to sale of paper bags - Held that - the appellant has claimed that they are eligible for CENVAT credit on the service tax paid by Shri V.M. Radhakrishnan for the commissions paid by the appellant to him. In that case, the services rendered by Shri V.M. Radhakrishnan is an input service for appellant. If this is to be accepted then the case of appellant that part of the commission pertains to Shri V.M. Radhakrishnan is incorrect - the appellant is liable to pay the service tax on the entire commission received by him. CENVAT credit of service tax paid by Shri V.M. Radhakrishnan - Held that - The documents placed require verification and for this limited purpose, matter is remanded to the adjudicating authority. Penalty u/s 76 and 78 - Held that - It is clear that the appellant was holding a bonafide belief that they are not liable to pay service tax. In fact, they had discharged the service tax other than the amount of commission received by Shri V.M. Radhakrishnan - the appellant has put forward a reasonable cause for not discharging service tax liability and there is sufficient ground to invoke section 80 of the FA, 1994 - penalty upheld. Appeal allowed in part and part matter on remand.

Summary

Issues:
Service tax liability on marketing services provided by the appellant, eligibility for CENVAT credit on service tax paid by a sub-contractor, imposition of penalties under sections 76 and 78 of the Finance Act, 1994.

Analysis:
1. The case involved a dispute regarding the service tax liability of the appellants for providing marketing services on behalf of a client. The appellants contended that a sub-contractor had already paid service tax on a portion of the commission received, absolving them of the liability. However, the tribunal found no evidence supporting the claim that the sub-contractor was acting on behalf of the client, leading to a rejection of this argument.

2. Another issue raised was the appellant's eligibility for CENVAT credit on the service tax paid by the sub-contractor. The tribunal decided to remand the matter to the adjudicating authority for verification of documents to determine if the appellant could avail CENVAT credit, indicating a need for further assessment in this regard.

3. The imposition of penalties under sections 76 and 78 of the Finance Act, 1994 was also contested by the appellant. The tribunal acknowledged the appellant's contention that they had a genuine belief in not being liable for the service tax and had already paid taxes on other amounts. Consequently, the penalties were set aside, citing a reasonable cause for the appellant's non-compliance with the service tax liability.

4. In conclusion, the tribunal partially allowed the appeal by setting aside the penalties imposed on the appellant. The matter was remanded for verification of documents related to CENVAT credit eligibility, emphasizing the need for a thorough assessment in this regard. The decision highlighted the importance of genuine belief as a factor in determining penalties under the Finance Act, 1994.