2018 (1) TMI 377 - AT - Service Tax

Penalty u/s 78 - services of foreign commission agents - reverse charge mechanism - Held that - Tribunal in the case of Modern Woolens vs. Commissioner of Central Excise, Jaipur-II 2016 (11) TMI 1353 - CESTAT NEW DELHI , in similar circumstances, set aside the penalty imposed upon the assessee, and held that whatever Service tax was required to be paid by the appellant, was available to them as cenvat credit. As such, the entire situation is revenue neutral, in which case, no malafide can be attributable to the appellant. There is no evidence of mala fide on the part of the assessee - penalty set aside - appeal allowed.

Summary

Issues:
Challenge to penalty imposed under section 78 of the Finance Act.

Analysis:
The appeal challenged the penalty imposed under section 78 of the Finance Act. The appellants were availing the services of foreign commission agents, and demands were raised against them for the period 2004-2008. A show cause notice was issued, and while finalizing it, demands for the period prior to 18.04.2006 were dropped following a decision of the Hon’ble Bombay High Court. The demand for the remaining period was confirmed, along with interest and equivalent penalty. The appellant argued that the law was unclear during the relevant period and was settled in their favor by the Hon’ble Bombay High Court. The Revenue challenged this decision before the Hon’ble Supreme Court, which dismissed the appeal. The appellant claimed there was confusion in the field due to subsequent circulars accepting the court decisions, thus no mala fide intent existed to attract the penalty provision. The Tribunal set aside the penalty in a similar case, citing confusion in the field and lack of evidence of mala fide intent on the part of the assessee.

The Tribunal considered the submissions and found no evidence of mala fide on the part of the assessee. Citing previous decisions, including Modern Woolens and Needle Industries, the Tribunal set aside the penalty imposed, noting that the appellant had a bona fide belief due to confusion in the field and circulars issued. The Tribunal upheld the demand for tax and interest as it was not contested by the appellant. The penalty under section 78 of the Finance Act was set aside, and the appeal was allowed to that extent.