2018 (1) TMI 1276 - HC - Service Tax

Penalty - Renting of immovable property service - non-payment of service tax - intent to evade duty - Held that - Assessee had paid service tax of ₹ 23,34,424/-, and total interest paid was ₹ 9.95,980/-, which means, major portion of the service tax has already been paid, even before the introduction of the Finance Act. Therefore, it cannot be said that there was any intention on the part of the respondent/assessee to evade payment of service tax - penalty rightly set aside - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Waiver of penalty under Section 78 of the Finance Act, 1994.
2. Applicability of Section 80 (2) for waiver of penalty.
3. Suppression of facts with intent to evade payment of service tax.

Issue-wise Analysis:

1. Waiver of Penalty under Section 78 of the Finance Act, 1994:
The appellant was earning rental income and was not paying service tax under the Renting of Immovable Property Service. The DGCEI issued a Show Cause Notice (SCN) demanding service tax and proposing penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The Additional Commissioner confirmed the demand and imposed penalties. The Commissioner (Appeals) reduced the penalty under Section 78 to 50% for the period from 8/4/2011 to 30/9/2011, as the relevant provision was introduced only from 8/4/2011. The CESTAT set aside the penalty, leading to the instant appeal.

2. Applicability of Section 80 (2) for Waiver of Penalty:
The appellant argued that the CESTAT erred in waiving the penalty by relying on a judgment applicable to Section 80 (2), which was not relevant to the case. The Commissioner (Appeals) noted that the appellant did not pay the entire tax liability within the prescribed period to avail the benefit under Section 80 (2). The CESTAT, however, followed its earlier decision in a similar case and concluded that no penalty was leviable due to the interpretational difficulty prior to a specific judgment.

3. Suppression of Facts with Intent to Evade Payment of Service Tax:
The adjudicating authority observed that the appellant had suppressed facts with the intent to evade payment of service tax. The Commissioner (Appeals) upheld this view, stating that the appellant tried to escape tax liabilities by suppressing relevant facts until pointed out by the department. The CESTAT, however, found no contumacious conduct on the appellant's part and noted that the major portion of the service tax was paid before the introduction of the Finance Act, indicating no intention to evade tax.

Judgment Summary:
The High Court upheld the CESTAT's decision to waive the penalty, noting that the appellant had paid a significant portion of the service tax and interest before the introduction of the Finance Act. The court found no intention to evade payment of service tax and dismissed the appeal, answering the substantial questions of law against the revenue. The court concluded that the CESTAT's reasoning was sound and did not warrant interference. The Civil Miscellaneous Appeal was dismissed without costs.