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2018 (2) TMI 943 - AT - Service TaxBenefit of reduced penalty u/s 78 - non-discharge of service tax - extended period of limitation - Held that - once the demand of service tax liability for the period 01.10.2005 to 31.07.2008 is demanded under the show cause notice dated 17.02.2011, it is obviously done by invoking the extended period. If there is a demand by invoking extended period for the payment of service tax, in my view, the provisions of Section 78 will have to be followed, giving relief of payment of reduced penalty - Adjudicating authority will have to requantify the amount of service tax liability and appropriate the amount by the appellant towards tax liability and interest and extend benefit pay of pending 25% of the amount of such requantified amount of tax liability, and also appropriate the amount which has been paid by the respondent towards penalty. Appeal disposed off.
Issues:
1. Discharge of service tax liability on commission received. 2. Contestation of demand calculation by the respondent. 3. Appeal against the Order-in-Original. 4. Applicability of penalty under Section 78 of the Finance Act, 1994. 5. Misdirection by the first appellate authority on law interpretation. Issue 1: Discharge of service tax liability on commission received During the period from October 2005 to July 2008, the Respondents did not discharge the service tax liability on a commission received. The Respondents paid the service tax liability plus interest from February 2008 to October 2008. A show cause notice was issued in February 2011 demanding an amount from the Respondent, which was contested on the grounds of miscalculation and reimbursement of expenses. The adjudicating authority confirmed the demands, leading to an appeal before the first appellate authority. Issue 2: Contestation of demand calculation by the respondent The first appellate authority upheld the Order-in-Original but directed the lower authorities to re-quantify the service tax liability after considering the opening balance and service tax paid. The direction was based on the contention that the department had included amounts in the demand calculation that were already paid or reimbursable as expenses. The Revenue was not aggrieved by this direction, and the demand of service tax was yet to be re-quantified. Issue 3: Appeal against the Order-in-Original The Revenue was aggrieved by the first appellate authority's decision to extend the benefit of 25% of the total tax payable after partial payment during the investigation. The Revenue argued that there was no provision for such a benefit. However, the Respondent contended that the penalty should be 25% of the remaining tax liability as per Section 78 of the Finance Act, 1994. Issue 4: Applicability of penalty under Section 78 of the Finance Act, 1994 The main contention revolved around the interpretation of Section 78 regarding the penalty imposition. The first appellate authority reduced the penalty under Section 78, considering the payment made before the show cause notice. The authority directed the payment of 25% of the total service tax amount as penalty, subject to the payment of the remaining tax liability, interest, and penalty within 30 days of the order. Issue 5: Misdirection by the first appellate authority on law interpretation The Tribunal noted that the first appellate authority had misdirected itself on the law regarding the penalty imposition under Section 78. The Tribunal opined that when the demand of service tax liability is made invoking the extended period, the provisions of Section 78 should be followed, allowing for a reduced penalty payment. The Tribunal supported the direction of the first appellate authority to pay 25% of the penalty amount after considering the amount paid before the show cause notice. In conclusion, the Tribunal disposed of the appeal, upholding the direction to re-quantify the service tax liability and allowing for a reduced penalty payment under Section 78. The Tribunal clarified that the appellant should pay 25% of the penalty amount after adjusting the payment made before the issuance of the show cause notice. The judgment emphasized the importance of following statutory provisions in determining penalty amounts under the Finance Act, 1994.
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