2018 (5) TMI 676 - AT - Service Tax

Penalty u/s 78 - failure to discharge service tax - Visa charges - reverse charge mechanism - Held that - The issue whether an assessee is liable to pay service tax under reverse charge mechanism was contentious for a long time and later settled - penalty imposed under section 78 is unwarranted and requires to be set aside. Penalty u/s 76 and 77 - Held that - the appellant had taken wrong interpretation of the said provision under section 65(104c) - penalty u/s 76 set aside - penalty u/s 77 upheld. Appeal allowed in part.

Summary

Issues:
1. Service tax demand on Visa charges under reverse charge mechanism.
2. Service tax demand on commission received from insurance companies.
3. Contesting penalties under sections 76, 77, and 78 of the Finance Act, 1994.

Analysis:
1. The appellant contested the service tax demand on Visa charges, arguing that the issue of liability under reverse charge mechanism was contentious and settled by a Supreme Court decision. The appellant did not contest the tax demand but challenged the penalty under section 78, citing no intention to evade duty. The Tribunal found the penalty unwarranted and set it aside.

2. Regarding the service tax demand on commission from insurance companies, the appellant accepted the tax liability but contested penalties under sections 76 and 77. The appellant claimed a genuine belief that the activities did not fall under Business Support Services, leading to non-payment based on a wrong interpretation. The Tribunal, based on a previous order, set aside penalties under sections 76 and 78 while upholding the penalty under section 77.

3. The Tribunal reviewed penalties imposed under sections 76, 77, and 78 in all appeals. For the Visa charges case, the penalty under section 78 was set aside due to the contentious nature of the issue. In the commission case, penalties under sections 76 and 78 were deemed unwarranted and set aside, while the penalty under section 77 was upheld. The Tribunal emphasized that simultaneous imposition of penalties under sections 76 and 78 was not justified.

In conclusion, the Tribunal modified the impugned orders by setting aside penalties under sections 76 and 78 in different cases, while upholding penalties under section 77. The appeals were partly allowed based on these considerations, with consequential relief granted as necessary.