2018 (7) TMI 271 - AT - Service Tax

Non-payment of service tax - Job-work - demand of service tax with interest - Penalties - Held that - the appellant had undertaken the work without receiving goods and hence was liable to discharge service tax as the service provided by the appellant would qualify as Business Auxiliary Service - also the appellant had collected rent from M/s Walzen Strips Ltd. but had failed to discharge service tax on the rent collected - further the appellant had also failed to discharge service tax on the GTA service availed by the appellant - demand of service tax along with interest is sustainable. Penalties u/s 77(1)(a) and 78 of FA - Held that - The appellant had paid the service tax amount along with interest as pointed out during the departmental audit - also there is no material on record to establish fraud collusion wilful misstatement or suppression of facts on the part of the appellant - penalties set aside. Appeal allowed in part.

Summary

Issues:
1. Liability for non-payment of service tax on job work undertaken by the appellant.
2. Failure to discharge service tax liability on rent collected and GTA services availed.
3. Imposition of penalties under Section 77(1)(a) and Section 78 of the Finance Act, 1994.

Analysis:
Issue 1: The appellant had not paid the duty on the job work undertaken, which qualified as Business Auxiliary Service. The appellant was liable to discharge service tax on the job work. Additionally, the appellant collected rent and availed GTA services without discharging the service tax liability, making the demand of service tax along with interest sustainable.

Issue 2: The appellant contended that they were under the bonafide belief that service tax was not required for the job work undertaken and that the value of taxable services availed was below the exemption limit. However, the Tribunal found that the appellant had failed to discharge service tax liabilities on various services provided, including job work, rent collected, and GTA services availed.

Issue 3: The Commissioner (Appeals) had modified the adjudication order, enhancing the penalty under Section 77(1)(a). However, the Tribunal found that the imposition of penalty under Section 77(1)(a) was unwarranted as the appellant had paid the service tax amount along with interest before the show-cause notice was issued. Moreover, there was no evidence of fraud, collusion, wilful misstatement, or suppression of facts to justify penalties under sections 77(1)(a) and 78 of the Finance Act. Therefore, the penalties were deemed unwarranted, and the impugned order was modified, partly allowing the appeal filed by the appellant.