2018 (7) TMI 787 - AT - Service Tax

Penalty u/s 78 of FA - case of appellant is that the entire amount of service tax along with interest had been paid on being pointed out - intent to evade duty - Held that - There is no dispute of the fact that the appellant had failed to discharge the service tax during the period 2008 to 2011, even though against the contract they supplied various equipment to M/s. Grasim Industries Ltd. and the said service is taxable under the category of supply of tangible goods for use services. Further, the appellant had not disclosed the provision of the said service to their clients against the respective contracts to the department nor registered with the Service Tax department. There is no reason to waive the penalty imposed u/s 78 of the Finance Act, 1994 - However, the appellant is eligible to discharge 25% of the penalty imposed under Section 78 of the Finance Act, 1994 subject to fulfilment of the conditions laid down therein - appeal allowed in part.

Summary

Issues:
1. Liability of penalty under Section 78 of the Finance Act, 1994.

Analysis:
The appeal was filed against the order-in-appeal passed by the Commissioner of Central Excise (Appeals), Pune-II. The main issue in this case was whether the appellant was liable to penalty under Section 78 of the Finance Act, 1994. The appellant provided services under the taxable category of 'supply of tangible goods for use of services' by supplying dozers and tippers to clients but failed to pay service tax amounting to ?16,43,785/- for the period from 16.5.2008 to 31.3.2011. The appellant paid the service tax along with interest after it was pointed out. The appellant argued that since they had paid the entire service tax with interest, penalty under Section 78 should not be imposed.

The appellant did not dispute the applicability of service tax but contested the imposition of penalty equivalent to the service tax under Section 78 of the Finance Act, 1994. The appellant claimed they were unaware of the applicability of service tax for the provided services and paid the outstanding amount promptly after being informed. The Revenue argued that the continuous non-payment of service tax for three years without disclosure cannot be considered bona fide, justifying the penalty imposition. However, the Revenue acknowledged that the appellant was not granted the benefit of discharging 25% of the penalty by the authorities below.

The Tribunal found that the appellant indeed failed to discharge the service tax during the relevant period, despite providing taxable services. The appellant did not disclose the provision of services to the department or register with the Service Tax department. Consequently, the Tribunal upheld the penalty under Section 78 of the Finance Act, 1994. However, the Tribunal allowed the appellant to discharge 25% of the penalty, subject to fulfilling the conditions laid down in the Act. The impugned order was modified to permit the appellant to avail this benefit, resulting in the partial allowance of the appeal.

In conclusion, the appeal was partly allowed, and the appellant was granted the opportunity to discharge 25% of the penalty under Section 78 of the Finance Act, 1994, upon meeting the specified conditions.