2018 (7) TMI 857 - AT - Service Tax

Penalty u/s 78(1) of FA - case of Revenue is that the appellant had paid taxes only after being pointed out by the department and interest due have been paid only after the decision of the Commissioner (Appeals) - justification for invocation of section 80 of the Finance Act, 1994 - Held that - There has been no challenge in the present case with regard to the finding in respect of mens rea evasion of tax etc. and both the authorities have concluded that there was enough mens rea in the present case for suppressing the value of the services received and not payment of tax. While doing so, both the authorities have also considered the plea of revenue neutrality. Without proper challenge to such a finding with regard to the malafide intent, the appellant cannot challenge the imposition of penalty and claim waiver in terms of Section 80 just on the ground of revenue neutrality. No cogent reason has been put forth to establish the bonafides by the appellant - invocation of Section 80 of the Finance Act, 1994 not justified - appeal dismissed - decided against appellant.

Summary

Issues:
Appeal against order upholding service tax demand, penalty under Section 78(1) challenged, invocation of Section 80 of Finance Act, 1994 for penalty waiver.

Analysis:
1. The appeal challenged the order of the Commissioner (Appeals) upholding the service tax demand and penalty imposed under Section 78(1) of the Finance Act, 1994. The Deputy Commissioner had demanded service tax amounting to ?13,05,472 along with penalties under Sections 77 and 78(1). The Commissioner (Appeals) upheld the demand and the penalty under Section 78(1) but dropped the penalty under Section 76.

2. The appellant's counsel argued that the demand was revenue neutral, and hence, the penalty should be waived invoking Section 80 of the Finance Act, 1994. The appellant cited precedents to support the claim of revenue neutrality. On the other hand, the Revenue contended that the appellant paid taxes only after departmental notice and did not establish bonafide intentions, arguing against invoking Section 80 for penalty waiver.

3. The adjudicating authority found that the appellant evaded service tax by suppressing taxable service value, leading to the imposition of penalties under Sections 76, 77, and 78. The Commissioner (Appeals) concurred with this finding, emphasizing the appellant's evasion of service tax liability under the Reverse Charge Mechanism, rejecting the plea of revenue neutrality.

4. The Commissioner (Appeals) justified the 50% penalty under Section 78(1) and the interest on the service tax demand. However, the penalty under Section 77 was set aside as the penalty under Section 78 was deemed sufficient. The judgment highlighted the appellant's failure to challenge the finding of mens rea or malafide intent, emphasizing the importance of establishing bonafides to invoke Section 80 for penalty waiver.

5. Ultimately, the Tribunal dismissed the appeal as no cogent reasons were presented by the appellant to establish bonafides, leading to the rejection of invoking Section 80 of the Finance Act, 1994. The judgment emphasized the significance of addressing malafide intent and establishing bonafides to seek penalty waivers under relevant provisions of the law.