2018 (8) TMI 1175 - AT - Service Tax

Penalty - service tax on Charges paid to the Overseas banks on Nostro and Vostro accounts and SWIFT Charges - Demand of Service Tax - Held that - In an identical issue in the case of The Karur Vysya Bank Ltd. Vs. C.C.E. & S.T., Tiruchirappalli 2018 (7) TMI 532 - CESTAT CHENNAI wherein, inter alia, the penalties imposed have been set aside by holding that During the relevant period, the issue whether an assessee is liable to pay service tax under reverse charge mechanism was under much litigation. The same reasoning can be extended to the appellants - penalties u/s 77 and 78 set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Proceedings initiated for service tax on charges paid to Overseas banks on Nostro and Vostro accounts and SWIFT Charges for a specific period. Confirmation of demand, interest, and penalties under Sections 77(1)(a) and 78 of the Finance Act, 1994. Appeal filed seeking relief from penalties. Comparison with a similar case where penalties were set aside. Disagreement on penalty imposition. Interpretational issue regarding liability to pay service tax under reverse charge mechanism.

Analysis:
The appeal before the Appellate Tribunal CESTAT Chennai involved proceedings against the appellant for service tax on charges paid to Overseas banks on Nostro and Vostro accounts and SWIFT Charges for a specific period. The Original Authority confirmed a demand of &8377; 11,68,547/- with interest and imposed penalties under Sections 77(1)(a) and 78 of the Finance Act, 1994. The appellant appealed to seek relief from penalties, but the Commissioner (Appeals) rejected the appeal citing non-compliance of provisions and lack of merit. The appellant then approached the Tribunal seeking relief from penalties.

During the hearing, the appellant's consultant referred to a previous decision of CESTAT Chennai where penalties in a similar issue were set aside. The respondent supported the findings in the impugned order but acknowledged the previous Tribunal decision. After hearing both sides and reviewing the facts, the Tribunal focused on the issue of penalties. Referring to the previous decision, the Tribunal noted that the issue of liability to pay service tax under reverse charge mechanism was interpretational. The Tribunal observed that penalties were unwarranted as there was no evidence of deliberate suppression of facts to evade tax payment. Therefore, the penalties under Sections 77 and 78 were set aside while maintaining the rest of the impugned order.

The Tribunal's decision was based on the interpretational nature of the issue and the lack of evidence of intentional tax evasion. The Tribunal allowed the appeal, setting aside the penalties under Sections 77 and 78 but not interfering with the remaining portion of the impugned order. The decision highlighted the importance of considering interpretational issues and lack of deliberate suppression of facts in penalty imposition cases.