2018 (8) TMI 1280 - AT - Service Tax

Penalty - Short payment of service tax - suppression of facts or not? - demand of differential service tax liability for the period 2004-2005 to 2007-2008 - entire case of the Revenue is that due erroneous method of calculation followed month after month and differential service tax liability remained evaded and is correctly confirmed by the lower authorities by invoking extended period. Held that - The copy of the audit report filed by the appellant in appeal memorandum clearly indicates that the entire records were made available to the audit party and audit record specifically states that the service tax of audit is of the Branch accounts and they had pointed out same discrepancy of non-payment of tax on foreign exchange remuneration and income received from the Government transactions, syndication fees, etc. These details indicate that the appellant assessee had in fact produced all the records before the authorities to check and come to a conclusion, whether the tax liability was correctly discharged or otherwise. There are strong force and contentions raised by the Learned Counsel that though they have not contested the tax liability before the Adjudicating Authority they had taken the point of limitation for setting aside the penalties so imposed, this is an acceptable point as, if the tax liability itself cannot survive on limitation the question of penalty does not arise - the penalty imposed on the appellant assessee are liable to be set aside; as also on the ground that the appellant assessee has not been able to discharge the tax liability during the period in question due to clerical error is an accepted position, hence this calls for setting aside the penalty of Section 80 of the Finance Act, 1994 invoking the provisions of Section 80 of the Finance Act, 1994. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Recovery of short payment, imposition of penalty, invocation of extended period, demand of interest, calculation error, limitation, suppression of facts, audit reports, penalty under Section 78 and Section 76 of the Finance Act, 1994.

Analysis:
1. The appeals were filed against Order-in-Original No. 11/2009 regarding the recovery of short payment made by the appellant assessee from September 2004 to March 2008. The main issues were whether the extended period could be invoked, demand of interest, and imposition of penalties under Section 78 and Section 76 of the Finance Act, 1994. The Adjudicating Authority confirmed the demands, interest, and penalties, leading to appeals from both the appellant and the Revenue.

2. The appellant contested the demands on the grounds of limitation, clerical error in payment calculation, and lack of intention to evade taxes. The appellant relied on legal precedents to support their arguments, emphasizing that penalties should not be imposed due to the payment made before the show cause notice and the existence of a reasonable cause for the errors.

3. The Departmental Representative argued in favor of invoking the extended period and penalties, stating that the audit reports indicated suppression of facts despite multiple audits. Legal precedents were cited to support the position that mere audits do not nullify the intention to evade taxes.

4. The Tribunal analyzed the case, focusing on the differential service tax liability for the period in question. It was noted that the appellant's method of calculation led to the evasion of tax liability, as confirmed by the lower authorities invoking the extended period.

5. The Tribunal considered the arguments from both sides and reviewed the records to determine that the appellant had contested only the penalties for incorrect calculation of service tax. The Tribunal found that the audit reports indicated discrepancies in tax payments, despite multiple audits conducted on the appellant.

6. Relying on legal precedents, the Tribunal concluded that penalties should be set aside due to limitations on tax liability and clerical errors in payment calculation. The appellant's failure to discharge tax liability was attributed to clerical errors, justifying the setting aside of penalties under Section 80 of the Finance Act, 1994.

7. Consequently, the penalties imposed on the appellant were set aside, and the Revenue's appeal seeking enhancement of penalties was rejected. The appellant's appeal was allowed, and the Revenue's appeal was dismissed, based on the justifications provided regarding limitations and clerical errors in payment calculations.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT HYDERABAD highlights the key issues, arguments presented by both parties, legal precedents cited, and the Tribunal's decision regarding the recovery of short payment, imposition of penalties, invocation of extended period, and other related matters.