2018 (9) TMI 1505 - AT - Service Tax

Penalty - tax with interest paid before issuance of SCN - Section 73(3) of the Finance Act, 1994 - Held that - Explanation to Section 73(3) of the Finance Act, 1994 becomes relevant which clarifies that no penalty shall be payable under any provisions of Finance Act, 1994 or the Rules made there under - In view of this provision, it becomes abundantly clear that where the tax has been paid by the assesse before the issuance of Show Cause Notice, the very ground of issue of notice is ultra vires to the Act which calls for the penalty, if any imposed, to be vacated - Penalty set aside. Sponsorship Service - Reverse Charge Mechanism - N/N. 15/2006-ST dated 24.04.2006 - Held that - The appellants were not liable to pay any service tax for rendering Sponsorship Service which was otherwise to be paid by the recipient under the Reverse Charge Mechanism - The liability qua Sponsorship Service was not sustainable. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Incorporation of additional grounds of appeal.
2. Liability for service tax on sponsorship services.
3. Imposition of penalty.

Issue 1: Incorporation of additional grounds of appeal

The appellant sought to add explanations to existing grounds of appeal, arguing against the invocation of extended limitation period and penalty imposition. The respondent opposed, citing delay in the application. The Tribunal found the explanations did not introduce new grounds but clarified existing ones, causing no prejudice. The application was allowed, and its contents treated as part of the appeal memo.

Issue 2: Liability for service tax on sponsorship services

The appellant, engaged in various services, challenged a demand for service tax on sponsorship services. The appellant relied on notifications exempting service providers from liability and placing it on the recipient under the reverse charge mechanism. The Department argued that the Adjudicating Authority had already considered and justified the demand. The Tribunal reviewed the notifications and rules, concluding that the appellant was not liable for the service tax on sponsorship services. The Order imposing penalty was set aside, and the appeal was allowed.

Issue 3: Imposition of penalty

The Department had raised demands for various services, including sponsorship services, and imposed a penalty. The Tribunal noted that the tax for other services had been paid before the show cause notice, invoking Section 73(3) of the Finance Act to set aside the penalty. Regarding the sponsorship services, the Tribunal analyzed relevant notifications and rules, finding the appellant not liable for the service tax. The Order imposing the penalty was set aside, and the appeal was allowed.

In conclusion, the Tribunal allowed the appeal, setting aside the penalty imposed on the appellant for service tax on sponsorship services. The Tribunal found that the appellant was not liable for the service tax based on the notifications and rules analyzed. The decision highlighted the importance of considering relevant legal provisions and notifications in determining tax liabilities, ultimately providing relief to the appellant in this case.