2018 (9) TMI 1727 - AT - Service Tax

Manpower Recruitment and supply Agency services - the appellant on being pointed out paid the service tax after collecting the same from the service recipients - no intent to evade - Held that - The appellant is a proprietary concern and he is providing the taxable service under the category of Manpower Recruitment and Supply Agency service but he was under a bona fide belief that he was not liable to pay service tax and that is why he did not take registration under the service tax and did not collect the service tax from his clients and also did not pay the service tax to the Government. The appellant is an illiterate person and does not have the knowledge about the service tax provisions and that his activity is liable to service tax as the said service was newly brought under the Service Tax regime - Tribunal in various cases has taken a view that after there is an honest belief founded on reasonable grounds that the assessee is not liable to pay service tax but pay the service tax if the Department intervened and demanded service tax, then in those situations, the Tribunal should take liberal view and give him the benefit under Section 80 of the Finance Act, 1994 and should drop the penalties under Sections 76, 77 & 78. The Tribunal in the case of Infinity Credit 2009 (3) TMI 22 - CESTAT, NEW DELHI , in identical circumstances, held that there are sufficient causes for the appellant in entertaining doubt that they were not liable to pay the service tax especially when the service tax was recently introduced and the Tribunal by invoking the provisions of Section 80 of the Finance Act, has set aside the various penalties imposed on the appellant. Penalties u/s 76, 77 and 78 of FA - As far as interest liability is concerned, since there is a delay in payment service tax by the assessee, consequently the assessee is liable to pay interest under Section 75 of the Finance Act and the computation of interest would be done by the adjudicating authority which the assessee will pay. Appeal disposed off.

Summary

Issues:
- Confirmation of demand and penalties under Sections 76, 77 & 78 by Commissioner of Service Tax.
- Appellant's liability for service tax under Manpower Recruitment and Supply Agency services.
- Appellant's contention of bona fide belief regarding service tax liability.
- Arguments on suppression of material facts and intent to evade service tax.
- Applicability of penalties under various provisions.
- Consideration of appellant's ignorance of service tax laws.
- Analysis of case law supporting appellant's position.
- Decision on penalties and interest liability.

Confirmation of Demand and Penalties:
The appeal challenged the Commissioner's order confirming the demand and penalties under Sections 76, 77 & 78 related to service tax liability in the case of Manpower Recruitment and Supply Agency services. The appellant had paid the service tax after an investigation revealed non-compliance, leading to the issuance of a show-cause notice.

Appellant's Service Tax Liability:
The appellant, a proprietary concern, was providing taxable services but had not registered or paid service tax initially. The Tribunal noted that the service became taxable from a specific date and acknowledged the appellant's lack of knowledge about service tax provisions due to being illiterate.

Bona Fide Belief and Ignorance of Law:
The appellant argued a bona fide belief in not being liable for service tax, supported by the fact that service tax was paid promptly upon realization of the liability. The Tribunal considered the appellant's lack of awareness of service tax laws and the recent inclusion of the service under the tax regime.

Suppression of Material Facts and Intent:
The respondent contended that the appellant suppressed material facts to evade service tax, emphasizing that ignorance of the law does not excuse non-compliance. The Commissioner imposed penalties based on the finding of intent to evade service tax.

Penalties and Interest Liability:
After considering the submissions and case law cited by the appellant, the Tribunal invoked Section 80 of the Finance Act to set aside penalties under Sections 76, 77 & 78. However, interest liability under Section 75 was confirmed due to a delay in paying service tax, with the actual computation left to the adjudicating authority.

Conclusion:
The Tribunal upheld the demand for interest under Section 75 but dropped the penalties imposed on the appellant, citing the appellant's prompt payment upon realization of the tax liability and the lack of intent to evade payment. The appeal was disposed of accordingly.