2018 (10) TMI 653 - AT - Service Tax

Penalty - Demand of service tax on Legal Services and Securing Agency Services - reverse charge mechanism - Bonafide belief - Held that - There is no dispute about the fact that the appellant was required to discharge its Service Tax liability in respect of Security Agency Services and Legal Consultancy Services so received by them, on Reverse Charge basis. However, inasmuch as the said services were not being provided by the appellant himself, there could be a bona fide belief on his part as regards his liability to pay the Service Tax. Payment of interest is also penal in nature and in the light of the overall facts and circumstances, it cannot be said that there was any mala fide on the part of the appellant so as to attract the penal provisions. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Request for adjournment for the Appellant(s)
2. Imposition of penalty by Commissioner(Appeals) on the Appellant

Analysis:
1. The judgment by Mrs. Archana Wadhwa of the Appellate Tribunal CESTAT ALLAHABAD dealt with a case where the Appellant had requested an adjournment, which was rejected. The appeal involved a short issue, and the judge proceeded to hear the case. The Appellant, registered for "Clearing and Forwarding Agents Service," was found not paying Service Tax on Reverse Charge basis for "Legal Services" and "Securing Agency Services" received, resulting in a demand of &8377; 9,456/- and &8377; 17,459. The original adjudicating authority did not impose a penalty due to doubts and immediate payment upon audit discovery. The Revenue appealed to impose a penalty of &8377; 26,915, leading to the present appeal challenging the penalty imposition.

2. The Appellant's liability for Service Tax on "Security Agency Services" and "Legal Consultancy Services" received was acknowledged, but given that these services were not provided by the Appellant directly, a bona fide belief in non-liability existed. The Appellant recorded the receipt of these services in statutory records, audited by the audit team, and promptly paid the amounts with interest upon objection. Considering the absence of mala fide intent, the penalty was set aside, and the appeal was allowed by restoring the original adjudicating authority's order.

This judgment highlights the importance of bona fide belief, prompt payment upon discovery, and absence of mala fide intent in determining the imposition of penalties related to Service Tax liabilities, providing clarity on the legal aspects involved in such cases.