2018 (10) TMI 1076 - AT - Service Tax

Penalty - Non-payment of Service Tax - import of certain services from over-seas entities - reverse charge mechanism - Section 66A of Finance Act - Held that - Since the appellant did not pay the service tax attributable to receipt of taxable service, the CERA audit officers have rightly pointed out such mistakes. Being a Service Tax registered assessee, the appellant was required to comply with the statutory provisions, including payment of service tax within the stipulated time frame. Penalty rightly upheld - appeal dismissed - decided against appellant.

Summary

Issues:
1. Appellant's liability to pay service tax under reverse charge mechanism for imported services.
2. Non-payment of service tax leading to show cause proceedings and penalties under Section 77 and 78 of the Finance Act, 1994.
3. Appeal regarding the imposition of penalties under Section 77 and 78 based on Section 73(3) of the Act.

Analysis:
1. The appellant, engaged in providing taxable services, imported services from overseas entities during the disputed period, making them liable to pay service tax under the reverse charge mechanism. The appellant failed to pay the service tax, which was later noticed during a CERA audit by Service Tax department officers.

2. Subsequently, show cause proceedings were initiated against the appellant, resulting in an adjudication order confirming a service tax demand along with interest. The appellant, prior to the show-cause notice, deposited the service tax amount, which was appropriated in the order. Penalties under Section 77 and 78 of the Finance Act, 1994, were also imposed in the adjudication order.

3. In the appeal, the appellant did not contest the service tax demand but sought relief from penalties under Section 77 and 78 based on Section 73(3) of the Act. The appellant argued that they should be exempt from penalties as they had deposited the service tax amount before the show-cause notice was issued.

4. The Revenue, represented by the Departmental Representative, supported the findings of the impugned order. The Revenue argued that the penalties were justified as per the specific findings of the learned Commissioner (Appeals) and based on authoritative judgments of the Hon'ble Supreme Court.

5. The Tribunal noted that the appellant had indeed received taxable services from overseas entities and was obligated to pay service tax under the reverse charge mechanism. Given the appellant's regular receipt of such services, it was deemed that they were aware of their obligations under the law. The Tribunal upheld the penalties imposed by the learned Commissioner (Appeals) based on the overall facts, circumstances of the case, and relevant Supreme Court judgments.

6. Consequently, the Tribunal found no reason to interfere with the impugned order and dismissed the appeal filed by the appellant. The decision was based on the appellant's failure to comply with statutory provisions despite receiving taxable services regularly from overseas entities.