2018 (11) TMI 1041 - AT - Service Tax

Penalty u/s 77(2) & 78 of the Finance Act, 1994 - works contract services - supply of manpower services - bonafide dispute of legal interpretation - partial reverse charge mechanism - N/N. 30/2012-ST dated 20.06.2012 - Held that - The governing body of Central Excise, CBEC had issued clarification in the education guide that in the partially reverse charge method, the service provider shall issue an invoice indicating the name, address and registration of the service provider and that of the service receiver, to mention the description of service as well as value of taxable service provided or agreed to be provided and the service tax payable thereon inclusive of service tax payable by service provider. Notification 33/12-ST dated 30.06.2012 indicates that if the turnover of the service provider is less than 10 lakhs, the service recipient shall be obliged to pay his share of service tax (of the service provider also) under the partial reverse charge mechanism. There is no denial of the fact that the idea behind introduction of this procedure was to bring unorganised sector on record so that the proper books of account are maintained by them, even though they are not aware about - 6 - ST/85989/2018 the various statutory liability cast on them and the same will remove the difficulty of the government in tracing out the service provider who are liable to pay service tax. Further no documents/invoices concerning such payment being made to the service provider is produced before the lower authorities, so as to conform if the invoice(s) were raised in conformity to the procedure meant for compliance of such Notification No. 30/2012-ST and nothing is found from the record to indicate that tax component has been fully realised from the service receiver by the service provider and paid to the Government in order to avoid situation like double taxation on the same service. The issue is a bonafide dispute of legal interpretation of the newly introduced provision coupled with transaction concerning availment of such services has been reflected in ST-I monthly return, no malafide can be attributed to the assessee to call for imposition of penalty of any kind - penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Confirmation of penalty under Section 77(2) & 78 of Finance Act, 1994 challenged before Tribunal.

Detailed Analysis:

1. Factual Background:
- Appellant engaged in manufacturing excisable goods and providing services under Centralised Service Tax registration.
- Availed works contract services from a non-corporate provider without paying 50% Service Tax under Partial Reverse Charge Mechanism.
- Promptly paid the due tax upon audit, but penalized under Section 77(2) & 78 of Finance Act, 1994.

2. Appellant's Arguments:
- No malafide intent to evade tax shown; paid tax promptly upon discovery.
- Claimed genuine human error due to complexity of new mechanism.
- Cited various judgments supporting their case and sought setting aside of the penalty.

3. Department's Response:
- Department justified penalty, citing appellant's failure to follow Notification No. 30/2012-ST.
- Relied on a Supreme Court judgment to support imposition of mandatory penalty even if tax paid before notice.

4. Tribunal's Observations:
- Dispute period from Jan 2013 to Jan 2014; Partial Reverse Charge Mechanism introduced in 2012.
- New legislation aimed to bring unorganized sector under tax purview.
- Lack of documents showing proper payment under the mechanism raised doubts.
- Audit procedures explained to ensure no tax evasion; no malafide intent found in appellant's actions.

5. Decision:
- Tribunal allowed the appeal, setting aside the penalty imposed by the Commissioner.
- Order-in-Appeal dated 04.12.2017 by Commissioner of Central Tax (Appeals-I), Pune, was overturned.
- Judgment pronounced on 20.11.2018, ruling in favor of the appellant's arguments.