2018 (11) TMI 1210 - AT - Service Tax

Penalty u/s 78 of FA - GTA Service - appellant had incurred considerable expenditure towards freight inwards and outwards but has not paid service tax on the same - Held that - There is no case that the appellant did not cooperate with the verification of accounts or that the appellant had parallel set of accounts etc. Mere failure to pay service tax cannot be presumed as suppression of facts with intent to evade payment of service tax. Further, the appellant was a dealer and not a provider of output service - Appellant is liable to pay service tax under the reverse charge mechanism. Penalty - Held that - This aspect was under doubt and confusion and mired by litigations for a long time - penalty set aside. The impugned order is modified to the extent of setting aside the penalty imposed under section 78 without disturbing the service tax demand or interest thereon or the penalty imposed under section 77 of the Finance Act - appeal allowed in part.

Summary

Issues:
Challenge to penalty imposed under Section 78 of the Finance Act, 1994.

Analysis:
The appellant, a dealer in various MS products, was found to have not paid service tax on freight charges incurred towards Goods Transport Agency (GTA) service and clearing and forwarding agent service. The appellant contested only the penalty imposed, claiming they were unaware of the liability under the reverse charge mechanism during the relevant period. The appellant cooperated with authorities, took registration, and paid the service tax upon notification. The appellant argued there was no intention to evade payment, as all freight details were maintained in their accounts.

The Revenue supported the penalty, stating the appellant's failure to register for service tax and file returns constituted suppression of facts with intent to evade payment. The Tribunal noted the demand was based on departmental verification and appellant's records, finding no evidence of non-cooperation or parallel accounts by the appellant. The Tribunal recognized the confusion surrounding the liability under the reverse charge mechanism and the appellant's status as a dealer, not a service provider. Considering these factors, the Tribunal set aside the penalty under Section 78, while upholding the service tax demand, interest, and penalty under Section 77 of the Finance Act.

In conclusion, the Tribunal modified the impugned order by canceling the penalty under Section 78 without affecting the service tax demand, interest, or penalty under Section 77. The appeal was partly allowed in favor of the appellant, providing consequential relief as necessary.