2019 (1) TMI 977 - AT - Service Tax

Imposition of penalty - Manpower Supply Service - non-payment of service tax - case of appellant is that the Manpower Supply Service was not taxable till 01.07.2012 - Held that - The demand as been raised qua receiving the manpower services was not taxable till 30.06.2012 i.e. till the preceding year of the period involved. No doubt till 29.10.2014 i.e. when the audit was conducted by the Department, the appellant had neither got itself registered nor had discharged the service tax liability but the aforesaid unawareness due to the impugned amendment being very much proximate to the period of demand, the possibility of appellant being unaware cannot be ruled out. Since the allegations of tax evasion on the ground of mis-representation and fraud are serious in nature, the heavier burden was upon the Department to prove some positive act on part of the appellant of the alleged intentional tax evasion. But except the submission that the tax was not paid till it was noticed by the Department there is no other evidence on record - also, it is also apparent from the e-challans enclosed on record dated 31.01.2015 that the entire amount of service tax as demanded was paid alongwith the interest on the said date i.e. much prior the issuance of the impugned SCN. For the given circumstances also, the question of imposition of penalty upon the appellant does not at all arise. Penalty not imposable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability for service tax on Manpower Supply Service.
2. Imposition of penalty on the appellant.

Analysis:
1. The appellant, engaged in the manufacture of MS billet, availed Manpower Supply Service from various providers. The Department observed non-payment of service tax amounting to ?4,72,293/- for the period of June 2013 to September 2014. The demand was confirmed initially, and the appellant appealed against it.

2. The appellant argued that the Manpower Supply Service was not taxable until 01.07.2012, and they were unaware of the amendment requiring payment. They contended that the service tax was paid promptly after the Department's notification, even before the issuance of the Show Cause Notice (SCN). The appellant also highlighted the lack of intentional tax evasion and requested the penalty to be set aside.

3. The Department argued that the delayed payment indicated the appellant's intention to evade taxes. They emphasized the non-registration of the appellant as a strategy for tax evasion and supported the imposition of the penalty. The Department urged for the dismissal of the appeal.

4. The Tribunal noted that the appellant did not contest the service tax demand and had paid the amount. The primary issue was the imposition of the penalty on the appellant.

5. Considering the timeline, the demand was for the year 2013-14, and the service tax on manpower services became taxable post June 2012. The appellant's lack of registration and tax payment until the audit in October 2014 was attributed to their unawareness due to the recent amendment. The Department failed to provide substantial evidence of intentional tax evasion by the appellant.

6. Referring to Section 11AC of the Central Excise Act and relevant provisions of the Finance Act, the Tribunal found that the penalty was not applicable as the service tax was paid with interest before the SCN was issued. The legislative mandate precluded the imposition of penalty under Section 78 of the Finance Act. Thus, the Tribunal set aside the penalty and allowed the appeal, highlighting the error in imposing the penalty by the lower authorities.