2019 (2) TMI 411 - AT - Service Tax

Penalty u/s 78 of FA - Non-payment of service tax - appellant had rendered service and collected service charges with tax but not paid the tax to the department - advertising agency service - period October 2007 to March 2010 - Held that - It is not in dispute also that during the period they have failed to furnish any returns with the department informing the collection of service tax along with service charges from the customers. In these circumstances, even if the appellant subsequently pays the amount on being pointed out by the department, along with interest, imposition of penalty under Section 78 of the Finance Act cannot be waived - penalty upheld. Demand of Service Tax - web hosting, server collocation, domain name registration etc. - Held that - The services rendered by the appellant all in the taxable category of information technology software service brought into statute with effect from 16.5.2008 and accordingly, confirmation of demand of ₹ 8,12,493/- for the said period with interest and penalty - the appellant s plea that they have not raised the issue of taxability for rendering services viz. domain name registration, web hosting, web design etc. is devoid of merit and liable to be rejected. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Imposition of penalty for non-payment of service tax.
2. Taxability of services under the category of 'information technology software service'.

Imposition of penalty for non-payment of service tax:
The appellant was engaged in providing services related to website design development and networking solutions. They were issued a show cause notice for non-payment of service tax amounting to ?31,14,678 for the period October 2007 to March 2010. The appellant did not dispute the liability but challenged the penalty imposition, arguing that they had paid the entire service tax amount along with interest before the notice was issued. However, the Revenue contended that the appellant collected service tax from customers but did not remit it to the government, thus justifying the penalty under Section 78 of the Finance Act. The Tribunal upheld the penalty, stating that even if the appellant paid the amount later, the penalty cannot be waived due to the failure to disclose the collected service tax to the department.

Taxability of services under the category of 'information technology software service':
The appellant disputed the demand of ?8,12,493 for the period 16.5.2008 to 31.3.2010 under the category of 'information technology software service'. They argued that the services provided, such as web hosting and domain name registration, should not be considered taxable under the Finance Act, 1994, as they were merely reselling web space obtained from a data center. The Revenue, however, maintained that these were taxable services and the appellant had consistently maintained their stand despite not paying the tax under a misconception of law. The Tribunal agreed with the Revenue, stating that the services fell under the taxable category of 'information technology software service' and confirmed the demand with interest and penalty. The appellant's plea that they had not raised the issue of taxability earlier was rejected, and the appeal was dismissed for lacking merit.

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