2019 (2) TMI 1377 - AT - Service Tax

Imposition of penalty u/s 78 - the entire service tax liability was paid much before the issue of show-cause notice which was issued after a lapse of 2 years 6 months by invoking the extended period of limitation - suppression of facts or not - Business Auxiliary Service - Held that - The original authority has confirmed the demand of ₹ 6,49,185/- but the appellate authority has given the cum-tax benefit and confirmed the tax liability to ₹ 5,83,590/- which is also wrong in quantification and the actual liability comes to ₹ 5,77,773/- and the appellant has already paid ₹ 6,15,926/- as per the various challans attached and he has also paid the interest of ₹ 33,437/- voluntarily computed and also paid the late filing fee of ₹ 52,100/- towards service tax returns - the entire amount was paid before issuance of the show-cause notice and the Department has failed to bring any evidence on record to show that there was suppression on the part of the appellant to evade the payment of service tax. Penalty not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Confirmation of demand under proviso to Section 73(1) of Finance Act, 1994
- Appropriation of amount and penalty under Section 77 and Section 78
- Tax liability on commission received by the appellant
- Imposition of penalty under Section 78
- Appellant's compliance and payment of service tax

Analysis:

The appeal was filed against an order confirming a demand of ?5,83,590 under the proviso to Section 73(1) of the Finance Act, 1994, along with interest and penalties, and upholding a penalty under Section 77 and imposing a penalty of ?5,83,590 under Section 78. The case involved the appellant, engaged in selling goods, receiving commission from M/s. Bata India Ltd. without discharging service tax. The Commissioner(Appeals) confirmed a service tax liability of ?5,83,590 for the commission received during 2013-14 and 2014-15, along with interest and penalties.

The appellant argued against the penalty under Section 78, stating the quantification of service tax liability was incorrect. They contended that the actual liability was ?5,77,773, not ?5,83,590 as determined. The appellant had voluntarily registered for service tax upon realizing the liability, paid the entire service tax liability before the show-cause notice, and submitted that there was no intent to evade payment. The appellant had paid the service tax, interest, and late filing fee, totaling ?6,15,926, before the notice was issued.

After hearing both sides and reviewing the records, the Tribunal found discrepancies in the quantification of the tax liability. The appellate authority had confirmed a tax liability of ?5,83,590, whereas the actual liability was ?5,77,773. The appellant had already paid ?6,15,926, including interest and late filing fees, before the notice. The Tribunal noted the lack of evidence of suppression by the appellant to evade tax payment. Consequently, the Tribunal held that the imposition of penalty was not sustainable in law and set aside the impugned order, allowing the appeal of the appellant.

In conclusion, the Tribunal overturned the order confirming the demand and penalties, citing incorrect quantification of tax liability, early payment by the appellant, and the absence of evidence showing intent to evade tax payment. The appellant's compliance with registration and payment obligations was considered in the decision to set aside the penalty under Section 78.