2019 (3) TMI 1325 - AT - Service Tax

Penalty u/s 77 and 78 of FA - non-payment of service tax - intentional mistake or not - no willful suppression of facts - reasonable cause - Held that - During the relevant period there was confusion as to whether the individual person who is rendering the service is liable to pay service tax. It was pleaded by the respondent that only a commercial concern would come within the purview of the levy of service tax. It is seen that the respondent has paid up the service tax liability. Taking note of the facts, the Commissioner (Appeals) invoking section 80 concluded that the respondent has given reasonable cause for not discharging the service tax liability. There is no evidence adduced by the department to disturb the findings that the respondent has not furnished reasonable cause for non-payment of service tax - the appeal filed by the department is devoid of merit and the same is dismissed - Decided against Revenue.

Summary

Issues:
Appeal against penalties under sections 77 and 78 of the Finance Act, 1994.

Analysis:
The appeal was filed by the department challenging the order of the Commissioner (Appeals) setting aside the penalties imposed under sections 77 and 78 of the Finance Act, 1994. The department argued that the respondent had undertaken services as a commercial concern, not in an individual capacity, and thus, the penalties should not have been set aside. The respondent, a Manpower Recruitment or Supply Agency Service provider, had not obtained registration or paid service tax on the amount received from a client. The Commissioner (Appeals) upheld the demand and interest but set aside the penalties under Section 80 of the Finance Act. The Commissioner found no willful suppression of facts by the respondent to evade service tax payment. The confusion existed during the relevant period regarding the liability to pay service tax, with the respondent arguing that only a commercial concern was liable. The respondent eventually paid the service tax liability. The Tribunal upheld the Commissioner's decision, stating that the department failed to provide evidence to disturb the finding that the respondent had a reasonable cause for non-payment of service tax, leading to the dismissal of the appeal.

This case highlights the importance of establishing willful suppression of facts to evade tax obligations. The Tribunal considered the confusion surrounding the liability to pay service tax during the relevant period and the respondent's argument that only commercial concerns were liable. The Commissioner's decision to set aside penalties under Section 80 was based on the finding that the respondent had a reasonable cause for not discharging the service tax liability. The Tribunal found no reason to disturb this finding, emphasizing the lack of evidence presented by the department to challenge the respondent's position. The dismissal of the appeal underscores the significance of providing substantial evidence to support allegations of tax evasion and the need to consider reasonable causes for non-compliance with tax obligations.