2019 (4) TMI 729 - AT - Service Tax

Imposition of penalty u/s 78 - payment of entire amount of service tax before issuance of the adjudication order - no intent to evade - main contention of the Revenue is that the appellant had not disclosed the tax liability, which was detected by the department and therefore, imposition of penalty is warranted - Held that - It appears that the records and documents were audited by the audit wing in earlier occasion. Hence, imposition of penalty under Section 78 of the Act is not justified - The Tribunal in the case of Shri P. Vinod vs. Commissioner of Service Tax, Chennai 2018 (6) TMI 11 - CESTAT CHENNAI , in identical situation, has set aside the penalty under Section 78 of the Act. Penalty u/s 78 set aside - demand of service tax along with interest and penalty imposed under Section 70 and 77 of the Act are upheld - appeal allowed in part.

Summary

Issues:
- Imposition of penalty under Section 78 of the Act for non-payment of service tax.
- Justification for penalty imposition based on suppression of facts.
- Applicability of penalty in cases where service tax was paid before adjudication order.
- Comparison with similar cases where penalties were set aside.

Analysis:

The case involved an appeal against an order passed by the Commissioner (Appeals) regarding the non-payment of service tax by the appellant for services provided during 2011-12 to 2013-14. The appellant was registered for taxable services under specific categories. The adjudicating authority confirmed a demand for service tax, interest, and penalties under various sections of the Finance Act, 1994. The Commissioner (Appeals) upheld this decision, leading to the appeal.

During the hearing, the appellant's counsel argued that there was no intent to evade tax, as the entire service tax amount had been paid before the adjudication order. The appellant contended that the penalty under Section 78 of the Act was unjustified. On the other hand, the Revenue representative supported the findings of the impugned order.

The Tribunal noted that the appellant had indeed paid the entire service tax amount and was not contesting the department's calculation. The appellant claimed that the delay in payment was due to a financial crisis and argued that the department was aware of their business activities from previous audits. The Revenue's main argument was based on the alleged non-disclosure of tax liability, justifying the penalty imposition.

However, the Tribunal found that since the department was aware of the appellant's business activities from previous audits, the imposition of penalty under Section 78 was not justified. Citing a similar case, the Tribunal referred to the judgment in Shri P. Vinod vs. Commissioner of Service Tax, Chennai, where the penalty under Section 78 was set aside in an identical situation.

Consequently, the Tribunal upheld the demand for service tax, interest, and penalties under Sections 70 and 77 of the Act. However, considering that the appellant had paid the service tax amount and the penalty under Section 78 was not warranted, the Tribunal partly allowed the appeal filed by the appellant.

In conclusion, the judgment clarified the circumstances under which penalties could be imposed for non-payment of service tax, emphasizing the importance of disclosure and previous audit history in determining the justification for penalties under Section 78 of the Act.