2019 (5) TMI 1023 - AT - Service Tax

Imposition of penalty u/s 77 and 78 of FA - Receipt of man power supply service - reverse charge mechanism - HELD THAT - In the present case, admittedly, the provider of service is a limited company and hence, the appellant is not liable to pay service tax on the Manpower Service received under Revere Charge Mechanism. The penalty is not imposable under Section 77 and 78 of the Finance Act only for the reason that the appellant has deposited the tax on being so pointed out by the Revenue in good faith - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether penalty rightly imposed under Sections 77 and 78 of the Finance Act for service tax liability under Reverse Charge Mechanism.

Analysis:
The judgment by the Appellate Tribunal CESTAT NEW DELHI revolves around the issue of the imposition of penalties under Sections 77 and 78 of the Finance Act concerning service tax liability under Reverse Charge Mechanism. The appellant had received man power supply service from a company, and the Revenue contended that service tax was payable under a specific notification. However, it was established that the appellant was not liable to pay service tax under Reverse Charge Mechanism as the notification specified payment by the receiver only in cases where the service provider is an individual, HUF, or partnership firm, which was not the case here as the service provider was a limited company. Consequently, the Tribunal found that the penalty was not justified as the appellant had deposited the tax upon being informed by the Revenue, acting in good faith. Therefore, the Tribunal set aside the impugned order, allowed the appeal, and granted the appellant consequential benefits as per the law.

In conclusion, the judgment provides a clear analysis of the issue at hand, emphasizing the correct interpretation of the relevant notification and the good faith actions of the appellant in complying with the tax requirements upon notification by the Revenue. The decision showcases the importance of understanding the specific provisions of tax laws and the significance of acting in good faith to rectify any potential errors promptly.