2019 (5) TMI 1098 - AT - Service Tax

Imposition of penalty - service tax with interest paid in instalments, even before the statement of the appellant was recorded - no suppression of facts - HELD THAT - It is not in dispute that the appellant was liable to pay service tax and had not paid it during the relevant time. However, subsequently, having realized his tax liability, he obtained registration and paid service tax in instalments through various challans. The first statement recorded by the Department was after the service tax along with interest already paid by the appellant - the appellant had a reason to not to pay service tax. He was merely ignorant. His conduct does not show in any manner that he had any intention to suppress the facts from the department or to evade payment of service tax. The entire service tax along with interest was paid, albeit in instalments, even before the statement of the appellant was recorded - thus this is a fit case to invoke Section 80 of the Finance Act, 1994 to waive penalties. The impugned order is modified to the extent that the service tax and interest already confirmed are upheld and all penalties are waived of, under section 80 of the Finance Act, 1994 - appeal allowed in part.

Summary

Issues:
1. Liability to pay service tax under "Manpower Recruitment or Supply Agency" under the Finance Act, 1994.
2. Imposition of penalties under sections 76, 77 & 78 of the Finance Act, 1994.
3. Applicability of Section 80 of the Finance Act, 1994 for waiver of penalties.
4. Interpretation of case laws on penalty waiver in the context of suppression of facts.

Analysis:
1. The appellant, a provider of manpower to firms, failed to pay service tax under the relevant provisions of the Finance Act, 1994. Despite later realizing the liability, the appellant obtained registration and paid the due amount in instalments. The Department issued show cause notices for recovery, leading to the imposition of penalties and interest by the lower authority.

2. The lower authority confirmed the demand, interest, and penalties under sections 76, 77 & 78 of the Finance Act, 1994. The appellant, aggrieved by the penalties, appealed to the first appellate authority seeking waiver under Section 80 of the Finance Act, 1994. The first appellate authority upheld the penalties citing suppression of facts by the appellant, supported by relevant case laws.

3. The appellant, in the appeal, argued for the waiver of penalties under Section 80, emphasizing that the penalties were not disputed, and the service tax and interest were paid before the show cause notices were issued. The appellant contended that the case laws cited by the first appellate authority were inapplicable as they pertained to the Central Excise Act, 1944, lacking a provision similar to Section 80 of the Finance Act, 1994.

4. Upon considering the arguments and records, the Tribunal found that the appellant, though initially ignorant of the tax liability, had no intention to suppress facts or evade payment. The appellant's proactive payment of service tax and interest, even before the statement was recorded, indicated a lack of fraudulent intent. Consequently, invoking Section 80 of the Finance Act, 1994, the Tribunal modified the order, upholding the service tax and interest while waiving all penalties imposed under sections 76, 77 & 78 of the Finance Act, 1994.

Conclusion:
The Tribunal allowed the appeal, disposing of the case by upholding the service tax and interest payments while waiving all penalties under Section 80 of the Finance Act, 1994. The judgment emphasized the appellant's lack of fraudulent intent and proactive approach towards meeting the tax liability, leading to the favorable decision on penalty waiver.