2019 (6) TMI 14 - AT - Service Tax

Demand of Interest and penalty - Manpower Recruitment/Supply Agency Services - scope of SCN - HELD THAT - The explanation by the authorities below on the argument that the final demand has gone beyond the SCN. It is the settled position of law that such an action is not sustainable and hence, the re-quantified interest liability over and above the interest demanded in the SCN is set aside - Consequently, the adjudicating authority has to see if the payments made towards the above interest after re-quantifying in the light of the deletion of reimbursements by the Commissioner (Appeals) and then proceed to recover the balance, if any, after adjusting all such payments claimed to have been made by the assessee - matter on remand. Penalty - HELD THAT - Undoubtedly, the issue vis- -vis facts of this case involved interpretation. Moreover, the appellant has also proved its bonafides when it claimed that it had made payments right from investigation stage itself. The appellant has made out a case for exercising discretion under Section 80 of the Finance Act, 1994 and hence, the penalty under Section 78 of the Finance Act, 1994 is set aside. Appeal allowed in part and part matter on remand.

Summary

Issues:
Appeal against interest liability and penalty under Section 78 of the Finance Act, 1994.

Analysis:
The appellant, a service provider, faced a Show Cause Notice (SCN) for discrepancies in income declaration. The Order-in-Original confirmed service tax demand, interest, and penalty. The appellant appealed to the Commissioner of GST & CE, who partially allowed the claim but sustained a late fee. The appellant then appealed to the forum. During the hearing, the appellant argued that the tax liability on reimbursements was deleted following a Supreme Court decision, but the final tax liability was not quantified. Payments made during investigation were highlighted. The Department supported the lower authorities' findings.

The appellate tribunal noted the lack of explanation on the final demand exceeding the SCN. It set aside the re-quantified interest liability beyond the SCN, directing the authorities to adjust payments made by the appellant. The tribunal acknowledged the settled interpretation post the Supreme Court decision and the appellant's payments from the investigation stage. Consequently, the tribunal exercised discretion under Section 80 of the Finance Act, 1994, directing the deletion of the penalty under Section 78. Since the addition was set aside by the Commissioner (Appeals), the tribunal found no grounds for penalty imposition.

In conclusion, the appeal was partly allowed and partly remanded based on the tribunal's directions. The penalty under Section 78 was deleted, considering the appellant's payments and the settled legal interpretation.