2019 (7) TMI 766 - AT - Service Tax

Extended period of limitation - proviso to Section 73 (1) of Finance Act - imposition of penalty u/s 78 - HELD THAT - It is found that the appellant has taken suo moto registration after being pointing out by the service receiver. It is only after they suo moto complied, it was found that they have not deposited the tax for earlier period though it was payable - Further, the admitted facts is that the appellants were under the belief that they are not liable for tax nor they were so advised by the service receiver, M/s. Hindustan Zinc Ltd. nor they have been approached by the Department about their liability to pay tax in the earlier point of time. It is also admitted fact that they have not charged the service tax from the service receiver, nor they have collected with any bills. Further, on being asked by the Department, they have approached the Hindustan Zinc Ltd. and again deposited the tax substantially - there is no case of any suppression or mis-statement of facts or contravention of any of the provisions of the Act or Rules made out against the appellant. Neither the extended period of limitation is available to the Revenue nor imposition of penalty under Section 78 is justified - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Applicability of extended period of limitation under proviso to Section 73(1).
2. Retention of penalty under Section 78 by the Commissioner (Appeals).

Analysis:
1. The issue in this appeal revolves around whether the extended period of limitation is applicable under the proviso to Section 73(1). The appellant, a small Cooperative Society engaged in providing 'Cleaning Service,' was found to have not discharged service tax on services provided to a company. The appellant, comprising illiterate village-based citizens, had registered for service tax only after being advised by the service receiver. The demand was raised for the period from October 2008 to September 2012, invoking the extended period of limitation. The Commissioner (Appeals) confirmed the demand and imposed penalties under various sections, including Section 78. The appellant contested, arguing that they were not aware of the tax liability earlier and had started compliance upon registration. The Tribunal held that there was no suppression of facts or contravention of provisions, thus disallowing the extended period of limitation and penalty under Section 78.

2. The second issue pertains to the retention of penalty under Section 78 by the Commissioner (Appeals). The appellant contended that they had not charged service tax earlier, and upon being advised, they registered and started compliance. The appellant cited a Delhi High Court case regarding penalty imposition under Section 78, arguing against its applicability in their case. The Revenue defended the impugned order, relying on a Supreme Court ruling. The Tribunal considered the contentions and found that the appellant had registered voluntarily after being pointed out by the service receiver, without any suppression of facts. It was noted that the appellant had not charged service tax earlier and had complied upon inquiry by the Department. Consequently, the Tribunal held that neither the extended period of limitation nor the penalty under Section 78 was justified, allowing the appeal with consequential benefit to the appellant.