2019 (7) TMI 831 - AT - Service Tax

Health and fitness services - appellant is providing taxable service of health club and fitness services without getting registered, without payment of Service Tax, without filing the returns - demand of service tax alongwith interest and penalty - HELD THAT - The appellant was liable to pay Service Tax for providing taxable service of health club and fitness service but did not get himself registered with the Service Tax Department and did not file the Returns and when the records of the appellant were verified and a SCN was issued demanding Service Tax of ₹ 20,27,851/- for the period 01.04.2011 to 30.09.2014, the appellant paid only ₹ 1,50,000/- during the course of investigation. Penalty u/s 77 and 78 - HELD THAT - Once the appellant has accepted the liability which was confirmed by invoking the extended period then he is liable to pay penalty as per the provisions of Section 78 of the Act. Since the entire demand is raised on the basis of the books of accounts shown by the appellant where all the transactions were recorded - Since, in the present appeal, the appellant has not contested the demand therefore the extended period has rightly been invoked and penalty under Section 77 78 has rightly been imposed. Appeal allowed in part.

Summary

Issues:
- Imposition of penalties under Section 77 & 78 without proper appreciation of facts and law
- Claim of CENVAT credit of Service Tax paid on rent
- Allegation of suppression under Section 78 with intent to evade payment of duty
- Applicability of proviso to Section 78(1) for reducing penalty
- Liability to pay Service Tax, interest, and penalties

Analysis:

The appeal challenged the impugned order dated 03.08.2018 passed by the Commissioner (Appeals) rejecting the appeal of the appellant. The case involved the appellant providing taxable health club and fitness services without proper registration, payment of Service Tax, or filing returns. A Show Cause Notice (SCN) was issued demanding Service Tax of &8377; 20,27,851/- for the period from 01.04.2011 to 30.09.2014. The Assistant Commissioner confirmed the demand, interest, and penalties under Section 77(1)(a), Rule 7C, and Section 78 of the Act. The appellant contested only the imposition of penalties, not the demand itself.

The appellant argued that penalties under Section 77 & 78 were unjust as they were not properly appreciated. They claimed entitlement to CENVAT credit of Service Tax paid on rent and asserted lack of mala fide intent due to maintaining proper accounts. The appellant cited legal provisions and precedents to support their case. The appellant's defense focused on the contention that the Department needed to prove the elements of Section 78 and that the penalties imposed were unsustainable under the law.

The Assistant Commissioner defended the penalties imposed, highlighting the appellant's failure to pay the full Service Tax amount despite accepting liability. Legal decisions were cited to support the respondent's position. The respondent argued that the appellant's actions demonstrated an unwillingness to pay the Service Tax along with interest, despite acknowledging the tax liability.

After considering both parties' submissions and the evidence, the Tribunal found the appellant liable to pay Service Tax for the provided services but noted the appellant's failure to register, file returns, and pay the full tax amount. The Tribunal upheld the penalties imposed under Section 78, citing the appellant's acceptance of liability and failure to produce documentation for claiming CENVAT credit. The Tribunal reduced the penalty to fifty per cent of the Service Tax amount based on the proviso to Section 78(1) due to the availability of transaction details in the specified records.

Ultimately, the Tribunal partially allowed the appeal, reducing the penalty under Section 78 while upholding the imposition of penalties under Section 77 & 78. The decision was based on the appellant's liability, acceptance of tax liability, and failure to provide necessary documentation for claiming CENVAT credit, leading to the reduction of the penalty amount as per the statutory provision.