2019 (11) TMI 494 - AT - Service Tax

Levy of penalty - service tax paid before issuance of SCN - Classification of services - Commercial Training and Coaching Service or Information Technology Service? - HELD THAT - During the relevant period, there were conflicting decisions regarding the classification of the impugned service. The Department has also not brought any evidence on record to show that there was suppression of material fact with intent to evade payment of tax. Penalties u/s 76, 77 and 78 of the Finance Act, 1994 dropped - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against service tax demand, interest, and penalties under Sections 73, 75, 76, 77, and 78 of the Finance Act, 1994.

Analysis:
The appellant, providing 'Management Consultancy Services' and Business Auxiliary Services (BAS), also offering training on AS/400 Mainframe computer software to IBM and its clients, faced a demand for service tax, interest, and penalties by the Commissioner. The appellant contended that their services fell under 'Information Technology Service,' excluded from BAS, and that since they paid the service tax and interest before the show-cause notice, penalties should be dropped. The Commissioner upheld the demand, interest, and penalties, leading to the appeal.

During the appeal, the appellant argued that the impugned order lacked legal sustainability and that they had a strong case as their services were classified under 'Information Technology Service,' not BAS. They emphasized that paying the tax and interest before the notice should exempt them from penalties, citing relevant case laws. The appellant did not press on the merits but focused on dropping the penalties imposed.

The Tribunal, after reviewing submissions and precedents, noted that the appellant had indeed paid the service tax and interest before the show-cause notice, which was undisputed. They found conflicting decisions on the classification of the service during the relevant period and observed no evidence of intentional tax evasion. Relying on a Karnataka High Court decision, the Tribunal dropped the penalties under Sections 76, 77, and 78 of the Finance Act, 1994, ultimately allowing the appeal.

In conclusion, the Tribunal found in favor of the appellant, emphasizing the timely payment of service tax and interest before the show-cause notice and the absence of evidence supporting tax evasion intent. By following legal precedents and considering the conflicting classification of services, the Tribunal dropped the imposed penalties, leading to the appeal being allowed.