2020 (1) TMI 371 - AT - Service Tax

Non-payment of service tax - commission agent services - job of the appellant is that where their principal are not getting payments towards providing telecommunication of service, the appellant recovers the amount from the telecom service recipients and the same is remitted to their principal - invocation of extended period of limitation - demand alongwith interest and penalty. HELD THAT - Apart from the explanation given by the appellant during the course of investigation, the appellant was entitled to claim the Cenvat credit on services received by them and the said credit could have been utilized for payment of the service tax in question. Further, on perusal of the show cause notice, it is found that there is no specific allegation against the appellant for suppression of facts, fraud or willful mis-statement or intent not to pay service tax. In these circumstances, penalty under Section 78 of the Act cannot be imposed on the appellant - Moreover, when there is no intent to evade payment of service tax on suppression of facts, fraud or willful misstatement, the extended period of limitation also cannot be invoked. The extended period of limitation is not invokable. Consequently, demand beyond the period of limitation is set aside and no penalty under Section 78 of the Act can be imposed on the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of demand of service tax with penalties under Sections 77 & 78 of the Finance Act, 1994 by invoking extended period of limitation.
2. Amendment of memo of appeal regarding contesting penalty under Section 77.
3. Contesting the liability of service tax and the invocation of extended period of limitation.
4. Applicability of penalty under Section 78 of the Act.
5. Claiming Cenvat credit and utilization for payment of service tax.
6. Allegations of suppression of facts, fraud, or willful misstatement.
7. Imposition of penalty under Section 78 in the absence of intent to evade service tax.
8. Invocation of extended period of limitation without intent to evade payment.

Analysis:
1. The appellant contested the demand of service tax, penalties under Sections 77 & 78, and the invocation of the extended period of limitation. The appellant, a Recovery Agent for telecom companies, argued that the extended period of limitation should not apply. The investigation revealed discrepancies in service tax payments, leading to the issuance of a show cause notice for the period 2010-11 to 2014-15.

2. An application to amend the memo of appeal was filed by the appellant to exclude contesting the penalty under Section 77. The Tribunal allowed the amendment, acknowledging the appellant's decision not to contest the penalty under Section 77.

3. The appellant acknowledged the liability of service tax but disputed the invocation of the extended period of limitation. Citing relevant precedents, the appellant argued for setting aside the demand for the extended period and the penalty under Section 78.

4. The Tribunal considered the arguments presented by both parties. The authorized representative opposed the appellant's contentions, emphasizing that the appellant had knowledge of their service tax liabilities based on their filing of ST-3 Returns.

5. During the investigation, the appellant provided explanations regarding their service tax obligations, including details of services provided and invoices raised. The appellant also highlighted their entitlement to claim Cenvat credit for services received, which could have been utilized for payment of the service tax in question.

6. The Tribunal noted that there were no specific allegations of suppression of facts, fraud, or willful misstatement against the appellant. In the absence of intent to evade service tax, the imposition of penalty under Section 78 was deemed unwarranted.

7. Given the lack of intent to evade payment and no evidence of suppression of facts, fraud, or willful misstatement, the Tribunal concluded that the extended period of limitation should not have been invoked. Consequently, the demand beyond the limitation period was set aside, and no penalty under Section 78 was imposed on the appellant.

8. In the absence of intent to evade payment, the Tribunal ruled in favor of the appellant, holding that the extended period of limitation was not applicable. The appeal was disposed of, with the appellant entitled to any consequential relief.