2020 (3) TMI 809 - AT - Service Tax

Imposition of penalty - Non-payment of Service tax - assessee had received services from abroad, viz. Management service/advise, Data Communication, use of Trademark, etc. - reverse charge mechanism - Suppression of material facts or not - HELD THAT - Perusal of the provisions of Section 73, 77 and 78 of the Finance Act, 1994 states that Section 73(3) is very clear as it says that if a tax is paid along with interest before the issuance of show-cause notice, then in that case show-cause notice shall not be issued. In the present case, it is found that the contention of the appellant that they bona fidely believed that they are not liable to pay service tax but when the audit party raised the objection that they are liable to pay service tax, then they immediately paid the service tax along with interest which is admitted in the impugned order, is justified - Further except mere allegation of suppression, the Department did not bring any material to prove that there was suppression and concealment of facts to evade payment of tax. The imposition of penalty under Section 77 78 is not justified and bad in law - Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Liability to pay Service Tax on imported services
- Imposition of penalty under Section 77 and 78 of the Finance Act

Analysis:

Issue 1: Liability to pay Service Tax on imported services

The appeal was against an order passed by the Commissioner of Service Tax regarding the appellant's liability to pay Service Tax on imported services. The appellant, engaged in various services, had received taxable services from abroad but had not paid the applicable Service Tax. The audit revealed this non-payment, leading to the appellant paying the due amount along with interest. The Department contended that the appellant had deliberately suppressed facts, resulting in the issuance of a show-cause notice. The original authority confirmed the demand, interest, and imposed penalties under Section 77 and 78 of the Act. The appellant argued that the penalties were contrary to Section 73(3) of the Finance Act, as they had paid the tax before the notice was issued. The Tribunal, after considering submissions and relevant provisions, found that the appellant had promptly paid the tax upon being informed by the audit party, and there was no evidence of deliberate suppression. Consequently, the penalties imposed were deemed unjustified and set aside.

Issue 2: Imposition of penalty under Section 77 and 78 of the Finance Act

The appellant contested the penalties imposed under Section 77 and 78 of the Finance Act, arguing that they had paid the tax before the show-cause notice was issued. The Department alleged suppression of facts by the appellant, which, if undetected by the audit, would have remained undisclosed. However, the Tribunal, after reviewing Section 73(3) of the Finance Act and various decisions cited by the appellant, found that the appellant had acted in good faith by paying the tax promptly upon notification. The Tribunal noted the absence of concrete evidence supporting deliberate suppression by the appellant. Consequently, the penalties imposed under Section 77 and 78 were deemed unwarranted and were set aside in favor of the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalties imposed under Section 77 and 78 of the Finance Act, as the appellant had promptly paid the Service Tax upon being informed by the audit party, and there was no evidence of deliberate suppression of facts to evade tax payment.