2020 (4) TMI 204 - AT - Service Tax

Enhancement of penalty u/s 78 from 25% to 100% - reasonable cause for not paying the tax on receipt of the mobilization advance existed or not - jurisdiction to issue corrigendum - HELD THAT - The appellant was registered with the department; they have been filing returns regularly and further maintaining proper books of accounts in the ordinary course of business. As regards the transaction in dispute, the receipts are through banking channels properly recorded in the books of accounts and further the appellant had deposited the tax along with interest before the issue of SCN. Further, it is also noticed that WCS was highly litigated and lot of interpretation issues were there. Taking pragmatic view of the matter, it is found that there is no contumacious conduct on the part of the appellant and accordingly, the penalty under section 78 section 77 is set aside - the corrigendum was issued beyond jurisdiction, and is a nonest in law. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Enhancement of penalty under section 78 - Reasonable cause for not paying tax on mobilization advance - Deliberate defiance of law - Jurisdiction of Adjudicating authority - Contumacious conduct - Interpretation issues in Works Contract Services (WCS).

Analysis:
The cross appeals involved the issue of penalty enhancement under section 78, with the Revenue seeking an increase from 25% to 100% of the tax amount in dispute. The appellant challenged the imposition of penalty, arguing that there was a reasonable cause for not paying tax on mobilization advance and no deliberate defiance of law.

The facts revealed that the appellant, a service tax registrant, had inadvertently not declared the proper turnover, leading to a dispute regarding tax payment on mobilization advances. The Revenue contended that deliberate default was evident, while the appellant claimed inadvertent error and cooperation with the department upon realization of the issue.

The Adjudicating authority initially imposed a 25% penalty, later enhanced to 100% through a corrigendum. The appellant's counsel argued for setting aside the penalty under section 78 and section 77, citing a judgment where penalty was annulled due to lack of willful misstatement.

The Revenue's Authorized Representative relied on precedents to support the penalty enhancement, alleging deliberate default. However, the Tribunal found no contumacious conduct on the part of the appellant, considering their registration, regular compliance, and proper accounting practices. The Tribunal noted the complexity of Works Contract Services and the lack of deliberate evasion, ultimately setting aside the penalty under sections 78 and 77.

In the final decision, the appellant's appeal was allowed with consequential relief, while the Revenue's appeal was dismissed. The Tribunal deemed the corrigendum beyond jurisdiction, rendering it legally invalid.