2021 (11) TMI 19 - AT - Service Tax

Penalty u/s 78 - service tax short paid - service provider in their bills cannot be termed as payment of service tax on the part of the assessee - reverse charge mechanism - HELD THAT - A proper verification of the claim made by the appellant in respect of service tax liability in respect of these transactions has to be undertaken. If the appellant claim for payment of the service tax is found correct then the same should be recorded accordingly and proceedings initiated against them by the show cause Notice dated 25.11.2013 should be dropped in totality. In case the same is not found to be correct, then appellant then this amount along with interest be recovered from them. It is made clear that the all the authorities have noted that the provisions were introduced newly, hence even in case the claim of the appellant in respect of payment tax during the relevant period cannot be established then also the no penalties should be impose in term of Section 76, 77 or 78 of Finance Act, 1994, and should be waived of in terms of Section 80, ibid. The matter is remanded back to original authority for causing the verification of the claim made by the appellant in respect of payment of service tax during the period 01.07.2012 to 31.10.2012 either by them under reverse charge mechanism, or by the service provider - appeal allowed by way of remand.

Summary

Issues:
1. Demand of service tax under reverse charge mechanism.
2. Imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1994.
3. Verification of the appellant's claim regarding payment of service tax.
4. Remand of the matter to the original authority for further verification.

Analysis:
1. The appeal challenged an order that modified the demand of service tax, interest, and penalties imposed by the Assistant Commissioner. The Commissioner (Appeals) upheld a part of the demand while setting aside another portion. The issue revolved around the appellant's failure to pay service tax under the reverse charge mechanism for services received, leading to a demand for the unpaid amount along with interest and penalties.

2. The Show Cause Notice detailed the appellant's alleged failure to pay service tax under the reverse charge mechanism. The Assistant Commissioner confirmed the demand and imposed penalties under Section 76, 77, and 78 of the Finance Act, 1994. The penalties were challenged in the appeal, leading to the Commissioner (Appeals) affirming the penalties imposed.

3. During the hearing, the Authorized Representative reiterated the findings of the impugned order. However, the Tribunal noted discrepancies in the Show Cause Notice and the appellant's claim of discharging the service tax liability. The Commissioner (Appeals) observed conflicting information regarding the payment of service tax by the appellant, leading to the need for a thorough verification of the appellant's claim.

4. The Tribunal, after considering the submissions and arguments, found merit in the appellant's claim regarding the payment of service tax. The matter was remanded back to the original authority for a detailed verification of the appellant's claim, emphasizing the importance of determining whether the service tax was paid by the appellant or the service provider under the reverse charge mechanism. Additionally, the Tribunal directed the adjudicating authority to verify the claim within a specified timeframe and waived the imposition of penalties if the appellant's claim was substantiated.