2023 (1) TMI 508 - AT - Service Tax

Levy of penalty - service tax alongwith interest have been paid on being pointed out - service tax liability discharged after availing the benefit of sub-section (2) of Section 67 of the Finance Act, 1994 - tax not paid on the ground o doubt regarding their liability to service tax in terms of CBEC Circular No. 108/02/2009-ST-F.No. 137/12/2006-CX.4 dated 29.01.2009 - no intent to evade tax - entitlement for benefit under section 73(3) of FA or not - HELD THAT - Section 67(2) clearly provided for treating the amount charged by the service provider as inclusive of service tax payable unless it is specifically mentioned in the documents - In the instant case no evidence has been produced by the revenue to hold that the amount collected by the appellant is exclusive of service tax or it has been separately collected by the appellant. In view of the above, there are no merit in the department s stand that benefit of Section 67(2) could not be extended. The appellant discharged the entire service tax along with interest soon after the same was pointed out and in this circumstances the benefit of Section 73(3) should not have been denied. The appeal is allowed to the extent that the penalty imposed on the appellant are set aside.

Issues:
Confirmation of demand of service tax, imposition of penalty, applicability of Section 73(3), interpretation of Section 67(2) of the Finance Act, 1994.

Confirmation of demand of service tax and imposition of penalty:
The appeal was filed against the confirmation of demand of service tax and penalty. The appellant argued that they were exempted from service tax at the material time based on a clarification issued by CBEC. However, after an amendment in the Finance Act in 2010, they registered in 2010 but had doubts about the liability to pay service tax. They voluntarily paid the service tax, interest, and late fee before a show cause notice was issued. The appellant contended that they had accepted the liability and thus should be allowed the benefit of Section 73(3) of the Finance Act. The revenue argued that since the service tax liability was not discharged initially, the benefit of Section 73(3) should not be extended. The Tribunal noted that the appellant discharged the tax liability promptly after it was pointed out, and there was confusion due to doubts about their liability. The Tribunal considered Section 67(2) of the Finance Act, which states that the value of taxable service is inclusive of service tax unless specifically mentioned otherwise. As there was no evidence that the amount collected was exclusive of service tax, the benefit of Section 73(3) should not have been denied. Consequently, the penalty imposed on the appellant was set aside.

Applicability of Section 73(3):
The appellant argued that they had accepted the liability for service tax before the issuance of the show cause notice and should be allowed the benefit of Section 73(3) of the Finance Act. However, the revenue contended that since the service tax liability was not initially discharged, the benefit of Section 73(3) should not be extended. The Tribunal found that the appellant promptly discharged the tax liability after it was pointed out and had doubts regarding their liability, leading to confusion. The Tribunal held that the benefit of Section 73(3) should not have been denied considering the circumstances.

Interpretation of Section 67(2) of the Finance Act, 1994:
The Tribunal analyzed Section 67(2) of the Finance Act, which states that the value of taxable service is considered inclusive of service tax unless specified otherwise. The appellant argued that they had discharged the service tax liability after availing the benefit of this provision, and thus the benefit of Section 73(3) should not have been denied. The Tribunal found no merit in the department's argument that the benefit of Section 67(2) could not be extended. As there was no evidence that the amount collected was exclusive of service tax, the Tribunal concluded that the appellant should not have been denied the benefit of Section 73(3).

This judgment highlights the importance of promptly addressing tax liabilities, the interpretation of relevant provisions of the Finance Act, and the implications of accepting tax liability voluntarily.

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