2023 (2) TMI 897 - AT - Service Tax

Levy of fine and penalty - Issuance of SCN under proviso to Section 73(1) of FA - service tax along with interest is paid before the issue of Show Cause Notice - intent to evade tax present or not - CBEC Circular F. No. 137/167/2006-CX dated 3.10.2007 - HELD THAT - It has been held by courts that appellate bodies should be mindful of the first-hand knowledge of the original authority and the position that he holds to assess the facts and the credibility of circumstances from his own observations. Even if a superior appellate body feels that another view is possible, that is no ground for substitution of the original authorities view with one s own by exercising its appellate jurisdiction. The exception would be if the impugned order is demonstrably found as not being rational or reasonable or is suffering from procedural impropriety. Which is not the case here. In the circumstances, the show cause notice having been issued invoking the extended time limit under proviso to section 73 (1) of the Finance Act 1994 and the imposition of penalty cannot be said to be unwarranted. In the instant case where suppression of facts has been alleged in the Show Cause Notice, the appellant has not paid the reduced penalty as is required by law along with tax and interest, however the same facility has still been extended to them by the original authority in the impugned order. Further with regard to the judgements cited by the appellant against the imposition of penalty, it is felt that each case has to be seen from the facts and circumstances that prevail. In its decision in M/S ONWARD E-SERVICES LTD. VERSUS COMMISSIONER OF SERVICE TAX, MUMBAI-II 2018 (5) TMI 323 - CESTAT MUMBAI , the Tribunal noted that the assessee had correctly declared the value in the ST-3 returns filed by them and had not suppressed any facts unlike the present case were no ST-3 Returns were filed for the relevant period on time. In the case of COSMIC DYE CHEMICAL VERSUS COLLECTOR OF CENTRAL EXCISE, BOMBAY 1994 (9) TMI 86 - SUPREME COURT , the Hon ble Supreme Court noted that it was a case where the goods were thought to be exempt from duty, whereas in the instant matter the taxability of the service during the relevant period is not under challenge. The judgements cited are hence not relevant in the appellant s case. In the circumstances, undue sympathy to impose an adequate penalty would undermine the efficacy of law and encourage other tax payers to avoid paying taxes on time while waiting for if and until they have been found to have evaded duty by the department to pay their taxes - appeal dismissed.

Summary

Issues:
- Appellant's liability for service tax and interest
- Appellant's contention on penalty imposition
- Appellant's plea regarding financial hardship and penalty
- Interpretation of CBEC Circular and relevant judgments
- Justification of imposition of penalty
- Assessment of original authority's decision
- Applicability of extended time limit under proviso to section 73(1)
- Analysis of relevant case laws and their applicability
- Consideration of financial hardship plea
- Upholding of impugned order

Analysis:
The appeal involved M/s. Nebula Computers Pvt. Ltd. contesting an Order in Original passed by the Commissioner of Central Excise, Chennai IV Commissionerate. The appellant was providing Manpower Recruitment and Supply Services and was found to have collected service tax but failed to remit it to the government exchequer. The appellant did not contest the tax and interest demand but challenged the imposition of penalty, citing financial hardship and compliance with CBEC Circular F. No. 137/167/2006-CX. The Revenue argued that the evasion was clear, justifying the penalty.

The Tribunal noted that the appellant's collection of service tax without depositing it was not contested, and the plea of financial hardship lacked substantive evidence. The original authority's decision was deemed rational, emphasizing the duty to pay taxes promptly. The Tribunal highlighted the importance of not substituting the original authority's view unless found irrational or procedurally flawed, which was not the case here. The extended time limit under proviso to section 73(1) was upheld, and the penalty imposition was justified based on the circumstances.

Regarding the appellant's plea on the CBEC Circular and case laws, the Tribunal analyzed the circular's provisions and cited judgments to differentiate the present case. The Tribunal emphasized the need to pay the reduced penalty along with tax and interest in cases of alleged suppression of facts. The relevance of cited case laws was assessed, noting the distinctions from the appellant's situation.

Ultimately, the Tribunal rejected the appeal, stating that undue sympathy in penalty imposition would undermine tax compliance. The impugned order was upheld, emphasizing the importance of timely tax payment and discouraging evasion practices. The judgment was pronounced on 22.02.2023.