2023 (6) TMI 65 - AT - Service Tax

Levy of interest and penalty - entire payment of Service Tax even before the issue of Show Cause Notice - Manpower services - cum-tax benefit in terms of Section 67(2) of the Finance Act, 1994 - HELD THAT - It is seen that there is no dispute that entire amount of Service Tax as demanded in the Show Cause Notice has been paid by the Appellant even before issue of the Show Cause Notice. It is not known as to whether the Appellant was even made aware of the fact that if the interest is paid by them, the Appellant would get complete waiver of the penalties. It is also seen that the Appellant has claimed that they have not charged the Service Tax on their clients and they have paid the Service Tax based on the quantification done by the Department wherein cum-tax benefit has not been granted. From the Show Cause Notice and Order-in-Original it is seen that the Department has not disputed the appellant s claim that they have not charged/collected the Service Tax from their clients. In such a situation when the Appellant has not charged the Service Tax on their clients they are entitled to the cum-tax benefit in terms of Section 67(2) of the Finance Act, 1994. Matter remanded to the Adjudicating Authority - Appellant should be allowed to get the benefit of cum-tax benefit and the amount of the Service Tax is required to be quantified - Appellant is required to pay the interest on the re-quantified amount of Service Tax from the time the Service Tax was due till the date on which Service Tax liability has been completed by him.

Summary

Issues involved:
The issues involved in the judgment are non-appearance of the Appellant, confirmation of Service Tax liability, penalties imposed under various sections of the Finance Act, 1994, cum-tax benefit, and waiver of penalties.

Confirmation of Service Tax liability:
The Appellant, a provider of Manpower services, did not register for Service Tax as the clients, Reliance and L & T, believed it was not required. However, after investigation, the Appellant was found to have provided services and paid the demanded Service Tax amount before the Show Cause Notice was issued. The Adjudicating Authority confirmed the Service Tax liability and imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Grounds of Appeal and Cum-tax benefit:
The Appellant contested the confirmed demand on merits and limitation. They argued that since they paid the entire Service Tax amount before the Show Cause Notice, the penalties should be set aside as per Section 80 of the Finance Act, 1994. The Appellant also claimed cum-tax benefit as they did not charge or collect Service Tax from their clients. The Tribunal found that the Appellant was entitled to the cum-tax benefit under Section 67(2) of the Finance Act, 1994.

Directions and Remand:
The Tribunal remanded the matter to the Adjudicating Authority with specific directions. The Appellant was allowed to get the benefit of cum-tax, and the Service Tax amount was to be quantified accordingly. The Appellant was required to pay interest on the re-quantified amount, and any differential amount was to be adjusted against the interest payable. Penalties under Sections 76, 77, and 78 were waived subject to compliance with the payment procedure. The Adjudicating Authority was directed to complete the Denovo Adjudication proceedings within four months.

Conclusion and Compliance:
If the Appellant failed to pay the interest within three months from the finalization of the Order-in-Original, the waiver of penalties would not be available, and the Revenue could proceed with penalty recovery. The judgment aimed to ensure compliance with the payment of interest and the quantification of Service Tax while granting the Appellant the benefit of cum-tax and waiving penalties under specified sections of the Finance Act, 1994.