2023 (6) TMI 313 - AT - Service Tax

Levy of penalty u/s 78 of FA - entire service tax demanded along with interests paid before issue of the Notice - suppression. of facts or not - requirement to issue SCN as per section 73(3) of the Finance Act, 1994 - HELD THAT - The Appellant has not paid the service tax on their own. The tax was paid only after initiation of investigation by the department. During the course of investigation, the Appellant has not cooperated with the department. They have furnished wrong information to the investigating authorities on various occasions. The findings of the adjudicating authority indicate that the Appellant tried to mislead the investigation .The Appellant has been receiving money from their client for the services rendered, but failed to pay service tax. From the statements recorded, it is evident that the Appellant was aware of the service tax liability on the services rendered by them. Thus, there was an intention to evade payment of service tax on the part of the appellant. Accordingly, penalty has been rightly imposed by the adjudicating authority under Section 78 of the Finance Act. Since the entire tax confirmed in the impugned order has already been paid, the adjudicating authority has given the option of payment of 25% of the tax amount as penalty. The appellant had already paid the 25% of the duty as penalty, albeit under protest . Thus, they have complied with the payment of duty and penalty as determined in the impugned order. The impugned order passed by the adjudicating authority upheld - appeal dismissed.

Summary

Issues Involved:
- Failure to pay service tax on construction services provided
- Imposition of penalty under Section 78 of the Finance Act, 1994

Issue 1: Failure to pay service tax on construction services provided
The appellant constructed a factory complex for a client and received payment without paying service tax. A show-cause notice was issued demanding service tax under works contract service, business auxiliary service, and goods transport agency service. The Commissioner confirmed the demands, including interest and penalties. The appellant argued that they paid the tax before the notice was issued, denying any intention to evade payment. However, investigation revealed that the appellant had not cooperated with the department and provided false information. The adjudicating authority found evidence of evasion and upheld the penalties imposed.

Issue 2: Imposition of penalty under Section 78 of the Finance Act, 1994
The appellant contended that they had paid the entire service tax along with interest before the notice was issued, thus penalty under Section 78 should not apply. However, the adjudicating authority found that the appellant had misled the department by submitting false information and attempting to evade service tax payment. The authority imposed penalties under Section 78, which the appellant paid under protest. Despite the appellant's compliance with the payment, the penalties were upheld by the appellate tribunal due to the intentional evasion of service tax.

In conclusion, the appellate tribunal upheld the impugned order, dismissing the appeal filed by the appellant based on the findings of intentional evasion and misleading conduct during the investigation.