2023 (7) TMI 581 - AT - Service Tax

Works Contract Services - Service Tax registration not taken - service tax not paid - Service Tax Returns not filed - suppression on the part of appellant - extended period of limitation - penalties - HELD THAT - The Appellant were required to pay Service Tax on certain portion of their operation. The very fact that the Appellant has not contested Rs.4,96,711/- on merits shows that the Appellant had rendered services which were liable for Service Tax as has been observed by the Commissioner (Appeals). Only detailed investigation and verification of the records of the Appellant, the fact of non-payment of Service Tax to the extent of Rs.4,96,711/- has come to light. As a matter of fact, since the Appellant have been providing services even prior to 2007-08, (during 2002 to 2007) the Service Tax liability could not be recovered by the Department as the period was even beyond the extended period of five years. Therefore, it is not a case of mere interpretation or bonafide belief but the case wherein the Appellant did not get themselves registered and did not make disclosure of all their activities to the Department. Extended period of limitation - penalty - HELD THAT - There are no merits in the submissions made by the Appellant that there is no suppression and hence the extended period could not have been invoked for raising the demand and imposing the penalty under Section 78 - demand and penalty imposed under Section 78, Section 77 (1) (a) and Section 77 (2) are required to be upheld. In respect of penalty of Rs.4,96,711/- imposed under Section 78, it is seen that the Adjudicating Authority and lower Appellate Authority have not given an option of paying the reduced penalty @ 25%, if the Service Tax along with interest is paid within 30 days. Now option given to the Appellant to pay the penalty @ 25% of Rs.4,96,711/-, if they pay the Service Tax of Rs.4,96,711/- along with interest and this re-quantified penalty within 30 days from the date of receipt of this Order. If they fail to fulfill this condition, the penalty under Section 78 will stand at Rs.4,96,711/- - Needless to say that they are also required to pay penalty imposed under Section 77(1)(a) and Section 77(2) as held by the lower Authorities. Appeal disposed off.

Summary

Issues involved:
The issues involved in this case include non-payment of Service Tax, failure to file Service Tax Returns, imposition of penalties under various sections of the Finance Act, 1994, contesting penalties imposed under Section 78, and invoking the extended period for raising demands.

Issue 1: Non-payment of Service Tax and Imposition of Penalties:
The Appellant was issued a Show Cause Notice for undertaking Works Contract Services without Service Tax registration, payment, or filing of returns. The Department alleged suppression and demanded Rs.11,49,034. The Adjudicating Authority confirmed a reduced demand of Rs.4,96,711, along with penalties under Section 77 (1)(a) and Section 77(2) of the Finance Act, 1994. The Commissioner (Appeals) upheld the penalties, noting the Appellant's failure to contest the Service Tax liability and non-registration. The Tribunal reviewed the case, finding no merit in the Appellant's suppression defense and upheld the confirmed demand and penalties.

Issue 2: Contesting Penalties under Section 78:
The Appellant contested only the penalty imposed under Section 78 before the Commissioner (Appeals). Despite not disputing the Service Tax liability, they argued against the penalty under Section 78. The Commissioner (Appeals) refused to waive the penalty, citing the Appellant's failure to register, pay Service Tax, and file returns. The Tribunal noted that the Appellant did not contest the Service Tax amount and focused solely on the penalty under Section 78, ultimately upholding the penalties imposed by the lower authorities.

Issue 3: Invocation of Extended Period and Suppression Allegations:
The Appellant challenged the invocation of the extended period for raising demands and penalties, claiming no willful suppression. They cited case law to support their argument. However, the Tribunal found that the Appellant's non-registration, non-disclosure of activities, and failure to contest the Service Tax liability indicated liability. The Tribunal held that the extended period was correctly invoked, and penalties under Section 78, Section 77 (1)(a), and Section 77(2) were justified.

Separate Judgement by the Judge:
The judgment was delivered by HON'BLE MR. R. MURALIDHAR, MEMBER (JUDICIAL), who reviewed the case comprehensively, upheld the confirmed demand and penalties, and provided the Appellant with an option to pay a reduced penalty under Section 78 if the Service Tax, interest, and re-quantified penalty were paid within 30 days. Failure to comply would result in the penalty standing at Rs.4,96,711. The Tribunal disposed of the Appeal, emphasizing the requirement to pay the imposed penalties under Section 77(1)(a) and Section 77(2).