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2008 (2) TMI 140 - AT - Service TaxAppellants providing Management Consultancy Services - appellants couldn t paid tax because of misconception that in case they receive the amount in foreign exchange for the service rendered, they would not liable to pay service tax contention of assessee that they are liable to discharge the service tax only on realization, is correct no suppression or intention to evade duty as alleged in SCN - service tax along with interest has already been paid no demand hence no penalty
Issues Involved:
1. Non-payment of service tax for specific months. 2. Demand for interest under Section 75 of the Finance Act. 3. Invocation of penal provisions under Sections 76 and 78 of the Finance Act. 4. Legality and propriety of the Assistant Commissioner's order dropping the demand and penalty. 5. Review by the Commissioner of Service Tax under Section 84 of the Finance Act. 6. Applicability of case laws cited by the appellants. 7. Justification for imposing penalties under Sections 76 and 78. Detailed Analysis: 1. Non-payment of Service Tax: The appellants, M/s. Price Water House Coopers Development Association Ltd., were alleged to have not paid service tax amounting to Rs. 24,33,219/- for the months of August 2001, September 2001, and February 2002. The adjudicating authority found that the appellants had already paid the service tax on 28-2-2002, hence dropped the demand. 2. Demand for Interest: Interest was demanded under Section 75 of the Finance Act. The appellants had paid the interest amounting to Rs. 4,34,380/- by challan dated 24-2-2003. 3. Invocation of Penal Provisions: Penal provisions under Sections 76 and 78 of the Finance Act, 1994 were invoked. The Assistant Commissioner dropped the imposition of penalties, citing the payment of service tax and interest before the issuance of the show cause notice. 4. Legality and Propriety of the Assistant Commissioner's Order: The revisionary authority, Commissioner of Service Tax, reviewed the Assistant Commissioner's order, deeming it not legal and proper. The Commissioner argued that the Assistant Commissioner exercised arbitrary powers under Section 80 of the Finance Act without recording any reason for waiving the penalties. 5. Review by the Commissioner of Service Tax: The Commissioner of Service Tax issued a show cause notice under Section 84 of the Act, challenging the Assistant Commissioner's decision to drop the penalties. The Commissioner imposed a penalty of Rs. 100/- per day under Section 76 and Rs. 30,00,000/- under Section 78 on the appellants. 6. Applicability of Case Laws: The appellants cited several case laws to support their contention that penalties should not be imposed when service tax and interest are paid before the issuance of a show cause notice. Notable cases include: - Maa Communications Bozell Ltd. v. CCE: No show cause notice should be issued under Section 84 for alleging suppression without challenging the factual position. - Mass Marketing & Advertising Services Pvt. Ltd. v. CCE: Penalty not leviable if duty is paid before the show cause notice. - CCE v. Sigma Steel Tubes: Penalty under Section 11AC not leviable when duty is paid before the show cause notice. - Sunitha Shetty: Discretion under Section 80 negates the application of Sections 76 and 78. 7. Justification for Imposing Penalties: The Tribunal found that the appellants had a reasonable cause for the delayed payment of service tax, including a mistaken belief regarding the taxability of services rendered in foreign exchange and delayed payments by their client, the Government of Karnataka. The original authority had verified these facts and found no intention to evade tax. The Tribunal held that the original authority's order was legal and proper, and the penalties imposed by the Commissioner in the review order were not justified. Conclusion: The Tribunal allowed the appeal, setting aside the revisionary order of the Commissioner of Service Tax. The original authority's decision to drop the demand and penalties was upheld, as the appellants had paid the service tax and interest before the issuance of the show cause notice, and there was no intention to evade tax. The appeal was allowed with consequential relief.
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