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2024 (11) TMI 286 - AT - Service Tax


Issues:
1. Liability of the appellant to pay service tax on 'Guarantee Fee'.
2. Invocation of extended period for issuing Show Cause Notice.
3. Allegation of suppression of liability by the appellant.
4. Imposition of penalty on the appellant.

Analysis:

Issue 1: Liability to pay service tax on 'Guarantee Fee'
The appellant, a State Government Company engaged in electricity distribution, procured services from M.P. Power Management Company Ltd. The Department alleged non-payment of service tax on 'Guarantee Fee' paid by the appellant to the State Government. The appellant acknowledged the liability under reverse charge mechanism and paid the demanded amount with interest. The primary issue is the liability of the appellant to pay service tax on the 'Guarantee Fee'.

Issue 2: Invocation of extended period for Show Cause Notice
The Department invoked the extended period for issuing the Show Cause Notice, alleging suppression of liability by the appellant. The appellant argued that the Notice was void under Section 73(3) of the Finance Act, 1994, as they promptly paid the demanded amount upon notification. The Tribunal examined whether the extended period was rightfully invoked based on the circumstances of the case.

Issue 3: Allegation of suppression of liability
The Department contended that the appellant willfully suppressed their liability to evade duty, justifying the extended period and penalty imposition. The appellant, a State-owned entity, argued ignorance rather than intent to evade tax, citing precedents. The Tribunal analyzed whether there was willful suppression of facts by the appellant and if the penalty was justified.

Issue 4: Imposition of penalty
The Department imposed a penalty on the appellant for alleged suppression of liability. The appellant contested the penalty, citing prompt payment upon notification as evidence of good faith. The Tribunal referred to legal precedents emphasizing the intent to evade duty for penalty imposition. It assessed whether the penalty was justified given the circumstances of the case and the appellant's status as a Government Company.

In the judgment, the Tribunal held that the penalty imposed on the appellant was unwarranted, the Show Cause Notice wrongly invoked the extended period, and the appellant had acknowledged and paid the demanded amount promptly. The appeal was partly allowed, setting aside the penalty but upholding the rest of the order.

 

 

 

 

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