2009 (10) TMI 227 - AT - Service Tax

Penalty- The assesese was supplying manpower to K Ltd. without discharging any service tax liability. On being pointed out by preventive officers of Central Excise he paid service tax for the relevant period along with interest. In adjudication, the original authority confirmed demand of service tax. However, he found that there was no cogent reason to believe that non-payment of tax was intentional and there was a suppression of facts with intent to evade payment of service tax and, dropped the proposal to impose penalty under section 78. The Commissioner revised the order of the adjudicating authority and imposed penalty under section 78 on the assesesee. Held that- levy of manpower recruitment and supply agency was introduced on 16.6.2005. The assessee was an individual person and supplied manpower to the limited company. It was noted that as soon as, it had come to the knowledge of the assessee, he had paid the tax along with interest. The assesese was not disputing the deposit of tax with interest. There was no material available on suppression of facts with intend to evade payment of duty. In any event, the levy was introduced on 16.6.2005 and the delay of payment of tax was not deliberate and, therefore, the original authority rightly invoked section 80, thus the order of Commissioner was to be set aside. The order of the original authority was to be restored.

Summary

Issues:
Imposition of penalty under sections 37 and 78 of the Finance Act, 1994 for non-payment of service tax on manpower recruitment and supply agency service.

Analysis:
1. The appellant contested the penalty imposed under sections 37 and 78 of the Finance Act, 1994 for non-payment of service tax on manpower recruitment and supply agency service. The appellant, an individual supplying manpower to a company, paid the service tax promptly upon becoming aware of the liability. The original authority did not impose any penalty, considering the circumstances. However, the Commissioner revised the order without sufficient reasoning, leading the appellant to challenge the penalty under section 78, arguing no intent to evade payment of duty existed.

2. The revenue, represented by the SDR, supported the Commissioner's decision, citing the extended period of demand for tax and the necessity of penalty under section 78 due to alleged suppression of facts. The SDR highlighted the detection of non-payment and intent to evade duty by Central Excise Officers, supporting the penalty imposition.

3. Upon review of the case, the original authority's findings revealed that the appellant promptly paid the tax upon notification, showing compliance and lack of intentional non-payment. The original authority acknowledged the appellant's limited understanding of tax laws and noted the immediate tax payment upon notification of the liability. The authority found no evidence of intentional non-compliance or suppression of facts to evade duty.

4. The Commissioner's order did not dispute the original authority's reasoning. The appellant's compliance upon notification, lack of intentional non-payment, and absence of evidence for suppression of facts were emphasized. The appellant's prompt tax payment upon awareness of the liability and lack of deliberate evasion were crucial in the decision.

5. The Tribunal, after thorough consideration, set aside the Commissioner's order, reinstating the Deputy Commissioner's decision. The Tribunal found no basis for penalty under section 78 due to the appellant's prompt tax payment upon notification of the liability and lack of evidence for intentional non-compliance or suppression of facts. The appeal was allowed, providing consequential relief to the appellant.