2010 (7) TMI 96 - AT - Service Tax

Management, Maintenance or Repair Service-Suppression of fcats- the show-cause notice was issued to the appellant for undervaluation of the taxable service and short payment of Service Tax. There is no allegation against the appellant for late payment of Service Tax or there was any intention to evade Service Tax by the appellants. Held that- there is no suppression of facts thus no penalty can be levied but demand confirm.

Summary

Issues:
Appeal against penalties under Sections 76, 77 & 78 of the Finance Act, 1994 confirmed by the impugned order.

Analysis:
The case involved a show-cause notice alleging undervaluation of taxable service and short payment of Service Tax. The appellants provided 'Retreading of Tyres' service under 'Management, Maintenance or Repair Service' category, paying tax only on labor charges excluding material costs. Two notices were issued demanding Rs.3,70,492 under Section 73(1) of the Finance Act, 1994, along with interest and penalties under Sections 76, 77 & 78. The Commissioner (Appeals) dropped the demand but confirmed penalties of Rs.1,95,863. The appellants contended they were entitled to cum duty price per a Supreme Court judgment. The Assistant Commissioner erred in quantifying the demand at Rs.23,075. The penalties were confirmed without establishing suppression with intent to evade tax, as per the Tribunal's decision in Rajarani Exports. The Revenue failed to prove suppression, and no penalties were warranted. The penalties were set aside, and the appeal was disposed of.

The appellant was registered on 25.10.2005 but did not pay Service Tax on time, justifying the penalty under Section 76. However, there was no established intent to evade tax for penalty under Section 78. The penalties were reiterated by the Respondent, but the Tribunal found no suppression by the appellants and set aside the penalties as no coercive finding was made against them. The burden of proof on the Revenue to establish suppression was not met, and no penalty was deemed applicable under Sections 76, 77 & 78. The impugned order's penalties were overturned, and the appeal was resolved in favor of the appellants.

In conclusion, the Tribunal found that while the appellants were liable for the Service Tax demand, the penalties under Sections 76, 77 & 78 were not justified as there was no evidence of suppression or intent to evade tax. The penalties were set aside based on the lack of coercive findings against the appellants and the failure of the Revenue to prove suppression. The appeal was disposed of with the penalties being overturned, providing relief to the appellants.