2010 (6) TMI 131 - AT - Service Tax

Manpower Recruitment Agency service- Tour Operator services- the appellants were found to have short paid service tax of 1, 31, 027/- under the category Manpower Recruitment Agency service and had not paid service tax of 3, 67, 332/- under the category Tour Operator. Held that- there is no dispute about the short payment of the Service Tax and the assessee paid 1, 90, 356 5, 510/- (interest) prior to the issue of Show Cause Notice. The request of the assessee for waiver of penalty can be considered only for the amount paid by them prior to the issuance of Show Cause Notice. In the light of the various decisions penalty was not imposable under Section 78 in the absence of any fraud suppression on the part of the assessee. The penalty imposed on the appellants is set aside and the appeal is allowed.

Summary

Issues:
1. Imposition of penalty under Section 78 of the Finance Act, 1994 on M/s. Omega Services & Consultants (P) Ltd.
2. Applicability of penalty in the absence of fraud, collusion, willful mis-statement, or suppression of facts as per Section 78 of the Act.

Detailed Analysis:
1. The appeal was filed by M/s. Omega Services & Consultants (P) Ltd. against the rejection of their appeal seeking to vacate a penalty of Rs 3,07,949 imposed under Section 78 of the Finance Act, 1994. The appellants had paid 25% of the penalty amount and sought to vacate this payment. The case involved short payment of service tax under 'Manpower Recruitment Agency' and non-payment under 'Tour Operator Services'. The appellants claimed a bona fide belief for both instances of non-payment. The original authority imposed a penalty equal to the service tax discharged by the appellants post a show cause notice. The Tribunal appeal argued against the sustainability of the demand for short payment under 'Manpower Recruitment Agency' and claimed exemption for the 'Tour Operator Services' until a certain date. The appellant sought relief only regarding the penalty imposed.

2. The appellant relied on judgments to support the argument that penalty should not be imposed in the absence of fraud, collusion, willful mis-statement, or suppression of facts as per Section 78 of the Act. The Tribunal examined various case laws and circulars cited by the learned JDR but found them irrelevant to the case at hand. The appellant's submissions highlighted their lack of deliberate contravention or suppression of taxable service value. They explained lapses in tax payment under different services due to a genuine belief about tax liability. The appellant requested leniency due to their cooperation, payment of dues, and inexperience with tax laws.

3. The Commissioner imposed a penalty under Section 78 but limited it to the amount paid post a show cause notice. However, the impugned order did not find the appellants guilty of any misconduct specified under Section 78. The order acknowledged the lapse in tax payment but also noted the payment made by the appellants before the show cause notice. Following the precedent set by the High Court of Punjab & Haryana in a similar case, the Tribunal set aside the penalty imposed on the appellants due to the absence of fraud or suppression on their part. The appeal was allowed based on this interpretation of the law.

In conclusion, the judgment focused on the imposition of penalties under Section 78 of the Finance Act, 1994, emphasizing the importance of establishing fraud or suppression of facts to justify such penalties. The case highlighted the significance of bona fide beliefs, cooperation, and payment of dues in determining the outcome of tax penalty appeals.