2013 (12) TMI 732 - AT - Service Tax

Penalty u/s 76, 77 and 78 - Service provided by foreign parties - Suppression of tax - Held that - The appellant says that it is registered soon after the amendment of law. There is no intention of evasion patent from orders but there was delay in payment of Service Tax. It appears that under bona fide mistake and due to confusion of law there was delay. We are unable to find the manner how suppression has occurred. For no finding in that regard in the revisional order, the revisional order appears to have preconceived imposition of penalty without assigning the reason for justification of levy - Following decision of Continental Foundation Jt. Venture 2007 (8) TMI 11 - SUPREME COURT OF INDIA - Decided in favour of assessee.

Summary

Issues:
1. Penalty imposed under Sections 76 and 78
2. Confusion regarding tax liability for services provided by foreign parties
3. Justification for penalty imposition
4. Application of legal principles in penalty imposition

Analysis:

1. Penalty Imposed under Sections 76 and 78:
The appellant was not disputing the tax and interest liability but was aggrieved by the penalty imposed under Sections 76 and 78. The penalty under Section 77 had been discharged. The Tribunal considered the harshness of the penalty and the confusion prevalent in the country regarding the liability arising from services provided by foreign parties. The Tribunal, after considering relevant judgments, decided to set aside the penalty under Sections 76 and 78 without requiring a pre-deposit.

2. Confusion Regarding Tax Liability for Services Provided by Foreign Parties:
There was a historical confusion about the tax liability for services provided by foreign parties, which was clarified in 2009 by a judgment of the Hon'ble High Court of Bombay upheld by the Apex Court. The appellant, registered soon after the amendment of the law, had a delay in paying the Service Tax due to a bona fide mistake and confusion of law. The Tribunal noted that there was no intention of evasion and no suppression of facts, applying legal principles to waive the penalty under Sections 76 and 78.

3. Justification for Penalty Imposition:
The Tribunal reviewed the show cause notice highlighting the liability aspect concerning payments to foreign parties. Despite a delay in payment, there was no evidence of suppression of facts or intentional evasion. The revisional order was criticized for preconceived imposition of penalty without proper justification, as it lacked reasoning for the levy. The Tribunal, referencing a relevant Apex Court judgment, found no suppression of fact and decided to waive the penalty under Sections 76 and 78 due to the discharge of Service Tax liability with penalty under Section 77.

4. Application of Legal Principles in Penalty Imposition:
The Tribunal, in its decision, clarified that it was not establishing a general principle but granting relief based on the peculiar circumstances of the case. By applying legal principles and considering the specific facts and legal precedents, the Tribunal allowed the appeal, disposed of the stay petition, and waived the penalty under Sections 76 and 78, emphasizing the absence of suppression of facts and the discharge of Service Tax liability under Section 77.

This comprehensive analysis of the judgment highlights the issues involved, the legal reasoning applied, and the ultimate decision reached by the Appellate Tribunal CESTAT NEW DELHI.