2015 (11) TMI 1252 - AT - Service Tax

Penalty under Section 77 and 78 - commissioning and installation service - Manpower Requirement Agency Services - Held that - appellant had neither charged service tax in its bills nor the same was paid by the principal. Further the stand taken by the appellant that the default was only due to lack of knowledge and there was no contumacious conduct and/or suppression with intent to evade Service Tax, have not been found untrue in the impugned order. Under the facts and circumstances, I hold that the appellant is entitled to the benefit under Section 73(3) of the Finance Act as the tax and interest had been paid under proper intimation. In this view of the matter the penalty retained under Section 78 and Section 77 are set aside. The appellant will be entitled to refund of the excess tax deposited and will also be entitled to refund of the proportionate interest on the excess deposit of tax and penalty if any deposited. - Decided in favour of assessee.

Summary

Issues:
Confirmation of penalty under Section 77 and 78 of the Finance Act.

Analysis:
The appellant was found liable for Service Tax under the category of "Manpower Requirement Agency Services" for supplying manpower to a principal entity. The appellant did not charge Service Tax in their bills nor did the principal pay any service tax to the appellant. The appellant admitted the tax liability and deposited the service tax under Section 73(3) of the Finance Act. However, a show-cause notice was issued demanding tax for a specific period, along with interest and penalties under Section 76, 77, and 78 of the Finance Act.

The appellant contested the show-cause notice, claiming the default was due to ignorance of service tax provisions and not deliberate. The Order-in-Original confirmed the demand and imposed penalties under various sections. The Commissioner (Appeals) allowed the Small Service Providers benefit, reducing the tax amount and penalties. The appellant appealed to the Tribunal challenging the penalties imposed.

After hearing both parties, the Tribunal found that the default was due to lack of knowledge and not contumacious conduct to evade Service Tax. The appellant was granted the benefit under Section 73(3) as tax and interest were paid before the show-cause notice. Consequently, penalties under Section 77 and 78 were set aside. The appellant was entitled to a refund of excess tax deposited and proportionate interest on the excess deposit. The concerned authorities were directed to refund the amount within two months from the date of the order.

In conclusion, the appeal was allowed, and the appellant was granted consequential benefits, including refunds of excess tax and interest on the deposit.