2008 (10) TMI 149 - AT - Service Tax

Failure to discharge the tax liability as C&F Agent - Adjudicating Authority holding that respondent intentionally avoided the payment of tax, confirmed the demand of tax and imposed penalty of equal amount under Section 78 and penalty of Rs. 100/- per day u/s 76 - Commissioner (Appeals) setting aside the penalty holding that mala fide is absent, is not correct - Commissioner (Appeals) is not correct to extend the benefit under Section 80 - impugned order passed by the Commissioner (Appeals) is set aside - Adjudication Order is restored since tax was paid before issue of SCN, penalty u/s 78 and 76 are reduced

Summary

Issues: Tax liability of C&F Agent, Penalty under Sections 78 and 76 of the Finance Act, 1994

In this case, the Appellate Tribunal CESTAT NEW DELHI dealt with the issue of tax liability of a C&F Agent of a pharmaceutical company. The Respondent failed to discharge the tax liability as a C&F Agent and deposited the tax amount along with interest upon detection by Central Excise Officers before the show cause notice was issued. The Adjudicating Authority confirmed the tax demand and imposed penalties under Sections 78 and 76 of the Finance Act, 1994. The Commissioner (Appeals) set aside the penalty under Section 78 and reduced the penalty under Section 76. The Revenue appealed this decision.

The Tribunal observed that the Respondent intentionally entered into an agreement with the pharmaceutical company to save service tax, which was being remitted to them. However, the complicity of revising the agreement to save the Service Tax component was attributed to the principals, not the Agent. The Tribunal noted that the Respondent's actions were not malicious as they were appointed as C&F Agent. The Adjudicating Authority had accused the Respondent of intentionally entering into the agreement to avoid tax payment. The Tribunal disagreed with the Commissioner (Appeals) and held that the Respondent knowingly entered into the agreement to avoid tax payment, thus not qualifying for the benefit under Section 80 of the Finance Act, 1994. The Tribunal set aside the Commissioner (Appeals) order and restored the Adjudication Order.

Regarding the penalties, the Tribunal considered that since the Respondent had deposited the duty before the show cause notice, the penalty under Section 78 was reduced to 25% of the tax amount. The total penalty imposed was reduced to Rs. 8,700 under Section 78 and Rs. 5,000 under Section 76 of the Act. The appeal was allowed in favor of the Revenue, and the penalties were adjusted accordingly.