2016 (11) TMI 937 - AT - Service Tax

Service tax liability - Business Auxiliary Service - non-declaration of the correct value of an amount received from one of the clients as commission - imposition of penalty u/s 78 of the Finance Act, 1994 - Held that - the appellant has admitted to short payment of the service tax liability and has paid the tax amount on being pointed out by the audit officers except for a small amount of ₹ 2.15 lakhs which was also paid off after issuance of show-cause notice. At this juncture we find that the contest in the appeal before us is only for the penalty imposed and as upheld. We find from the records that the appellant s conduct prior and post to the period in question by discharging his service tax liability in time was being of a good assessee. There could be a bonafide error on the appellant s part of not declaring the amount of ₹ 3.05 crores as the commission received in the ST return, but it is also undisputed that the said amount has been declared in the balance sheet as receipts. In our view this plea of the appellant that there was a bonafide error in not recording the amount in the ST-3 return is seems to be acceptable. In the facts and circumstances of this case, by invoking the provisions of Section 80 of Finance Act, 1994, we set aside the penalty imposed by the adjudicating authority under Section 78 of Finance Act, 1994 - appeal disposed off.

Summary

Issues:
Service tax liability on appellant under the category of "Business Auxiliary Service" for the period November 2008 to March 2009.

Analysis:
The appellant had not declared the correct value of an amount received from a client as commission. The appellant paid most of the tax liability before the show-cause notice, but a small amount remained unpaid. The appellant argued that the penalty under Section 78 of the Finance Act should be waived as they paid the tax before being pointed out, had a good record of paying taxes on time, and the amount was recorded in the balance sheet. The Department argued that the non-declaration of a significant commission amount in the ST-3 return was suppression with intent to evade tax.

The Tribunal considered both sides' submissions. They noted that the appellant admitted to the short payment and rectified it promptly after the audit officers' intervention. The Tribunal acknowledged the appellant's good tax compliance history and the fact that the unreported commission amount was recorded in the balance sheet. They found the appellant's claim of a bona fide error in not declaring the commission amount in the ST-3 return acceptable. Therefore, invoking Section 80 of the Finance Act, 1994, the Tribunal set aside the penalty imposed under Section 78.

In conclusion, the Tribunal disposed of the appeal by overturning the penalty based on the appellant's good compliance history, prompt rectification of the error, and the commission amount being recorded in the balance sheet.