2017 (3) TMI 241 - AT - Service Tax

Levy of penalty - amount received as consideration but did not deposit the same with government account due to shortage of trained staff and lack of awareness of Service Tax Law - whether benefit of Section 73(3) of FA as per which no SCN to be issued once the service tax and interest are paid, shall be available to appellant or not? - Held that - The appellant who has collected the service tax from the recipients of the service cannot take a plea that there was no willful suppression of facts from the department as collection of service tax from recipient of service implies that tax collected needs to be deposited with the government. The service tax collected if not deposited with the government automatically leads to an inference that there was an intention on the part of the appellant to evade the tax. The apex court decision in the case of Rajasthan Spinning and Weaving Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA relied upon, wherein it has been held that once the ingredients spelt out in the Section 11 AC of the CEA, 1944 are present, there is no discretion to the authorities to waive the penalty on the ground that the duty and interest has been paid before the issuance of SCN. Appeal dismissed - decided against appellant.

Summary

Issues: Appeal against Order-in-Original confirming service tax liability, penalty imposition under Sections 76, 77(2), and 78 of Finance Act, 1994.

Analysis:
1. Service Tax Liability: The appellant, a Clearing and Forwarding Agency Service provider, was found to have collected service tax from service recipients but failed to deposit it with the Government. The appellant admitted to this in a statement, leading to a demand for unpaid service tax of ?19,63,962 for the period from October 2008 to September 2013. The lower authority confirmed the demand, which was upheld by the Commissioner (A) in the impugned order.

2. Penalty Imposition: The appellant argued against penalty imposition, citing payment of service tax and interest before the show-cause notice, claiming reasonable cause due to illness, and lack of awareness of tax laws. However, the AR contended that the penalty was justified due to the appellant's failure to deposit collected service tax, file returns, and the suppression of material facts. The Commissioner (A) invoked the extended period due to willful suppression, rejecting the appellant's arguments and relying on precedents like Erecon vs. CST, Ahmedabad and others to support the penalty imposition.

3. Legal Considerations: The Commissioner (A) analyzed the case, noting the appellant's collection of service tax without depositing it, implying an intention to evade tax. The Commissioner rejected the appellant's plea of no willful suppression, citing the continuous lapse over five years and the applicability of Section 73(3) of the Finance Act only in the absence of fraud or collusion. Referring to legal precedents, the Commissioner upheld the penalty, emphasizing that payment of tax and interest before notice issuance does not negate penalty imposition when the conditions for invoking the extended period are met.

4. Decision: After reviewing the submissions and judgments, the Commissioner (A) found no fault in the impugned order, upholding the penalty imposition and dismissing the appellant's appeal. The Commissioner concluded that the penalty was justified given the appellant's actions and the legal provisions applicable in the case.

In conclusion, the appeal against the Order-in-Original confirming the service tax liability and penalty imposition was dismissed by the Commissioner (A), who upheld the penalty based on the appellant's failure to deposit collected service tax and the presence of willful suppression, as per relevant legal provisions and precedents.