2017 (3) TMI 1103 - AT - Service Tax

Levy of penalty - invocation of section 80 - Works Contract Service - tax paid on being pointed out - ignorance of law was given as reason for non-payment of tax - Held that - before adjudication of the matter, the appellant had paid ₹ 5,84,962/-, which has been appropriated in the adjudication order and the balance amount of tax alongwith interest was paid immediately after adjudication of the dispute. The authorities below have not specifically alleged/ concluded regarding the involvement of the appellant in any fraudulent activities with intent to defraud the Government Revenue. It is not the case of revenue that the appellant recovered the service tax amount from the service receiver and had not deposited the same with the Government Exchequer - benefit of Section 80 ibid should be extended to the appellant for non-imposition of penalty u/s 76, 77 and 78 ibid - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Liability of the appellant to pay service tax on Works Contract Service provided
- Imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1994
- Benefit of Section 80 for non-imposition of penalties

Analysis:
1. Liability of the appellant to pay service tax: The appellant provided Works Contract Service to a company during 2008-2012, but failed to deposit the service tax attributable to the taxable service. The department initiated Show Cause proceedings, resulting in an adjudication order confirming a service tax demand. The Ld. Consultant for the appellant argued that the appellant was unaware of the tax liability initially and voluntarily deposited a portion of the amount upon being informed by tax officers. The Tribunal noted that there were no specific findings of fraudulent activities by the appellant to defraud the Government Revenue. It was also observed that the appellant had paid the balance tax along with interest after the adjudication. The Tribunal concluded that the appellant should be granted the benefit of Section 80 for non-imposition of penalties.

2. Imposition of penalties under Section 76, 77, and 78: The Ld. DR reiterated the findings of the impugned order, emphasizing that the appellant's failure to register and file periodic returns exposed them to penal consequences as per the statute. However, the Tribunal found that there was no evidence to suggest that the appellant had recovered the service tax amount from the service receiver but failed to deposit it with the Government Exchequer. As a result, the Tribunal set aside the imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1994.

3. Benefit of Section 80 for non-imposition of penalties: The appellant's counsel argued that charges of fraud, collusion, or misappropriation could not be substantiated as no specific findings were recorded to that effect by the authorities. The Tribunal agreed with this argument and extended the benefit of Section 80 to the appellant, leading to the decision to set aside the penalties imposed under Section 76, 77, and 78. Consequently, the appeal was allowed in favor of the appellant, and the impugned order regarding the imposition of penalties was overturned.

In summary, the Tribunal ruled in favor of the appellant, granting the benefit of Section 80 and setting aside the penalties imposed under Section 76, 77, and 78 of the Finance Act, 1994, due to the lack of evidence of fraudulent activities and the appellant's compliance with the tax payment after being informed of the liability.