2017 (10) TMI 1057 - AT - Service Tax

Maintenance and repair service - demand of service tax has been confirmed on the ground that appellant has collected service tax and did not deposit the same with the Government treasury - Held that - Although, the taxable turnover falls within the exemption limit of ₹ 4 lakhs during the impugned period but the appellant has collected service tax from the service recipient. In that circumstances, the appellant cannot retain the said amount with them, therefore, the appellant are required to pay the amount of service tax collected by them alongwith interest. It cannot be said that appellant was under bonafide belief that they are not required to pay service tax. Therefore equivalent amount of penalty is confirmed u/s 78 of the FA, 1994. Appeal dismissed - decided against appellant.

Summary

Issues:
- Confirmation of service tax demand for the period 2006-2007 to 2009-2010 for maintenance and repair services provided to a thermal power station.
- Applicability of threshold exemption limit for service tax payment.
- Imposition of penalty under Section 78 of the Finance Act, 1994 for failure to deposit collected service tax.

The judgment dealt with an appeal against the confirmation of service tax demand for the period 2006-2007 to 2009-2010 for maintenance and repair services provided to a thermal power station. The appellant had collected service tax but failed to deposit it with the Government. The appellant argued that their turnover fell within the threshold limit of exemption, thus they were not liable to pay service tax. However, it was found that despite falling under the exemption limit, the appellant had collected service tax from the service recipient. The tribunal held that the appellant could not retain the collected amount and was required to pay the service tax along with interest. The tribunal rejected the appellant's argument of bonafide belief for non-payment of service tax and confirmed the penalty under Section 78 of the Finance Act, 1994.

The main issue revolved around the applicability of the threshold exemption limit for service tax payment. The appellant contended that since their taxable turnover was within the exemption limit, they were not obligated to pay service tax. However, the tribunal emphasized that despite falling within the exemption threshold, the appellant had collected service tax from the service recipient. The tribunal ruled that the appellant could not withhold the collected amount and was therefore liable to pay the service tax along with interest. This decision highlighted the importance of complying with tax obligations even if the turnover falls within the exemption limit.

Regarding the imposition of penalty under Section 78 of the Finance Act, 1994, the appellant argued that they had a bonafide belief that they were not required to pay service tax due to their turnover falling within the exemption limit. However, the tribunal rejected this argument, stating that the appellant's collection of service tax and failure to deposit it with the Government could not be justified by a bonafide belief. Consequently, the tribunal upheld the penalty under Section 78, emphasizing the importance of fulfilling tax obligations and depositing collected amounts with the appropriate authorities to avoid penalties and legal consequences.