2018 (1) TMI 60 - AT - Service Tax

Penalty - service tax with interest paid on being pointed out - Held that - the differential service tax already stands paid by the appellant in full. The interest liability for such delayed payment has also been made even before the show-cause notice was issued - in terms of Section 73(3) of the FA, 1994, if the service tax has already been paid with interest before issue of show-cause notice, there will be no need to issue show-cause notice and hence there will be no liability for penalty - demand of tax with interest upheld - appeal allowed in part.

Summary

Issues:
1. Applicability of service tax on Customs House Agent (CHA) services.
2. Interpretation of Circular issued by CBEC regarding service tax on CHA services.
3. Imposition of penalty for non-payment of service tax.

Analysis:
1. The appeal was filed against an Order-in-Appeal where the appellant, a CHA service provider, was found to have not paid service tax on the entire amount collected from clients. The Department demanded service tax for the period 1998-99 to 2002-03, which the appellant remitted along with interest. The original authority confirmed the service tax with interest and imposed a penalty equal to the service tax paid after a delay. The Commissioner(Appeals) upheld this decision, leading to the present appeal.

2. The appellant argued that they also engaged in other services besides CHA services, and payments made for such services on behalf of importers were reimbursed later. Referring to a circular by CBEC, it was clarified that amounts paid for other services procured on behalf of clients would not form part of the value for computing service tax. The circular specified that only the agent's commission or charges recovered from clients would be subject to service tax. Despite this, authorities levied service tax on the entire amount collected by the CHA. The appellant contended that they had already paid the service tax along with interest before the show-cause notice, thus challenging the penalty imposition.

3. Upon review, it was found that the appellant had paid the differential service tax in full and the interest liability before the show-cause notice was issued. As per Section 73(3) of the Finance Act, 1994, if the service tax with interest is paid before the show-cause notice, there is no need for penalty imposition. Therefore, the penalty was set aside, while confirming the service tax and interest payment. The appeal was partly allowed based on this finding.