2018 (2) TMI 324 - AT - Service Tax

Penalty u/s 77 and 78 of FA - Recovery Agent Services - appellant had not taken any registration nor was making any compliance. Held that - it is not the case of Revenue that the appellant was a highly educated person understanding and/or having knowledge of the service tax provisions. In the statement recorded the appellant proprietor have stated that he was not aware of the provisions of service tax. He was entirely dependent on the bank which used to calculate the payments/commission payable to him, which was credited to his account, after deducting of income tax TDS at source. Further it is admitted fact on record that the appellant was not preparing any bills on the Bank nor have charged service tax and/or collected any service tax. Thus, there is no conscious attempt on the part of the appellant to evade payment of service tax. There is no deliberate attempt and/or contumacious conduct on the part of the appellant in compliance with the service tax provisions. Penalty u/s 78 set aside - penalty u/s 77 reduced - appeal allowed in part.

Summary

Issues:
1. Imposition of penalty under Section 78 and Section 77 for non-registration on the appellant - assessee.

Analysis:
The appellant, a proprietorship concern providing Recovery Agent Services to ICICI Bank Ltd., was found to have received payments/commission from the bank for the service during the period 2006-07 to 2009-10. The Revenue gathered information from the bank regarding these payments. The appellant had not taken any registration, made any compliances, filed ST-3 Returns, or collected/deposited service tax. The appellant claimed ignorance of service tax provisions and stated reliance on the bank for payment calculations. The total tax liability was calculated, and penalties were imposed under various sections, including Section 78, Section 70, and Section 77 for non-registration.

The Commissioner (Appeals) reduced the adjudicated service tax demand and penalty under Section 78. However, the penalty under Section 77 for non-registration was confirmed. The appellant argued lack of education and knowledge about service tax provisions, reliance on ICICI Bank for payment calculations, and no deliberate attempt to evade tax. The Revenue supported the impugned order.

After considering the contentions, the Tribunal found that the appellant lacked understanding of service tax provisions and was dependent on the bank for payment calculations. The appellant did not prepare bills, charge service tax, or collect it. Most of the turnover fell below the exemption limit, with only a marginal part attracting service tax. The Tribunal concluded no deliberate evasion by the appellant and set aside the penalty under Section 78. The penalty under Section 77 was reduced to ?5,000. The appeal was allowed in part, granting the appellant consequential benefits.

This judgment highlights the importance of knowledge and compliance with tax provisions, the role of reliance on third parties for financial matters, and the consideration of turnover thresholds in determining tax liabilities. The Tribunal's decision focused on the lack of deliberate evasion by the appellant and the circumstances leading to the reduced penalties under the relevant sections.