2018 (4) TMI 596 - AT - Service Tax

Benefit of cum-tax - remuneration received as consideration for arranging holidays - case of appellant is that as they had not collected tax from their principal, the benefit of cum-tax should be extended to them - penalties - Held that - The appellant has discharged tax liability on cum-tax computation. It is apparent from the records that no service tax has been collected from the recipient of the service, therefore, it would be appropriate to limit the tax liability to that discharged by the appellant. Penalties - Held that - The issuance of the show cause notice itself is questionable and not in accordance with law. The scope of imposition for penalties does not exist. Appeal allowed.

Summary

Issues:
Tax liability on commission income | Applicability of 'cum-tax' benefit | Invocation of section 73(3) of Finance Act, 1994 | Penalties under sections 70, 76, 77, and 78 | Suppression of facts | Discharge of tax liability | Validity of show cause notice

Analysis:
The case involves appellants engaged in promoting holiday options, earning commission, and facing tax liability. The original authority confirmed substantial demands and imposed penalties. The first appellate authority modified penalties but upheld some. The appellants challenge the penalties before the Tribunal.

The appellants argue that they discharged the tax liability after registration and should receive the 'cum-tax' benefit due to not collecting tax from their principal. They contend that the show cause notice should not have been issued as they had already paid taxes, invoking section 73(3) of the Finance Act, 1994.

The Tribunal notes that the appellants paid taxes on a 'cum-tax' basis before the notice was issued and were not under investigation. It finds insufficient evidence to justify invoking section 73(4) for suppression of facts. The Tribunal observes that the principal had multiple individuals promoting the holiday package, some of whom did not pay taxes, indicating unfairness in attributing suppression solely to the appellants.

Considering the circumstances, the Tribunal rules in favor of the appellants. It limits their tax liability to the amount already paid, citing the applicability of section 73(3) as per a High Court decision. The Tribunal questions the validity of the show cause notice and concludes that penalties are unwarranted beyond the deposited amount.

In the final judgment, the Tribunal sets aside the impugned order, absolving the appellants from all penalties and excess tax liability. The decision highlights the importance of fair treatment and proper application of tax laws in such cases.

This detailed analysis covers the key legal issues addressed in the judgment, providing a comprehensive understanding of the Tribunal's decision in the case.