2018 (4) TMI 1327 - AT - Service Tax

Penalties - service tax demand along with interest was also paid by the appellant before adjudication of the matter - wrong advice of tax consultant - malafide intent - Business Auxiliary Services - Held that - Held that - due to wrong advice of the Excise Consultant, the appellant though had reflected its liability in the E R1 returns, but did not pay the service tax within the stipulated time frame - based on the records maintained by the appellant, the department has proceeded for recovery of the adjudged dues. Therefore, mala fides cannot be attributed for imposition of penalty on the appellant - penalty set aside by invoking section 80 - appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal against service tax demand, applicability of Section 80 of the Finance Act, 1994 for non-imposition of penalties.

Analysis:
1. Service Tax Demand: The appellant, engaged in manufacturing molding boxes, was found to earn income from labor charges and incur expenses on transportation. The department classified the services under 'business auxiliary service,' leading to a service tax demand of ?76,32,595/- confirmed against the appellant. The appellant did not contest the demand and paid the amount before adjudication.

2. Applicability of Section 80: The appellant contested the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994. The appellant argued that the benefit of Section 80 should be extended as the non-payment of service tax within the stipulated time was due to a genuine belief that payment from the CENVAT account was not permitted. The appellant's consultant submitted that the service tax liability was reflected in the returns, indicating no malafide intent.

3. Arguments: The appellant's consultant argued for the benefit of Section 80, emphasizing the lack of malafide intent in non-payment. The Revenue reiterated the findings of the impugned order, upholding the penalties.

4. Decision: After considering the submissions and perusing the records, the Tribunal found that the appellant had paid the service tax demand and interest before adjudication. The Tribunal examined a certificate from the Cost Accountant, which highlighted the wrong advice received by the appellant regarding payment. The Tribunal concluded that the benefit of Section 80 should be granted in the interest of justice, as no malafides were found in the appellant's actions. Consequently, the penalties imposed under Sections 77 and 78 were set aside, and the appeal was allowed in favor of the appellant.