2018 (5) TMI 321 - AT - Service Tax

Penalty u/s 78 - case of appellant is that the adjudicating authority has applied the higher rate of service tax whereas the lower rate of service tax was prevailing for certain period - Held that - there is a plausible reason shown by the appellant for non-payment of service tax. Therefore prima facie it is the case wherein the penalty under Section 78 should not be imposed - also, all the aspects have not been considered by the adjudicating authority while imposing the penalty under Section 78 of the Finance Act - It is also observed that the adjudicating authority has also not extended the option of reduced penalty of 25% in terms of proviso to Section 78 of the Act. The matter needs to be reconsidered - appeal allowed by way of remand.

Summary

Issues Involved:
Service tax demand on the service of manpower recruitment and supply service.

Analysis:
The case involved a dispute regarding the service tax demand on the service of manpower recruitment and supply service. The appellant contested the imposition of penalty under Section 78, arguing that certain amounts were not payable due to various reasons. The appellant acknowledged the service tax demand but disputed a specific amount due to the application of a higher tax rate. The appellant highlighted that service tax was payable on the actual receipt of service charges, not on an accrual basis. Additionally, the appellant argued that certain job work done was not covered under the service in question. The appellant also explained delays in payment due to unforeseen circumstances, such as the illness of the Director undergoing a kidney transplant. The appellant relied on specific judgments to support their arguments.

The Revenue, represented by the Joint Commissioner, reiterated the findings of the impugned order. The Tribunal carefully considered the submissions from both sides. It was noted that the appellant had paid the entire service tax demand along with interest, except for the disputed amount. The Tribunal found merit in the appellant's argument regarding certain periods where service tax had been paid with delays but eventually cleared along with interest. The Tribunal also acknowledged the appellant's explanation regarding the service tax on debtors and job work. It was observed that the adjudicating authority had not considered all aspects while imposing the penalty under Section 78 and had not offered the option of reduced penalty as per the law. Therefore, the Tribunal decided to remand the case back to the adjudicating authority for reconsideration, specifically on the issue of the disputed amount and the penalty imposed under Section 78. The adjudicating authority was directed to provide the appellant with a sufficient opportunity for a personal hearing before passing a fresh order on the limited issue discussed.

In conclusion, the Tribunal disposed of the appeal by remanding it back to the adjudicating authority for a fresh decision on the disputed amount and penalty under Section 78, considering the observations made during the hearing.