2018 (5) TMI 1716 - AT - Service Tax

Extended period of limitation - Non-payment of service tax - advertising services - appellant case is that they did not pay the service tax as they were under the impression that service tax was not payable on these services - U.O. Note No. 13643/CT.II(1)/2004-3, dated 24.02.2005 issued by Special Chief Secretary, Government of Andhra Pradesh - demand with interest and penalties by invoking extended period. Held that - After the UO note was issued, the appellant had no excuse not to add the value of services rendered to the Government departments in their returns and pay service tax on the services rendered by them to the Government departments. They cannot plead ignorance after the UO note is issued - The demand of duty is clearly recoverable under the proviso to Section 73 (1), from 24.02.2005, the assessee has definitely suppressed the value of taxable services rendered and evaded paying service tax in full knowledge that their services are taxable - The demand is sustained and the extended period of demand is invokable from 24.02.2005 till the date of show cause notice Penalty u/s 76 and 78 - Held that - Since it is now well established fact that no penalty can be imposed under section 76 of Finance Act, even before amendment to this Section w.e.f. 14.05.2015 or prior to it, the penalty imposed under section 76 is, therefore, set aside - penalty u/s 78 to be modified. Appeal allowed in part.

Summary

Issues:
1. Invocation of extended period for service tax demand.
2. Allegations of suppression of facts and intent to evade payment of service tax.
3. Applicability of penalties under sections 76, 77, and 78 of the Finance Act, 1994.

Analysis:
1. The case involved the Appellate Tribunal CESTAT HYDERABAD addressing the invocation of the extended period for service tax demand. The appellants, engaged in advertising services, were found to have not paid service tax on services provided to government organizations. The department issued a show cause notice for the unpaid tax, interest, and penalties under sections 76, 77, and 78 of the Finance Act, 1994. The appellants contested the invocation of the extended period, arguing that the proviso to Section 73 was not invoked and could not be applied retrospectively.

2. The Tribunal examined the allegations of suppression of facts and intent to evade payment of service tax. The appellants claimed that they were under the impression that no service tax was payable on the services provided to government departments, citing a communication from the Government of Andhra Pradesh. However, the Tribunal noted that the appellants had not included these services in their returns despite being aware of the taxability. The Tribunal found that the appellants had suppressed the value of taxable services, leading to the invocation of the extended period for demand from a specific date.

3. Regarding penalties under sections 76, 77, and 78 of the Finance Act, the Tribunal modified the penalties imposed, setting aside the penalty under section 76. It upheld the demand based on suppression of facts and evasion of service tax from a certain date. The Tribunal concluded that the extended period for demand was applicable from the date of clear suppression, and penalties were adjusted accordingly. The appeal was allowed partially, with the demand sustained and penalties modified in line with the findings.

This detailed analysis provides insights into the Tribunal's decision on each issue raised in the case, covering the invocation of the extended period, allegations of suppression, and the applicability of penalties under the Finance Act, 1994.