2018 (6) TMI 336 - AT - Service Tax

Penalties u/s 77 and 78 - Appellant did not pay service tax voluntarily but paid on being pointed out - Held that - The Appellant after audit conducted by the revenue has paid the service tax alongwith interest before issue of SCN - there was dispute of service tax on various other services also and the demands on the said services were dropped by the adjudicating authority. The nature of services and non payment of service tax was not suppressed by the Appellant and the details were appearing in book of accounts - there is no merits in imposing penalties - penalties not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Service tax liability on import of services, imposition of penalty under Section 78 and Section 77, payment of service tax before show cause notice, eligibility for credit of service tax, suppression of facts, applicability of penalties.

Analysis:
The case involved a BPO providing business support services to international clients, facing a service tax demand for not depositing tax on import of services. The adjudicating authority confirmed a demand of &8377; 82,58,538/- but dropped the remaining amount. However, penalties were imposed under Section 78 and Section 77 for not paying service tax monthly and not doing so voluntarily. The Appellant contended that they had paid the service tax along with interest before the show cause notice, arguing against the penalties.

The Appellate Tribunal noted that the service tax was indeed paid by the Appellant after an audit by the revenue department, and before the show cause notice was issued. They also found the Appellant eligible for credit of the service tax paid on a reverse charge basis. Importantly, the Tribunal observed that there was no suppression of facts regarding the nature of services or non-payment of tax, as the details were in the Appellant's books of accounts. Citing precedents like Mahindra Water Utilities and others, the Tribunal concluded that penalties under Section 77 and 78 were not warranted in this case.

Therefore, based on the facts presented and the legal precedents, the Tribunal held that the penalties imposed on the Appellant were not justified. The appeal was allowed, and the penalties were deemed unsustainable. The judgment was pronounced on 11th May 2018.