2018 (7) TMI 616 - AT - Service Tax

Penalty - security services - legal consultancy services - reverse charge mechanism - revenue neutral situation - Held that - The service tax paid on security services as well as legal consultancy services being paid under reverse charge mechanism, the appellant as a service recipient would be eligible to avail credit. Thus the situation is a revenue-neutral one - the intention to evade payment of tax cannot be saddled upon the appellant - penalty not warranted. Penalty - Supply of Tangible Goods Service - service tax along with the interest paid immediately on being pointed out by the department - Held that - The demand has been raised within the normal period and the department has not furnished any evidence to show that there was any intent to evade payment of duty on the part of the appellant and the amount has been collected from the books of accounts maintained by the appellant - demand of penalty do not sustain. The impugned order is modified to the extent of setting aside penalties imposed without disturbing the duty demand, interest thereon - appeal allowed in part.

Summary

Issues:
1. Failure to discharge service tax liability on Security Agency Service, Consultancy Service, and supply of Tangible Goods Service.
2. Imposition of penalty under Section 78 of Finance Act, 1994.

Analysis:
1. The appellant was engaged in various services but failed to discharge service tax liability on Security Agency Service, Consultancy Service, and supply of Tangible Goods Service for the period April 2013 to March 2014. The original authority confirmed the demand, interest, and imposed a penalty under Section 78. The Commissioner (Appeals) upheld the decision, leading to the current appeal.

2. The appellant argued that upon discovering the failure to pay service tax, they immediately discharged the liability and paid the interest within a month of receiving the Show Cause Notice (SCN). The appellant contended that service tax on Security Agency Service and Consultancy Service, paid under reverse charge mechanism, allowed them to avail cenvat credit, making the situation revenue-neutral. Citing relevant cases, the appellant claimed no intention to evade tax. Regarding the supply of Tangible Goods Service, the appellant asserted that the tax was paid promptly upon notification in 2015 within the same financial year, with transparent transactions and no intent to evade payment. The appellant contested only the penalty imposed.

3. The respondent reiterated the findings of the impugned order, supporting the penalty imposition.

4. After hearing both sides, the Member (Judicial) considered the arguments and facts presented. The service tax paid on Security Agency Service and Consultancy Service, under reverse charge mechanism, allowed the appellant to avail credit, creating a revenue-neutral scenario. Relying on previous decisions, the Member opined that no intent to evade tax could be attributed to the appellant in this context, leading to the penalty's dismissal.

5. Regarding the supply of Tangible Goods Service, the appellant promptly paid the service tax and interest upon notification by the department. There was no evidence of intent to evade payment, as the amount was derived from the appellant's maintained accounts. Consequently, the penalty imposed for this service was deemed unsustainable and set aside.

6. In conclusion, the impugned order was modified by setting aside the penalties while upholding the duty demand and interest. The appeal was partly allowed with consequential reliefs as per law.