2018 (9) TMI 183 - AT - Service Tax

Penalty u/s 76 and 78 - the appellant have admittedly paid the same along with interest - Held that - Even before initiation of the investigation already paid major amount of 1.71 Lakhs remaining amount along with interest was also paid before issuance of SCN. In this fact there was no need to issue any SCN in terms of Section 73(3) of Finance Act, 1994 - Consequently, no penalty was imposable - demand with interest upheld - appeal allowed in part.

Summary

Issues:
1. Applicability of service tax on commission/brokerage received by the appellants.
2. Validity of the demand for service tax under Section 73 of the Finance Act, 1994.
3. Imposition of penalties under Section 76 and 78.

Analysis:

Issue 1: Applicability of service tax on commission/brokerage received by the appellants
The appellants were engaged in selling old and used cars, receiving commissions, and arranging finance for clients. The revenue authorities found that the appellants did not pay service tax on the commission received from banks/financial institutions during a specific period. The appellants argued that they had a valid service tax registration and had paid a substantial amount of service tax before the investigation began. The main contention was whether the commission received was liable for service tax.

Issue 2: Validity of the demand for service tax under Section 73 of the Finance Act, 1994
The Assistant Commissioner confirmed the demand for service tax under Section 73 of the Finance Act, 1994, invoking an extended period of five years. The demand was based on the commission/brokerage received by the appellants, which they had not fully paid service tax on initially. The Commissioner (Appeals) upheld this decision, leading to the present appeal. The question was whether the demand for service tax was justified and whether penalties imposed were appropriate.

Issue 3: Imposition of penalties under Section 76 and 78
The appellate tribunal considered the submissions from both sides and reviewed the records. It was acknowledged that the appellants had paid the service tax along with interest before the issuance of the show cause notice (SCN). The tribunal held that since the appellants had already paid a significant amount and the remaining balance along with interest before the SCN, there was no need for the SCN to be issued. Consequently, the tribunal found that penalties under Section 76 and 78 were not sustainable. The tribunal ruled that the service tax demand, along with interest, was valid, but the penalties under Sections 76 and 78 were set aside. The appeal was partly allowed on these grounds.

In conclusion, the tribunal upheld the service tax demand and interest but set aside the penalties imposed under Sections 76 and 78, emphasizing that it was a case of delayed payment rather than deliberate evasion.