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2018 (11) TMI 1525 - AT - Service TaxPenalty u/s 77 and 78 - wrong assessment of Service Tax liability - reduction in rate of service tax - service tax alongwith interest paid before issuance of SCN - Held that - When the appellant admitted itself that it had negotiated the price which includes Service Tax components, it is not understood as to how he believed that the tax would be paid by the service receiver. More importantly, non-payment of Service Tax collected by the appellant was detected by the Department from the point of service received from the service receiver i.e. appellant and the same would clearly establish the intention of the appellant that it had not paid the tax under bonafide mistake, since its intention to evade payment of tax was apparent from its conduct. The investigation made by the Department also reveals that appellant had not declared their Service Tax liability correctly for which he imposed penalty under Section 78 of the Finance Act, 1994 - Penalty under Section 77 to the tune of ₹ 10,000/- was also imposed as appellant had failed to furnish the periodical ST-3 returns in contravention to Section 70 of the Finance Act, 1994 - penalties upheld. Appeal dismissed - decided against appellant.
Issues:
Imposition of penalty under Section 77 & 78 challenged in second round of litigation after reduction of Service Tax liability. Analysis: The case involves the challenge against the imposition of penalties under Section 77 & 78 by the Commissioner of Central Tax (Appeals), Raigarh, which was contested by the appellant in the second round of litigation following a reduction in the Service Tax liability. The appellant had been directed by the CESTAT to address the issue of wrong assessment of Service Tax liability, which was reduced from 12.36% to 10.3%, and to consider the benefit of SSI exemption amounting to ?10 lakhs. The factual background of the case includes the evasion of Service Tax by the appellant on manpower supply to MSEDCL, leading to an investigation and the calculation of a Service Tax liability of ?19,01,905. The Additional Commissioner of Central Excise, Raigarh, passed an Order-in-Original confirming the duty liability and penalties under Sections 76, 77 & 78 of the Finance Act, 1994. The appellant challenged this order before the Commissioner (Appeals), which was then appealed to the Tribunal and remanded back to the Commissioner (Appeals) for further inquiry. The Commissioner (Appeals) accepted the appellant's contentions regarding the tax liability discharge upon reaching a turnover of ?10 lakhs in the financial year 2008-09 and the prevailing tax rate of 10.3% during a specific period. However, the penalty under Section 77 was confirmed, albeit reduced to ?18,65,432, equivalent to the recalculated tax liability at 10.3%. The penalty under Section 76 was waived off due to the appellant's entitlement to exemption under Notification No. 06/2005-ST. During the appeal, the appellant's counsel argued against the imposition of penalties when the Service Tax along with interest was deposited before the issuance of the show-cause notice. Various judgments were cited in support of this argument. The appellant also contended that there was no suppression of facts warranting the invocation of the extended period under Section 73 of the Finance Act. The Department's Assistant Commissioner justified the imposition of penalties, citing the appellant's failure to file returns for the relevant period and the delayed payment of the differential amount. The Department argued that there was clear suppression of facts leading to the evasion of duty, justifying the penalties imposed by the Commissioner (Appeals). After hearing both sides and examining the case records, the Tribunal dismissed the appeal and confirmed the order passed by the Commissioner (Appeals). The cross objection was allowed accordingly, and the judgment was pronounced on 19.11.2018.
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