2019 (2) TMI 582 - AT - Service Tax

Imposition of penalty - levy of service tax on agency Commission received by them from Reserve Bank of India for taking Government business on their behalf - non-payment of service tax for the period 12th November 2012 to March 2014 - no suppression of facts - extended period of limitation - Held that - The issue has been clarified by insertion of illustration to Section 65(F) of the Finance Act, 2015, wherein such agency commission became taxable to service tax. The appellant has also paid the amount which is also not disputed by the Revenue. It is on record that during that period there was decision in case of State Bank of Patiala 2016 (10) TMI 800 - CESTAT NEW DELHI wherein it was held that no service tax is payable on such commission received by the appellant. The appellant has accordingly followed the same and the Revenue was also fully aware of these judgments on the issue. Subsequently, when the issue was clarified by adding to Section 65(F) of the Finance Act. Being interpretational issue and there is no question of levy of penalty on the appellant as has been held in the impugned order - Penalty set aside - demand of service tax with interest upheld - appeal allowed in part.

Summary

Issues:
1. Imposition of penalty under the provisions of Finance Act, 1994.
2. Liability to pay Service Tax on agency commission received.
3. Interpretation of Section 65(F) of the Finance Act, 2015.
4. Applicability of penalty under Section 78(1) of the Finance Act, 1994.

Analysis:
The appellant filed an appeal against the Order-in-Original confirming the demand of &8377; 14,97,82,395, including penalties, for not paying Service Tax on agency commission received. The appellant did not contest the duty but challenged the penalty imposition. The appellant argued that the agency commission became taxable only after the insertion of Section 65(F) of the Finance Act, 2015. Referring to previous tribunal judgments, the appellant claimed that Service Tax was not payable on such commissions. The appellant highlighted that the Department was aware of this and had requested details of agency commissions in the past. The appellant argued that there was no suppression of facts to evade tax, so the extended period of limitation should not apply.

The Revenue supported the impugned order, but after hearing both sides, the Tribunal analyzed whether the appellant was liable to pay Service Tax on agency commissions. It was noted that the appellant had paid the demanded amount, and the dispute was mainly about the penalty under Section 78(1) of the Finance Act, 1994. The Tribunal considered the interpretational issue regarding the taxability of agency commissions and the previous judgments in similar cases where it was held that no Service Tax was payable on such commissions. The Tribunal concluded that since the appellant followed the law as per those judgments and the Revenue was aware of them, there was no basis for imposing a penalty. Therefore, the Tribunal set aside the penalty portion of the order but confirmed the demand.

In conclusion, the Tribunal allowed the appeal, emphasizing that due to the interpretational issue and the appellant's compliance with previous judgments, no penalty should be levied. The decision highlighted the importance of clarity in tax laws and the significance of following established legal interpretations.