2019 (8) TMI 1376 - AT - Service Tax

Imposition of penalty u/s 78 of FA - appellant had paid service tax only on invoices raised for reimbursement of salaries from the service receivers/clients but not on the incentives, rewards and reimbursement (RR) receipts from its clients - contravention of provisions of 67(3)1 of the Finance Act 1994 - HELD THAT - There is nothing available in the show cause about the intention of the appellant to evade payment of tax except that error was pointed out in the EA-2000 audit which appellant accepted to be an error and made its best efforts to rectify the same as in both Order-In-Appeal and Order-In-Original, it has been noted by the authorities that they had checked the payment and found them accounted in the assessee s account on ACES that has established that the payment details are genuine. Therefore, there if no cogent reason available to impose penalty under section 78 of FA when under section 76 penalty of 10% was imposed and appellant had abided the same by paying the penalty. The transitory provision as contained under section 78(B)(1)(b), provision of section 76 or 78 shall be applicable to the cases where show cause notice was issued but no order has been passed under sub section of 2 of section 73 as section 76 deals with non-payment of tax other than the reason of fraud or collusion or wilful misstatement or suppression of fact or contravention of any other provision of the act or rules while section 78 covers any of these grounds. Penalty set aside - Appeal allowed.

Summary

Issues Involved:
Challenge to the legality of equivalent penalty imposed under section 78 of the Finance Act after payment of penalties under sections 76 and 77 of the Finance Act.

Detailed Analysis:

1) Background and Duty Liability: The appellant, a private limited company providing Consultancy Service and Manpower Recruitment/Supply Agency Services, was audited for the period from F.Y. 2010-2011 to 2014-2015. The audit revealed that the appellant had not paid service tax on incentives, rewards, and reimbursements received from clients, leading to a service tax liability of ?45,69,370. The appellant admitted the liability, paid the amount except for the interest component, and was subsequently adjudicated for duty liability, interest, and penalties under sections 76, 77, and 78 of the Finance Act.

2) Appellant's Submissions: The appellant promptly discharged the duty liability upon audit findings, requested an extension for interest payment, and sought waiver of the penalty proposed in the show cause notice. The appellant argued that judicial decisions support that when a penalty is imposed under section 76, it cannot be imposed under section 78. The appellant accepted the mistake, paid the penalty under section 77, and appealed for setting aside the penalty under section 78.

3) Respondent's Argument: The respondent contended that the appellant did not pay the interest until the Tribunal hearing, despite being given an opportunity to do so within 30 days for possible waiver of penalty. The respondent supported the Commissioner (Appeals) decision, stating that the confirmation of the Order-In-Original by the Commissioner did not warrant interference.

4) Tribunal's Decision: After hearing both parties and reviewing the case record, the Tribunal noted that the appellant had promptly discharged the duty liability upon audit findings and requested an extension for interest payment due to financial constraints. The Tribunal highlighted that the audit process aims to ensure no tax evasion, and the appellant's actions did not indicate any malafide intention to suppress duty liability. The Tribunal found no reason to impose a penalty under section 78 when the appellant had paid the penalty under section 76 and complied with the same. Additionally, the transitory provision under section 78(B)(1)(b) clarified the applicability of sections 76 and 78 based on the circumstances of the case.

5) Final Order: The Tribunal allowed the appeal, setting aside the equivalent penalty of ?45,69,370 imposed under section 78 by the Commissioner (Appeals) in the order dated 16-02-2018.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision.