2020 (1) TMI 804 - AT - Service Tax

Imposition of penalty u/s 78 - short paid of service tax under Reverse Charge Mechanism, which was subsequently paid alongwith the interest - HELD THAT - So far as invocation of Section 78 of the Act is concerned, the ingredients mentioned therein namely fraud, suppression, willful misstatement etc. have to be established by the department. The learned adjudicating authority in this case has specifically mentioned that based on the records, maintained by the appellant, the short payment of Service Tax on the GTA service was detected by the department. Thus under such circumstances, the charges of suppression, misstatement etc. cannot be leveled against the appellant, justifying invocation of the provisions of Section 78 of the Act for imposition of penalty. Late fee for delayed filing of ST-3 returns - HELD THAT - The SCN had not specifically invoked the provisions of section 74 of the Act, which has been invoked for the first time by the adjudicating authority, during the course of adjudication of the matter. It is evident that the adjudication order in this case, has gone beyond the scope of the show cause notice and on that count, imposition of late fee on the appellant cannot be sustained. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Appellant liable for Service Tax under Reverse Charge mechanism, short payment observed during audit, show cause proceedings initiated for confirmation of demand, imposition of penalties under Finance Act, 1994, appeal against original order, imposition of penalty under Section 78, demand of late fee for non-submission of ST-3 returns.

Analysis:
The case involved the appellant being held liable for Service Tax under the Reverse Charge mechanism due to short payment observed during an audit. The department initiated show cause proceedings seeking confirmation of the demand and imposition of penalties under the Finance Act, 1994. The original authority confirmed the demand, leading to an appeal before the learned Commissioner (Appeals) and subsequently to the Tribunal. The appellant, while not contesting the adjudged Service Tax and interest demand, argued against the imposition of penalties under Section 78 of the Act, citing lack of intent to evade payment and absence of suppression or misstatement. The appellant also contested the demand for late fee for non-submission of ST-3 returns, stating that the show cause notice did not invoke the relevant provisions.

The Tribunal considered both sides' arguments and reviewed the records. It noted that the department had observed the discrepancy in Service Tax payment based on the appellant's maintained books of accounts. Regarding the invocation of Section 78 of the Act for penalties, the Tribunal emphasized that the elements of fraud, suppression, or willful misstatement needed to be established, which were not evident in this case. The adjudicating authority's mention of the short payment based on the appellant's records did not justify penalties under Section 78. Additionally, the Tribunal found that the imposition of late fees for delayed filing of ST-3 returns went beyond the scope of the show cause notice, as the relevant provisions were not invoked initially. Therefore, the Tribunal set aside the penalties under Section 78 and the late fee for delayed filing of ST-3 returns, allowing the appeal in favor of the appellant.