2022 (9) TMI 1284 - AT - Service Tax

Levy of penalty u/s 78 of FA - Short payment of service tax - Short payment found during the course of audit - HELD THAT - The appellant has accepted the demand with regard to non-payment of service tax under various categories of services. One of the issue was whether the amount that has to be paid under works contract services was to be treated as original works or maintenance work. Other issue was whether the tax has to be paid under manpower supply services or works contract service. It is seen that there are interpretational issues. There is no iota of evidence adduced by the department that the appellant has committed any positive act of suppression of facts with intention to evade payment of service tax. Further, the appellant is an undertaking under the State Government of Tamil Nadu and for these reasons, it is a fit case to set aside the penalties imposed u/s 78 of the Finance Act, 1994. All the penalties imposed under section 78 requires to be set aside - the impugned order is modified to the extent of setting aside the penalties imposed under sec. 78 of the Finance Act only without the disturbing the confirmation of demand or the interest thereon - appeal allowed.

Summary

Issues:
Penalties imposed under sec. 78 of the Finance Act, 1994.

Analysis:
The appellant, an undertaking of the State Government of Tamil Nadu, engaged in land acquisition and development activities, was found to have short-paid service tax under various categories during an audit. The Show Cause Notice proposed demanding the service tax, interest, and penalties. The original authority confirmed part of the demand and dropped part of it, imposing penalties on the confirmed demands. The appellant contested the penalties before the Tribunal.

The consultant for the appellant argued that the figures for the demand were obtained from the appellant's accounts, with no evidence of intentional suppression to evade tax. The issue revolved around the classification of services and tax payments. The appellant accepted and paid the demand with interest, emphasizing the lack of malicious intent due to being a State Government undertaking. The consultant cited relevant case laws to support the appeal.

The respondent supported the findings in the impugned order, highlighting that the short-payment would not have been discovered without the audit. After hearing both sides, the Tribunal considered the penalties imposed under sec. 78 of the Finance Act, 1994. It was noted that the appellant had accepted the demand related to non-payment of service tax under various services, with interpretational issues arising regarding works contract services and manpower supply services. However, no evidence was presented to prove intentional evasion of tax by the appellant. Given the appellant's status as a State Government undertaking, the Tribunal decided to set aside the penalties under sec. 78, while confirming the demand and interest.

In conclusion, the Tribunal relied on the arguments presented by both parties and the case laws cited by the appellant. It held that there was no evidence of deliberate evasion by the appellant and thus set aside all penalties imposed under sec. 78 of the Finance Act, 1994. The impugned order was modified to reflect this decision, allowing the appeal with consequential relief if any.