2023 (3) TMI 579 - AT - Service Tax

Levy of penalty under Section 78 and 77 (1)(c) of FA - suppression of turnover and/or mis-classification of taxable service - Extended period of limitation - disallowance of cenvat credit along with interest and further penalty - abatement under N/N. 30/2012-ST - HELD THAT - It is evident on the face of the impugned order, that no case of suppression or fraud, or misrepresentation is found on the part of the appellant/assessee. In this view of the matter, I set aside the penalty under Section 78 of the Finance Act and also under Section 77(1)(c) of the Act. The appellant is entitled to cenvat credit of Rs.1,25,018/-, which is towards Group Insurance taken for the medical and accident claim benefits. In the facts and circumstances, the penalty under Rule 15 of Cenvat Credit Rules read with Section 78 of the Act also set aside. It is further noticed that the appellant have also deposited the differential amount payable (during adjudication proceedings) as per the impugned order - the Adjudicating Authority is directed to recalculate their tax liability as per order of this Tribunal and after adjustment, if any, amount is found paid in excess, grant the refund to the appellant of the balance amount in cash. Appeal allowed.

Summary

Issues Involved:
1. Imposition of penalty under Section 78 and 77(1)(c) - Whether rightly imposed?

Detailed Analysis:

Issue 1: Imposition of penalty under Section 78 and 77(1)(c) - Whether rightly imposed?

The appellant, a registered assessee under Service Tax Provisions, was providing services under various heads from 2013-2014 to 2017-2018. The Revenue suspected suppression of turnover or misclassification of taxable services based on data received from the Income Tax Department. A show cause notice was issued, proposing a demand of Rs.1,98,60,297/- including cess, disallowance of cenvat credit, and penalties under various sections. The appellant contested the notice and provided detailed submissions. The appellant calculated a differential duty payable for each year, which was paid during adjudication proceedings. The Commissioner confirmed a truncated amount due to differences in abatement claim and disallowed cenvat credit on insurance services. Penalties were imposed under different sections, which the appellant challenged, arguing no major error or suppression on their part. After considering the contentions, the Tribunal found no suppression, fraud, or misrepresentation by the appellant. The penalties under Section 78 and 77(1)(c) were set aside, and the appellant was granted cenvat credit for insurance services. The Tribunal directed the recalculation of tax liability and refund of any excess amount paid by the appellant.

In conclusion, the Tribunal allowed the appeal, modified the impugned order, and set aside the penalties under Section 78 and 77(1)(c) while granting cenvat credit for insurance services to the appellant.