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2023 (9) TMI 69 - AT - Service TaxLevy of Penalty u/s 78 of FA - suppression of facts or not - manpower supply agency service - reverse charge mechanism within the meaning of Section 66A of the Finance Act, 1994 read with Rule 3(iii) of Taxation of Services (Provided from Outside India and Received in India) Rules, 2006 - extended period of limitation - HELD THAT - The Hon ble High Court of Karnataka in the case of COMMISSIONER OF CENTRAL EXCISE AND SERVICE TAX VERSUS M/S ADECCO FLEXIONE WORKFORCE SOLUTIONS LTD 2011 (9) TMI 114 - KARNATAKA HIGH COURT had an occasion to consider a similar situation where the Revenue having appropriated the duty liability as well as interest, had issued Show Cause Notice, wherein the proposal was made again to appropriate the amount already paid towards the duty liability and interest and also thereby proposing penalty, had deleted the penalty so levied since there was no loss to the exchequer. The issue of penalty came up for the consideration before the High Court of Karnataka in the case of COMMISSIONER OF SERVICE TAX, BANGALORE VERSUS MASTER KLEEN 2011 (9) TMI 788 - KARNATAKA HIGH COURT where it was held that It is unfortunate that inspite of statutory provisions, the authorities have issued a show cause notice claiming penalty. So, tax and interest was paid before issue of show cause notice. Therefore, the Tribunal was justified in setting aside those orders. As the said order is strictly in accordance with law we do not find any legal infirmity that calls for interference. It is found that the same reasons apply even for invoking the larger period since other than mere alleging suppression, no documentary evidence is placed on record - the Show Cause Notice is therefore clearly issued only for levying penalty and to this extent, the above decision of the Hon ble High Court of Karnataka in M/s. Adecco Flexione Workforce Solutions Ltd. squarely applies. The demand for the normal period alone upheld - appeal disposed off.
Issues involved:
The issues involved in the judgment are the liability of Service Tax on the appellant under reverse charge mechanism, deliberate suppression of facts with intent to evade payment of Service Tax, imposition of penalty under Sections 78 and 76 of the Finance Act, 1994, and the appropriateness of invoking the larger period of limitation. Detailed Summary: Issue 1: Liability of Service Tax under reverse charge mechanism The appellant was rendering service under 'business auxiliary service' and availing CENVAT Credit of the Service Tax paid on input services. The Revenue contended that the deputation of employees by M/s. Areva group to the appellant for a fee constituted manpower supply agency service, leading to a Service Tax liability under reverse charge mechanism. Issue 2: Deliberate Suppression of Facts The Revenue issued a Show Cause Notice alleging that the appellant deliberately suppressed facts by not remitting Service Tax as per the self-assessment procedure. The original authority confirmed the demand, stating that the appellant failed to demonstrate a reasonable cause for non-remittance and did not disclose their activities in their returns, indicating an intention to evade payment. Issue 3: Imposition of Penalty The Show Cause Notice proposed the demand for Service Tax on manpower recruitment or supply agency, along with interest and penalties under Sections 78 and 76 of the Finance Act, 1994. The appellant contended that since they had paid the Service Tax and interest before the Show Cause Notice, the penalty should not be imposed, citing judicial precedents where penalties were deleted when the tax liability and interest were paid before the issuance of notices. Issue 4: Appropriateness of Invoking Larger Period The appellant challenged the invocation of the larger period of limitation, arguing that there was no documentary evidence supporting the allegation of suppression. The Tribunal upheld the demand for the normal period alone, following the precedent that Show Cause Notices issued after payment of tax and interest do not warrant penalties. In conclusion, the Tribunal set aside the impugned order and allowed the appeal based on the settled legal principles regarding the imposition of penalties when tax liabilities and interest are paid before the issuance of Show Cause Notices.
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