2023 (11) TMI 371 - AT - Service Tax

Levy of penalty under sections 76 and 77 of the Finance Act - invocation of Section 80 of the Finance Act - service charges amounting to Rs. 3,66,93,393/- out of the total Rs. 4,30,08,843/- were actually released or not - HELD THAT - Section 80 of the Finance Act, as was in force at the relevant time, provides that notwithstanding anything contained in the provisions of section 76 or section 77, no penalty shall be imposable on the assessee for any failure referred to in the said provisions, if the assessee proves that there was reasonable cause for the said failure. When in the earlier two matters, section 80 of the Finance Act had been invoked and penalties under sections 76 and 77 of the Finance Act were dropped, there is no good reason as to why the provisions of section 80 were not invoked by the Commissioner (Appeals) in the present case to drop the penalties under sections 76 and 77 of the Finance Act. This apart, a perusal of the order passed by the Tribunal on 06.02.2018 also shows that the bona fides of the appellant were not in doubt and, therefore, the extended period of limitation was not invoked. In this view of the matter, the imposition of penalties under sections 76 and 77 of the Finance Act cannot be sustained. As this issue has not been decided by the Commissioner (Appeals), it will not be appropriate for the Tribunal to record a finding in the first stance. The matter would have to be remitted to the Commissioner (Appeals) to decide this issue in accordance with law. While confirming the demand of service tax, the penalty imposed upon the appellant under sections 76 and 77 of the Finance Act are set aside and the matter is remitted to the Commissioner (Appeals) only for the limited purpose of deciding whether the appellant was justified in paying service tax on Rs. 3,66,93,393/- - Appeal allowed.

Summary

Issues involved:
The issues involved in this case are the imposition of penalty under sections 76 and 77 of the Finance Act, and the calculation of the actual liability of service tax based on the amount received by the appellant.

Imposition of Penalty:
The Tribunal's order from 06.02.2018 indicated that in a previous case, section 80 of the Finance Act was invoked, leading to the non-imposition of penalties under sections 76 and 77. The subsequent decision on 09.09.2019 also did not impose penalties under sections 76 and 77 by utilizing the provisions of section 80. Section 80 of the Finance Act states that no penalty shall be imposed if the assessee proves reasonable cause for the failure. Since the appellant's bona fides were not in doubt and the extended limitation period was not invoked, penalties under sections 76 and 77 cannot be upheld.

Calculation of Actual Liability:
The appellant submitted that the Ministry released service charges of Rs. 3,66,93,393 out of the total Rs. 4,30,08,843. The appellant deposited service tax under protest based on the Point of Taxation Rules, which changed the liability to pay service tax upon the issuance of invoices. The appellant argued that the actual liability should be Rs. 37,79,419 instead of Rs. 44,29,910 as stated in the show cause notice. The Commissioner (Appeals) did not consider these facts, and the matter needs to be remitted to decide if the appellant was correct in paying service tax on Rs. 3,66,93,393. Therefore, the demand of service tax is confirmed, penalties under sections 76 and 77 are set aside, and the case is sent back to the Commissioner (Appeals) for further consideration.