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of <h1>Tribunal upholds service tax, sets aside penalties, remands issue of withholding tax for further review</h1> The Tribunal upheld service tax liability on payments to service providers post 18-04-2006 but set aside penalties as the appellant had already discharged ... Demand of service tax - Whether appellant is liable to service tax liability on the payments made to service providers prior to 18-04-2006 as also post 18-04-2006 and whether service tax liability is to be discharged on the amount held back by the appellant as withholding tax for the remittances made the persons situated abroad - Held that:- first appellate authority has come to a conclusion that service tax liability arises on the appellant after 18.04.2006 by the virtue of provisions of section 66 A of the Finance Act 1994. The said findings of the first appellate authority is correct and does not require any interference. The impugned order to the extent it upholds service tax liability and the interest thereof, is correct and legal and does not suffer from any infirmity. This takes us to the penalties imposed on the appellant on this count. It is seen from the records that the appellant has discharged the entire service tax liability and the interest thereof before the issuance of show cause notice. The service tax liability having being discharged prior to issuance of show cause notice, we consider the same as it would fall under the provisions of section 73 (3) of the Finance Act 1994, show cause notice need not have been issued this point; be that is it may, since the issue involved was contested before the various forms, we invoke the provisions of section 80 of Finance Act 1994, set aside on the penalties imposed on this point as also wherever appellant has discharged the service tax liability and with the interest, before the issuance of show cause notice. As regard the service tax liability under the category of withholding amount for taxes, the first appellate authority as well as the adjudicating authority have not recorded any reasoning for coming to conclusion that appellant is liable to discharge the service tax liability. Both the lower authorities has only relied upon the Board circular and holding that the withholding tax is an amount which needs to be considered as TDS. - Matter remanded back - Impugned order is set aside Issues Involved:1. Service tax liability on payments made to service providers pre and post 18-04-2006.2. Service tax liability on amount held back as withholding tax for remittances made to persons abroad.Issue 1: Service tax liability on payments made to service providers pre and post 18-04-2006The appeal addressed whether the appellant is liable for service tax on payments made to service providers before and after 18-04-2006. The first appellate authority concluded that service tax liability arose after 18.04.2006 based on section 66 A of the Finance Act 1994. The Tribunal upheld this conclusion, stating that the service tax liability and interest were correctly imposed. However, since the appellant had already discharged the service tax liability and interest before the show cause notice was issued, the Tribunal considered it falling under section 73 (3) of the Finance Act 1994. Consequently, the penalties imposed on the appellant were set aside where the service tax liability had been discharged before the issuance of the show cause notice.Issue 2: Service tax liability on amount held back as withholding tax for remittances made to persons abroadThe second issue revolved around the service tax liability concerning the amount held back by the appellant as withholding tax for remittances made to persons abroad. Both the first appellate authority and the adjudicating authority did not provide reasoning for determining the appellant's liability for discharging the service tax. They relied solely on a Board circular, equating withholding tax to TDS. The Tribunal noted the lack of addressing the appellant's contested issue by the lower authorities and decided that this issue required reconsideration by the adjudicating authority. The matter was remanded back to the adjudicating authority with a directive to reevaluate the service tax liability on withholding tax, emphasizing the need to adhere to the principles of natural justice.In conclusion, the Tribunal upheld the service tax liability on payments to service providers post 18-04-2006 but set aside penalties where the appellant had already discharged the liability. The issue of service tax liability on withholding tax for remittances made abroad was remanded for further consideration by the adjudicating authority.
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