Commission settles tax liability, grants immunity from prosecution

The Commission settled the service tax liability at Rs. 11,76,016 and interest at Rs. 2,37,917, both confirmed as paid by the applicant. Penalty was waived, and immunity from prosecution was granted. The order specified that the settlement would be void if obtained by fraud or misrepresentation of facts.

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Issues Involved:
1. Evasion of service tax.
2. Demand and recovery of service tax.
3. Interest on unpaid service tax.
4. Penalty for willful suppression of facts.
5. Penalty for non-payment of service tax.
6. Claim for immunity from penalty and prosecution.
7. Dispute over exemption eligibility under Notification No. 2/2013-S.T. and Notification No. 9/2013-S.T.

Issue-wise Detailed Analysis:

1. Evasion of Service Tax:
The applicant company, engaged in providing taxable services such as manpower recruitment, transport of goods by road, and construction of residential complexes, was alleged to have evaded payment of service tax amounting to Rs. 12,13,407 (including cess). During an audit under EA 2000, the applicant accepted the evasion and voluntarily deposited Rs. 11,73,019 (including cess) plus interest.

2. Demand and Recovery of Service Tax:
A show cause notice (SCN) was issued on 29-9-2015, demanding service tax of Rs. 12,13,407 and proposing appropriation of Rs. 11,60,980 already paid by the applicant. The applicant admitted liability of Rs. 11,73,019 out of the total demand and requested for settlement, adjustment of duty and interest from the amount already deposited, and immunity from penalty and prosecution.

3. Interest on Unpaid Service Tax:
The applicant had paid interest amounting to Rs. 2,34,997 before approaching the Commission. The total interest liability was settled at Rs. 2,37,917, which was confirmed as paid by the applicant.

4. Penalty for Willful Suppression of Facts:
The Department argued that the applicant's contention of a bona fide mistake was not acceptable, as the evasion was detected during an audit, and the applicant did not pay the service tax immediately but only after a month. The Department suggested that the application was a cover-up for lapses and recommended that immunity from penalty should not be granted.

5. Penalty for Non-Payment of Service Tax:
The applicant contended that the non-payment was due to a procedural lapse and not an attempt to evade tax. They cited several case laws to support their claim that mere failure to discharge tax liability does not amount to evasion, and thus, penalty under Section 78 was not justified.

6. Claim for Immunity from Penalty and Prosecution:
The applicant requested immunity from penalty and prosecution, asserting that they had made a full and true disclosure, cooperated with the Department, and paid the tax and interest promptly upon detection. The Commission noted the applicant's cooperation and prompt payment and decided not to impose any penalty, granting immunity from prosecution.

7. Dispute Over Exemption Eligibility:
The applicant disputed the demand of Rs. 40,388 under the head of construction of residential complex services, claiming eligibility for a 75% abatement as per Notification No. 2/2013-S.T. They argued that the Department had wrongly calculated the tax by giving only a 70% exemption. The Commission reviewed the relevant notifications and concluded that for the period from 1-3-2013 to 7-5-2013, the applicant was eligible for a 75% exemption, making the taxable amount 25%. Thus, the demand of Rs. 37,391 did not sustain.

Conclusion:
The Commission settled the service tax liability at Rs. 11,76,016 and interest at Rs. 2,37,917, both of which were confirmed as paid by the applicant. Penalty was waived, and immunity from prosecution was granted. The order clarified that the settlement would be void if obtained by fraud or misrepresentation of facts.

Order:
- Service Tax: Settled at Rs. 11,76,016.
- Interest: Settled at Rs. 2,37,917.
- Penalty: Waived.
- Prosecution: Immunity granted.

Final Note:
The immunities from penalty and prosecution are subject to the provisions of Section 32K of the Act, and the order shall be void if obtained by fraud or misrepresentation.

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