2008 (10) TMI 149 - AT - Service Tax

C&F Agent's Tax Evasion Appeal Denied, Penalties Reduced

The Tribunal held that the C&F Agent knowingly entered into an agreement to avoid tax payment, not qualifying for benefits under Section 80 of the ... Liability of commission and forwarding (C&F) agent for service tax - penalty for failure to discharge service tax liability as agent under Section 78 of the Finance Act, 1994 - penalty for non-filing of returns under Section 76 of the Finance Act, 1994 - availability of benefit under Section 80 of the Finance Act, 1994 - appropriation of deposited taxLiability of commission and forwarding (C&F) agent for service tax - availability of benefit under Section 80 of the Finance Act, 1994 - Whether the Commissioner (Appeals) was correct in extending benefit under Section 80 to the Respondent who had entered into an agreement with the principal to avoid service tax - HELD THAT: - The Tribunal examined the findings of the Adjudicating Authority and the Commissioner (Appeals). The Commissioner (Appeals) held that the principal (M/s. Intas Pharmaceuticals Ltd.) bore the complicity for revising the agreement to save service tax and that no mala fides could be attributed to the Respondent appointed as C&F Agent. The Adjudicating Authority, however, had found that the Respondent had intentionally entered into the agreement to avoid payment of tax and to mislead the Revenue. The Tribunal accepted the Adjudicating Authority's conclusion that the Respondent had knowingly entered into the agreement with the principal for the purpose of avoiding tax and held that, on that basis, the Commissioner (Appeals) was not justified in extending the statutory concession under Section 80. Accordingly, the Tribunal set aside the Commissioner (Appeals) order on this point and restored the Adjudication Order.Benefit under Section 80 not available to the Respondent; Commissioner (Appeals) order set aside and Adjudication Order restored.Penalty for failure to discharge service tax liability as agent under Section 78 of the Finance Act, 1994 - penalty for non-filing of returns under Section 76 of the Finance Act, 1994 - appropriation of deposited tax - Extent of penalties to be imposed where the tax was deposited by the Respondent before issuance of show cause notice - HELD THAT: - The Tribunal noted that the Respondent had deposited the tax along with interest before issuance of the show cause notice and that the Adjudicating Authority had appropriated the deposited amount. While restoring the Adjudication Order on liability, the Tribunal exercised its discretion to moderate the penalties in view of the pre-notice deposit. The penalty under Section 78 was reduced to 25% of the tax paid; the penalty for non-filing of returns under Section 76 was fixed at a reduced amount. These reductions reflect mitigation in consequence of the deposit prior to initiation of adjudicatory proceedings.Penalty under Section 78 reduced to 25% of the tax deposited; penalty under Section 76 reduced to a moderated amount; deposited tax appropriated by the Adjudicating Authority.Final Conclusion: The appeal is allowed in part: the Commissioner (Appeals) order granting benefit under Section 80 is set aside and the Adjudication Order restored; penalties are moderated in view of tax deposited before show cause notice (Section 78 reduced to 25% of tax and Section 76 penalty reduced), and the deposited tax is appropriated. Issues: Tax liability of C&F Agent, Penalty under Sections 78 and 76 of the Finance Act, 1994In this case, the Appellate Tribunal CESTAT NEW DELHI dealt with the issue of tax liability of a C&F Agent of a pharmaceutical company. The Respondent failed to discharge the tax liability as a C&F Agent and deposited the tax amount along with interest upon detection by Central Excise Officers before the show cause notice was issued. The Adjudicating Authority confirmed the tax demand and imposed penalties under Sections 78 and 76 of the Finance Act, 1994. The Commissioner (Appeals) set aside the penalty under Section 78 and reduced the penalty under Section 76. The Revenue appealed this decision.The Tribunal observed that the Respondent intentionally entered into an agreement with the pharmaceutical company to save service tax, which was being remitted to them. However, the complicity of revising the agreement to save the Service Tax component was attributed to the principals, not the Agent. The Tribunal noted that the Respondent's actions were not malicious as they were appointed as C&F Agent. The Adjudicating Authority had accused the Respondent of intentionally entering into the agreement to avoid tax payment. The Tribunal disagreed with the Commissioner (Appeals) and held that the Respondent knowingly entered into the agreement to avoid tax payment, thus not qualifying for the benefit under Section 80 of the Finance Act, 1994. The Tribunal set aside the Commissioner (Appeals) order and restored the Adjudication Order.Regarding the penalties, the Tribunal considered that since the Respondent had deposited the duty before the show cause notice, the penalty under Section 78 was reduced to 25% of the tax amount. The total penalty imposed was reduced to Rs. 8,700 under Section 78 and Rs. 5,000 under Section 76 of the Act. The appeal was allowed in favor of the Revenue, and the penalties were adjusted accordingly.