2016 (11) TMI 320 - AT - Service Tax

Tribunal rules in favor of taxpayer, citing no willful suppression for tax evasion.

The Tribunal rejected the Department's appeal, ruling in favor of the tax payer. It held that there was no willful suppression to evade tax payment, ... Waiver of Penalty - willful suppression - Whether equal penalty is to be levied in the present case as it is an undisputed fact that tax along with interest stands paid - Held that: - the argument of the Appellant is not tenable in view of the principle laid down by the Hon’ble Supreme Court in the case of UOI Vs Kamlakshi Finance Corporation Ltd. 1991 [ 1991 (9) TMI 72 - SUPREME COURT OF INDIA ], wherein it was held that mere fact of filing an appeal can furnish no ground for not following a judicial pronouncement unless its operation has been suspended by a competent Court - only omission on the part of the Respondent was non-payment of tax and that they have paid the same along with interest upon intimation by the DGCEI - there is no suppression much less a willful suppression on the part of the Respondent to evade payment of tax which is a pre-requisite for invocation of extended period and imposition of penalty. Regarding Penalty - there is a specific provision for waiver of penalty under the Finance Act, 1994 when reasonable cause exists whereas the same is not available under Central Excise law - In the present case, as seen above, there is no suppression of facts with an intention to evade payment of duty and accordingly a reasonable cause is present to invoke Section 80 of the Finance Act, 1994 - Decided in favor of the assessee. Issues involved:Levy of equal penalty under Service Tax law for non-payment of tax under reverse charge mechanism; Interpretation of Section 80 of the Finance Act, 1994 for waiver of penalty; Allegation of willful suppression by the tax payer; Applicability of judicial precedents in determining penalty imposition.Detailed Analysis:1. Levy of Equal Penalty: The case involved a dispute regarding the levy of equal penalty on a tax payer for non-payment of service tax under reverse charge mechanism. The tax authorities had alleged willful suppression by the tax payer for not depositing service tax received from foreign vendors. The tax payer contended that the tax and interest had been paid before the issuance of the show cause notice, and hence, equal penalty should not be applicable.2. Interpretation of Section 80 of the Finance Act, 1994: The Commissioner (Appeals) had relied on Section 80 of the Finance Act, 1994 to waive the penalty proceedings, citing the case of Atwood Oceanics Pacific Ltd. vs. CST Ahemdabad. The tax authorities argued that the extended period of limitation was invoked, and hence, no waiver of penalty was possible under Section 80. The Tribunal analyzed the provisions of Section 80 and its applicability in the present case.3. Allegation of Willful Suppression: The key issue revolved around the allegation of willful suppression by the tax payer to evade payment of tax. The Tribunal examined whether there was any willful suppression on the part of the tax payer based on the facts of the case. The tax payer argued that there was no suppression involved as they had paid the tax and interest upon being notified by the authorities.4. Applicability of Judicial Precedents: Both parties relied on various judicial precedents to support their arguments regarding penalty imposition. The tax payer cited cases where mere failure to pay duty did not amount to willful suppression, while the tax authorities referenced judgments emphasizing the mandatory nature of penalty imposition under the Finance Act, 1994. The Tribunal analyzed these precedents to determine their relevance to the present case.In conclusion, the Tribunal rejected the Department's appeal, holding that the tax payer was entitled to the benefit under Section 73(3) of the Finance Act, 1994, as there was no willful suppression to evade tax payment. The Tribunal distinguished the case law cited by the Department and upheld the waiver of penalty under Section 80, emphasizing the tax payer's cooperation and immediate payment upon notification. The judgment highlighted the importance of distinguishing between cases of willful suppression and technical/non-malafide lapses in tax compliance.