2016 (12) TMI 162 - AT - Service Tax

Dismissal of Tax Appeal Upheld, No Penalty Imposed under Section 78.

The Tribunal dismissed the appeal and cross-objections regarding tax demand, recovery, and penalties under the Finance Act, 1994. The Tribunal upheld the ... Imposition of penalty - manpower recruitment or supply service - cleaning services - supply of tangible goods service - security agency service - interior decorators service - non registration of assessee - intention to evade tax - Held that: - The respondent discharged his tax liability before the issue of impugned order. Whether the extended period of limitation is invoked or not, admittedly, no further tax is in arrears and non-invoking of section 78 of Finance Act, 1994 does not compromise the discharge of tax liability. Once the amount has been paid in full, there is no reason. In the circumstances narrated in the impugned order, to invoke the proviso to section 73(1) of Finance of Act, 1994. Therefore, the non-imposition of penalty in the circumstances of the specific finding that the pre-requisites for imposition of penalty under section 78 do not exist is tenable. Appeal dismissed - decided against the revenue. Issues:Challenge to tax demand, recovery under section 73A, penalty under sections 76 and 77 of Finance Act, 1994. Limiting of penalty under section 76 and non-imposition of penalty under section 78 challenged. Liability of penalty under section 78 in case of extended limitation period.Analysis:1. Tax Demand and Penalties:The appeal challenges the order confirming tax demand, recovery under section 73A, and penalties under sections 76 and 77 of the Finance Act, 1994. The appellant objects to the limitation of penalty under section 76 and the non-imposition of penalty under section 78. The contention is that once the assessee was found liable for recovery due to an extended limitation period, the adjudicating Commissioner should have imposed a penalty under section 78. The appellant argues for a stricter penalty imposition based on the circumstances of the case.2. Assessee's Services and Compliance:The respondent, a service provider offering various services including 'manpower recruitment or supply', 'cleaning services', 'supply of tangible goods service', 'security agency service', and 'interior decorators service', faced issues related to registration, tax collection, and compliance. The respondent allegedly did not promptly register for services, failed to deposit collected taxes, and collected tax from customers before the taxable service was provided. These actions led to the initiation of penalties and legal proceedings.3. Penalties Imposed and Cross-objections:The assessee filed cross-objections contesting the penalties imposed in the impugned order. The penalties, particularly under section 76, were limited in amount based on the circumstances of the case. The adjudication Commissioner considered various factors, including the assessee's actions, knowledge, and compliance with tax regulations, in determining the extent of penalties to be imposed.4. Adjudication and Conclusion:The impugned order highlighted that the assessee had collected service tax but failed to pay it in full to the government account. Despite the lack of malicious intent to evade taxes, delays in full payment were acknowledged. The Commissioner noted that the assessee's actions, though not intentional evasion, resulted in delayed tax payments. The decision not to impose penalty under section 78 was supported by the circumstances and evidence presented, indicating a lack of intent to evade taxes but delays in payment.5. Discharge of Tax Liability and Penalty Imposition:The Tribunal upheld the impugned order, emphasizing that the respondent had discharged the tax liability before the order was issued. The non-imposition of penalty under section 78 did not compromise the tax payment. The Tribunal found no grounds to invoke the proviso to section 73(1) of the Finance Act, 1994, given the full payment of taxes. The decision not to impose penalties under section 78 was deemed reasonable based on the specific findings regarding the absence of prerequisites for such penalties.6. Final Judgment:Considering the circumstances and findings of the impugned order, the Tribunal dismissed the appeal and disposed of the cross-objections. The decision was based on the timely discharge of tax liability, absence of further tax arrears, and the lack of grounds for imposing penalties under section 78. The Tribunal's decision aligned with the assessment of the case's facts and the applicable legal provisions, leading to the dismissal of the appeal and cross-objections.This detailed analysis of the judgment covers the issues raised, the legal arguments presented, the adjudication process, and the final decision rendered by the Tribunal.