Tribunal affirms penalty for failure to pay service tax, citing lack of reasonable cause

The Tribunal upheld the penalty imposed under Section 78 by the lower authorities, dismissing the appeal. The appellant, an individual labor contractor, failed to establish a reasonable cause for non-payment of service tax under Manpower Recruitment or Supply Agency services. The Tribunal found the appellant's belief of non-taxability unsatisfactory, noting that both the appellant and the service recipient were aware of the change in the definition of services. The benefit of Section 73(3) was deemed unavailable due to the extended period invoked based on suppression of facts.

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Issues involved:
Whether the appellant is required to pay service tax under Manpower Recruitment or Supply Agency services.

Analysis:
The appellant, an individual labor contractor, supplied labor to a company and believed they were not liable to pay service tax post a change in the law. The appellant argued that they had paid the service tax with interest before any notice was issued. The appellant contended that the service recipient had availed Cenvat credit, resulting in revenue neutrality. The appellant cited various judgments to support their case.

The Revenue argued that the appellant was not ignorant of the taxability of services as they had sought advice from the service recipient, indicating no bonafide belief. The demand was raised invoking the extended period due to alleged suppression of facts by the appellant. The Revenue stated that the penalty under Section 78 was justified.

The Tribunal noted that the change in the definition of Manpower Recruitment and Supply agency was known to both the appellant and the service recipient, making the appellant's belief of non-taxability unsatisfactory. The Tribunal held that the appellant failed to establish a reasonable cause for non-payment of service tax. The Tribunal found the judgments cited by the appellant not similar to the present case. The Tribunal also ruled that the benefit of Section 73(3) was not available to the appellant due to the invocation of the extended period based on suppression of facts.

Ultimately, the Tribunal upheld the penalty imposed under Section 78 by the lower authorities, dismissing the appeal. The order was pronounced in the open court on 31.08.2018.

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