Tribunal cancels penalty for service tax non-payment on freight charges, upholds tax demand.

The Tribunal set aside the penalty imposed under Section 78 of the Finance Act, 1994, on the appellant, a dealer in MS products, for non-payment of service tax on freight charges. While upholding the service tax demand, interest, and penalty under Section 77, the Tribunal canceled the penalty under Section 78. The appellant's cooperation, lack of intent to evade payment, confusion over reverse charge mechanism, and dealer status were considered in the decision. The appeal was partly allowed in favor of the appellant, granting consequential relief.

---

---

Issues:
Challenge to penalty imposed under Section 78 of the Finance Act, 1994.

Analysis:
The appellant, a dealer in various MS products, was found to have not paid service tax on freight charges incurred towards Goods Transport Agency (GTA) service and clearing and forwarding agent service. The appellant contested only the penalty imposed, claiming they were unaware of the liability under the reverse charge mechanism during the relevant period. The appellant cooperated with authorities, took registration, and paid the service tax upon notification. The appellant argued there was no intention to evade payment, as all freight details were maintained in their accounts.

The Revenue supported the penalty, stating the appellant's failure to register for service tax and file returns constituted suppression of facts with intent to evade payment. The Tribunal noted the demand was based on departmental verification and appellant's records, finding no evidence of non-cooperation or parallel accounts by the appellant. The Tribunal recognized the confusion surrounding the liability under the reverse charge mechanism and the appellant's status as a dealer, not a service provider. Considering these factors, the Tribunal set aside the penalty under Section 78, while upholding the service tax demand, interest, and penalty under Section 77 of the Finance Act.

In conclusion, the Tribunal modified the impugned order by canceling the penalty under Section 78 without affecting the service tax demand, interest, or penalty under Section 77. The appeal was partly allowed in favor of the appellant, providing consequential relief as necessary.

---