2019 (1) TMI 914 - AT - Service Tax

Tribunal confirms service tax, waives penalties for lack of intention to evade tax

Home Land Industrial Security Agency Versus CCE & ST, Raipur

The Tribunal confirmed the service tax liability of Rs. 72,83,917/- along with interest but held that penalties under Sections 76, 77, and 78 were not ... Penalty u/s 76 and 78 of FA - payment of service tax made on being pointed out - invocation of section 80 - intent to evade or not - services provided by them to various Government Undertakings - Held that:- It is an admitted fact that the service tax evasion was detected by the department after undertaking an investigation. It also appears that the appellant came to know about service tax not being paid by his authorized person Shri Abhishek Kumar only after initiation of the investigation. It is also an admitted fact that as soon as the appellant came to know about non-filing of service tax returns as well as non-deposit of service tax by the authorized person Shri Abhishek Kumar, the appellant deposited an amount of ₹ 44,28,835/- before the issue of the show cause notice and the balance amount of about ₹ 28,55,083/- was deposited subsequently after issue of the show cause notice as well as after the matter was adjudicated by the Adjudicating Authority. The appellant did not commit fraud nor was there any mis-statement or suppression of the facts with an intention to evade payment of service tax as he was regularly paying the required amount of the service tax to his authorized representative. This indicates that there was no intention on the part of the appellant to evade payment of service tax - it was not appropriate to impose penalty under Sections 76 and 78 on the appellant - penalty not imposable - demand of service tax with interest upheld - appeal allowed in part. Issues Involved:1. Imposition of Service Tax under Section 73(1) of the Finance Act, 1994.2. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.3. Applicability of Section 80 of the Finance Act, 1994 concerning penalties.Detailed Analysis:Imposition of Service Tax under Section 73(1) of the Finance Act, 1994:The appellant, a proprietary concern providing 'Security Agency Services,' was investigated by the department for evasion of Service Tax. A show cause notice dated 22.10.2012 demanded Service Tax of Rs. 72,83,917/- under Section 73(1) of the Finance Act, 1994. The appellant admitted the service tax liability and deposited the amount along with interest. The learned Commissioner confirmed the Service Tax demand and imposed penalties under Sections 76, 77, and 78.Imposition of Penalties under Sections 76, 77, and 78 of the Finance Act, 1994:The appellant contested the imposition of penalties under Sections 76 and 78. It was argued that the show cause notice was issued after the amendment to Section 78, which states that if penalties are payable under Section 78, Section 76 shall not apply. The appellant relied on the Karnataka High Court judgment in Commissioner of Service Tax vs. M/s. Motor World & Others, which held that Sections 76 and 78 are mutually exclusive.Applicability of Section 80 of the Finance Act, 1994:The appellant argued that the circumstances leading to the evasion of service tax were beyond its control. The appellant had appointed Shri Abhishek Kumar to handle statutory compliance, including service tax payments. However, Shri Abhishek Kumar failed to deposit the service tax despite receiving the necessary funds from the appellant. The appellant contended that there was no intention to evade tax, and the penalties should not be imposed under Sections 76 and 78.Tribunal's Findings:1. Service Tax Liability: The Tribunal noted that the appellant admitted the service tax liability and had deposited the entire amount along with interest. The service tax amounting to Rs. 72,83,917/- was rightly confirmed.2. Penalty under Section 76: The Tribunal agreed with the appellant's argument that the proviso to Section 78, effective from 10/05/2008, precludes the imposition of penalty under Section 76 when a penalty under Section 78 is applicable. Hence, the penalty under Section 76 should not have been imposed.3. Penalty under Section 78: The Tribunal found that the appellant had no intention to evade tax as it regularly paid the service tax amount to its authorized representative, Shri Abhishek Kumar. The non-payment was due to the representative's failure to deposit the tax. The Tribunal referred to the judgments in Hemangi Enterprises vs. CCE, Pune I and CST, Chennai vs. Lawson Travel & Tours (I) Pvt. Ltd., which supported the appellant's case for non-imposition of penalties under Section 78 due to reasonable cause under Section 80.4. Penalty under Section 77: The Tribunal did not specifically address Section 77 but implied that penalties under Sections 76, 77, and 78 were not justified given the circumstances.Conclusion:The Tribunal held that while the service tax amounting to Rs. 72,83,917/- along with interest was rightly confirmed, the imposition of penalties under Sections 76, 77, and 78 was not warranted. The appeal was partly allowed, setting aside the penalties under Sections 76, 77, and 78.(Pronounced in the Court on 16 January 2019.)