Tribunal overturns penalty for late service tax payment, finding prompt payment post-notification.

The Tribunal set aside the penalty imposed on the appellant for non-payment of service tax on Manpower Supply Service, ruling that the tax was paid promptly after notification, before the Show Cause Notice was issued. The Tribunal found no evidence of intentional tax evasion and determined that the penalty was not applicable as the tax was paid with interest before the issuance of the SCN, in accordance with relevant legislative provisions. Consequently, the appeal was allowed, and the penalty was overturned due to an error in its imposition by the lower authorities.

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Issues:
1. Liability for service tax on Manpower Supply Service.
2. Imposition of penalty on the appellant.

Analysis:
1. The appellant, engaged in the manufacture of MS billet, availed Manpower Supply Service from various providers. The Department observed non-payment of service tax amounting to Rs. 4,72,293/- for the period of June 2013 to September 2014. The demand was confirmed initially, and the appellant appealed against it.

2. The appellant argued that the Manpower Supply Service was not taxable until 01.07.2012, and they were unaware of the amendment requiring payment. They contended that the service tax was paid promptly after the Department's notification, even before the issuance of the Show Cause Notice (SCN). The appellant also highlighted the lack of intentional tax evasion and requested the penalty to be set aside.

3. The Department argued that the delayed payment indicated the appellant's intention to evade taxes. They emphasized the non-registration of the appellant as a strategy for tax evasion and supported the imposition of the penalty. The Department urged for the dismissal of the appeal.

4. The Tribunal noted that the appellant did not contest the service tax demand and had paid the amount. The primary issue was the imposition of the penalty on the appellant.

5. Considering the timeline, the demand was for the year 2013-14, and the service tax on manpower services became taxable post June 2012. The appellant's lack of registration and tax payment until the audit in October 2014 was attributed to their unawareness due to the recent amendment. The Department failed to provide substantial evidence of intentional tax evasion by the appellant.

6. Referring to Section 11AC of the Central Excise Act and relevant provisions of the Finance Act, the Tribunal found that the penalty was not applicable as the service tax was paid with interest before the SCN was issued. The legislative mandate precluded the imposition of penalty under Section 78 of the Finance Act. Thus, the Tribunal set aside the penalty and allowed the appeal, highlighting the error in imposing the penalty by the lower authorities.

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