2020 (11) TMI 537 - AT - Service Tax

Tribunal Overturns Penalty for Service Tax Non-Payment

The Tribunal set aside the penalty imposed under Section 78 of the Finance Act, 1994 on the appellant, a PSU, for non-payment of service tax. Despite a ... Levy of Penalty u/s 78 of FA - Non-payment of service tax - Renting of Immovable Property Service - amnesty scheme - VCES scheme - HELD THAT:- The service tax has been duly paid and informed to the Department well before the issuance of Show Cause Notice Applicable interest has also been deposited subsequently as noted by the Learned Commissioner (Appeals) in the impugned order. The tax amount for the period in dispute has been deposited together with the previous period covered under the VCES scheme in installments as noted in the original order - There are no positive evidence has been brought on record in the entire proceedings that non-payment of tax was attributable to reasons to deliberately evade payment of tax. Moreover, the appellant is a PSU in the instant case. The Courts have consistently held that there is a presumption that PSU would not have intention to evade payment of duty or tax. Penalty do not sustain - appeal allowed - decided in favor of appellant. Issues:- Imposition of penalty under Section 78 of the Finance Act, 1994 for non-payment of service tax.- Applicability of penalty in cases of fraud or suppression to evade tax.- Payment of service tax under the VCES scheme and subsequent dispute for the period January 2013 to January 2014.- Arguments regarding deliberate intent to evade tax by the appellant.- Legal precedents cited in support of dropping the penalty.- Consideration of the status of the appellant as a PSU in determining intent to evade tax.Analysis:1. Imposition of Penalty under Section 78: The appeal was filed against the penalty imposed by the Learned Assistant Commissioner under Section 78 of the Finance Act, 1994, amounting to Rs. 7,35,334. The penalty was imposed despite the appellant having paid the demanded tax amount before the Show Cause Notice was issued. The appellant also paid interest of Rs. 4,87,193 before the Commissioner. The central issue was whether the penalty was justifiable in this scenario.2. Fraud or Suppression to Evade Tax: The Chartered Accountant representing the appellant argued that penalty under Section 78 can only be imposed in cases involving fraud or suppression with the intent to evade tax. It was contended that since the tax amount was paid before the issuance of the Show Cause Notice and interest was also paid subsequently, there was no deliberate action to evade tax. Citing legal precedents, including cases like Bio-Med. Health Care Products (P) Ltd., the appellant emphasized the lack of intentional evasion.3. Payment under VCES Scheme and Subsequent Dispute: The appellant, a PSU engaged in coal mining, had paid service tax under the Renting of Immovable Property Service category under the VCES scheme for the period up to December 2012. However, a dispute arose for the subsequent period from January 2013 to January 2014. The tax for this period was also paid by the appellant, and details were communicated to the Department. Despite this, a Show Cause Notice was issued, leading to the penalty imposition.4. Intent to Evade Tax: The appellant argued that there was no deliberate intent to evade tax, especially considering the proactive payment of the demanded amount and interest. The appellant's status as a PSU was highlighted, indicating a presumption that PSUs do not have the intention to evade payment of duty or tax. Legal authorities and judgments were cited to support this argument, emphasizing that penalty should not be imposed in the absence of intentional evasion.5. Legal Precedents and Arguments: The appellant relied on various case laws, including Commissioner of Central Excise, v. Indian Aluminium and EWAC Alloys Limited v. Union of India, to support the contention that penalty should not be imposed when there is no intent to evade tax. The argument was further reinforced by referring to judgments like Commissioner of Central Excise, Indore vs. Nepa Ltd and Commissioner of Central Excise, Chennai-I v. Chennai Petroleum Corporation Limited, which highlighted the lack of deliberate evasion by PSUs.6. Decision and Rationale: After considering the arguments and examining the facts of the case, the Tribunal, in line with the legal precedents and the absence of evidence indicating intentional evasion, set aside the penalty imposed under Section 78. The decision was based on the premise that the service tax had been duly paid, interest deposited, and no positive evidence of deliberate non-payment was presented. The status of the appellant as a PSU further supported the decision to drop the penalty, aligning with the presumption that PSUs do not intend to evade tax.