2022 (6) TMI 915 - AT - Service Tax

Tribunal upholds waiver of penalties under Section 80, citing no suppression of facts.

The Tribunal dismissed the appeal filed by the department, upholding the invocation of Section 80 to waive penalties. It found that the extended period of ... Penalty - Suppression of facts or not - Extend period of limitation - Service tax paid on Reverse Charge Mechanism and credit was availed even after issuance of SCN - whether the Ld. Adjudicating Authority was correct in invoking section 80 of the Finance Act, 1994 to drop the penalty as proposed in the SCN for delay in payment of service tax? - HELD THAT:- The present issue involved in this appeal is no more resintegra in view of the decision of the Tribunal in the case of M/S BHORUKA ALUMINIUM LIMITED. VERSUS THE COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, MYSORE [2016 (11) TMI 1292 - CESTAT BANGALORE] where it was held that Except mere allegation of suppression, the Department did not bring any material on record to prove that there was suppression and concealment of facts to evade payment of tax. Consequently, in my opinion, the imposition of penalty under Section 78 of the Act is not justified and bad in law. The Commissioner should have dropped the demand for the extended period of limitation in view of our finding in this case that there was no suppression of facts. However, the confirmation of demand has not been assailed by the respondent, possibly because it was entitled to the CENVAT credit of whatever service tax it paid. Hence, we cannot modify the impugned order with respect to the confirmation of the demand. Thus, invoking section 80 to waive the penalties was correct and invoking extended period of limitation for confirmation of demand was not. In the case of Mahindra & Mahindra, a larger bench of Supreme Court clarified the position of law regarding invocation of larger period of limitation alleging suppression of facts in cases where there is revenue neutrality. It would be essential to examine the background. In the case of AMCO BATTERIES LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, BANGALORE [2003 (2) TMI 66 - SUPREME COURT] the charge of suppression of facts was dismissed on the ground of Revenue neutrality. A question may arise that if it is found that the elements necessary to invoke extended period of limitation were not available and therefore, Revenue could not have demanded duty for an extended period, can the respondent seek refund of the service tax so paid voluntarily by it? It cannot, for the reason the charge of service tax is not under section 73 but is under the charging sections (whether under forward charge or under reverse charge). There is no limitation on the charge of the service tax and it does not extinguish with the efflux of time. Only the remedy available to the department to recover the service tax not paid is enabled and also limited by section 73. If the charge is proven or is uncontested, and the assessee pays the tax, though it is beyond the limitation, it cannot seek refund of the service tax so paid. It is like a time-barred debt. As we have found that even extended period of limitation could not have been invoked in the factual matrix of this case, we find nothing inconsistent wrong in the Commissioner invoking section 80 to waive the penalties. We fully endorse the views expressed by the Commissioner that there were reasonable causes for failure of the respondent not paying service tax. Appeal dismissed - decided against Revenue. Issues Involved:1. Invocation of Section 80 of the Finance Act, 1994 for waiving penalties.2. Invocation of extended period of limitation under Section 73(1) of the Finance Act, 1994.3. Allegation of suppression of facts by the respondent.4. Revenue neutrality as a defense for non-payment of service tax.5. Contradictory stands taken by the respondent regarding service tax liability.Issue-wise Detailed Analysis:1. Invocation of Section 80 of the Finance Act, 1994 for waiving penalties:The core issue in this case was whether the Adjudicating Authority was correct in invoking Section 80 to drop the penalty proposed in the Show Cause Notice (SCN) for the delay in payment of service tax. Section 80 states, 'No penalty shall be imposable on the assessee for any failure referred to in the said provisions if the assessee proves that there was reasonable cause for the said failure.' The Tribunal found that the invocation of Section 80 to waive penalties was correct, considering the respondent's status as a Public Sector Undertaking (PSU) and the fact that the service tax was payable under the Reverse Charge Mechanism (RCM), which would have been eligible for CENVAT credit.2. Invocation of extended period of limitation under Section 73(1) of the Finance Act, 1994:The Revenue contended that the Commissioner was incorrect in dropping the penalties while invoking the extended period of limitation under Section 73(1), which requires the establishment of suppression of facts. The Tribunal agreed with the Revenue that these two actions were contradictory. It held that the Commissioner should have dropped the demand for the extended period of limitation, as there was no suppression of facts. However, since the confirmation of demand was not challenged by the respondent, the Tribunal could not modify the impugned order regarding the confirmation of the demand.3. Allegation of suppression of facts by the respondent:The Revenue argued that the respondent had suppressed facts by not paying service tax until it was pointed out by the officers during the investigation. The Tribunal found that the respondent's failure to pay service tax initially did not prove suppression of facts. The respondent paid the service tax once it was pointed out and took CENVAT credit of the same. The Tribunal emphasized that suppression requires an intent to evade payment of duty, which was not evident in this case.4. Revenue neutrality as a defense for non-payment of service tax:The Revenue argued that revenue neutrality could not be the basis for determining suppression of facts. The Tribunal examined relevant case laws, including Mahindra & Mahindra and Dharmpal Satyapal, and concluded that while revenue neutrality is not a conclusive factor, it is a relevant consideration. In this case, the Tribunal found that the respondent, being a PSU, had no intent to evade duty as it would gain nothing by evading payment. The service tax paid was eligible for CENVAT credit, making the situation revenue-neutral.5. Contradictory stands taken by the respondent regarding service tax liability:The Revenue contended that the respondent took contradictory stands by claiming ignorance of the levy and simultaneously arguing that the services were rendered outside Indian territorial jurisdiction. The Tribunal found no force in this argument, stating that it is possible to hold a view that no tax is payable on multiple grounds. The Tribunal noted that the Commissioner considered these submissions to determine if there was suppression of facts and found nothing wrong in noting the submissions by the respondent.Conclusion:The Tribunal dismissed the appeal filed by the department and upheld the invocation of Section 80 to waive penalties while finding that the extended period of limitation could not have been invoked due to the absence of suppression of facts. The Tribunal emphasized that the respondent, being a PSU, had no intent to evade payment of duty, and the situation was revenue-neutral. The cross-objection was also disposed of accordingly.