Tribunal sets aside service tax demand, annuls penalties citing lack of malafide intent

The tribunal allowed the appeal, setting aside the order and directing adjustments to be made per relevant circulars and judgments. The demand for service tax was deemed unsustainable as it had already been paid under a different registration number. Penalties under sections 76, 77, and 78 were annulled due to the absence of malafide intent. The decision was made on 03.02.2023.

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Issues Involved:
1. Whether the service tax paid by the head office can be adjusted against the service tax dues of the Anjar unit.
2. Whether the demand for service tax is sustainable when the tax has already been paid under a different registration number.
3. Applicability of penalties under sections 76, 77, and 78 for non-declaration of consulting engineering services in ST-3 returns.

Issue-wise Detailed Analysis:

1. Adjustment of Service Tax Paid by Head Office:
The appellant argued that the service tax paid by their head office in Mumbai should be considered as payment for the Anjar unit's dues. The tribunal found that the Anjar unit and the Mumbai head office are part of a single entity, Welspun Gujarat Stahi Rohren Ltd (now Welspun Corp Ltd). The tribunal cited a Board Circular No. 58/7/2003, which allows for the adjustment of service tax paid under an incorrect registration number. The tribunal emphasized that the department should have adjusted the service tax paid by the head office against the Anjar unit's dues instead of raising a fresh demand.

2. Sustainability of Service Tax Demand:
The tribunal noted that the service tax of Rs. 78,17,225/- was already deposited by the appellant's head office. The tribunal referred to several judgments, including Devang Paper Mills Pvt Ltd vs. UOI, Commissioner of C. Ex & ST, Bhopal Vs. KK. Kedia, and M/s. Sahara India TV Network vs. CCE & ST, which support the view that payment of tax under a different registration number but by the same entity should not result in a fresh demand. The tribunal concluded that the demand for service tax in this case is not sustainable because the tax was already paid, albeit under a different registration number.

3. Applicability of Penalties:
The tribunal did not find any malafide intent or deliberate evasion of tax by the appellant. The non-declaration of consulting engineering services in the ST-3 returns was due to a clerical error, and the service tax was already paid by the head office. The tribunal cited the case of M/s. Sahara India TV Network vs. CCE & ST, where it was held that penalties should not be imposed in the absence of malafide intent. Consequently, the tribunal set aside the penalties imposed under sections 76, 77, and 78.

Conclusion:
The tribunal set aside the impugned order, allowing the appeal and directing that the necessary adjustments be made in accordance with the procedure prescribed in the relevant circulars and judgments. The demand for service tax was deemed unsustainable, and the penalties were annulled. The tribunal's decision was pronounced in the open court on 03.02.2023.

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