Penalty under Section 78 requires proof of deliberate suppression; service tax demand on reverse charge basis was sustained.

Service tax demand on reverse charge basis was sustained because the Tribunal's factual findings, including the Chartered Accountant's certificate and labour-charge split, showed the tax had already been paid and the challenge failed on that issue. Penalty under Section 78 was set aside because the record did not establish willful mis-statement or intent to evade tax; mere use of statutory language was insufficient without material facts proving deliberate suppression. The appeal succeeded only on penalty, while the demand remained undisturbed.

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Issues: (i) Whether the demand of service tax on reverse charge basis was sustainable when the tax amount had already been paid; (ii) Whether penalty under Section 78 could be sustained in the absence of material showing willful mis-statement or intent to evade tax.

Issue (i): Whether the demand of service tax on reverse charge basis was sustainable when the tax amount had already been paid.

Analysis: The demand related to service tax of Rs.25,16,900/- was examined on the basis of the material considered by the Tribunal, including the Chartered Accountant's certificate and the split of labour charges between contractors and locally hired workers. The record showed that the tax amount had already been paid, and the Tribunal had affirmed the adjudicating authority's factual findings after re-appreciation of the evidence.

Conclusion: The demand of service tax was sustained and the challenge to that extent failed.

Issue (ii): Whether penalty under Section 78 could be sustained in the absence of material showing willful mis-statement or intent to evade tax.

Analysis: Penalty under Section 78 requires more than the mere use of expressions such as fraud or willful mis-statement; the facts constituting such conduct must be brought on record. The material did not establish that the assessee made any willful mis-statement with intent to evade tax, particularly when the activities were treated as outside the service tax net under the forward charge regime and reverse charge applied only from 1 July 2012 for manpower supply.

Conclusion: The penalty was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded only on the penalty issue, while the service tax demand remained undisturbed.

Ratio Decidendi: Penalty for willful mis-statement cannot be imposed unless the record discloses material establishing deliberate suppression or intent to evade tax; a mere incantation of the statutory language is insufficient.

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