ST - Penalty - Legislation is operative proprio vigore on enactment - No person therefore, could reasonably harbour any manner of doubt that when legislation is under challenge, challenged legislation is in eclipse to be upheld - s. 73(3) cannot be invoked to not impose penalty: CESTAT
By TIOL News Service
AHMEDABAD, AUG 02, 2013: THE adjudicating authority confirmed the appellant's liability to service tax, as the recipient of the taxable service, namely, Business Auxiliary Service and appropriated Rs. 9,74,252/- towards service tax and Rs. 1,72,359/- towards interest, from the amount remitted by the appellant before issuance of the SCN.
In the matter of imposition of penalties, the adjudicating authority relied on the provisions of s. 73(3) of the FA, 1994 and did not impose any by offering the following justification - while Section 66A of the Act clearly imposes liability on the service recipient to remit tax, it is likely for many assessees to assume that as recipients they are not liable to pay tax; that in the instant case the failure to remit tax was occasioned by a bonafide misconception; and therefore, no case is made out for levy of penalty.
Revenue preferred an appeal against this munificence and the appellate Commissioner by reversed the conclusion of the adjudicating authority by concluding that the adjudicating authority had erroneously invoked provisions of Section 73(3) of the Act and that, where there was willful contravention of the provisions of Chapter V of the Act, with a view to evade payment of service tax, provisions of sub-section 3 would not apply, in view of the provisions of sub-section 4 of Section 73.
The appellant is before the CESTAT and the Bench observed -
"4. Section 66A was inserted with effect from 18.4.2006 into the Act, by the Finance Act, 2006 (21 of 2006). This provision enjoins that where any service specified in 65 (105) is provided or to be provided by a person has established a business or has the fixed establishment of his service provided or to be provided or has his permanent address in a country other than India and such service is received by a person (recipient) who has his place of business or its establishment, permanent address or the usual place of residence in India, the recipient shall be treated as having provided the taxable service in India and accordingly, all the provisions of chapter 5 will apply. With effect from 01.5.2006, therefore, the liability of a service recipient, in respect of taxable service provided to such locally established recipient, by a service provider having an overseas establishment, to remit service tax is clear and unequivocal, beyond a scintilla of doubt.
5. The learned counsel for the appellant strenuously contends that since provisions of Section 66A were in challenge before various Courts, the appellant assessee was under a bonafide impression that compliance with the said provisions is not mandatory. This contention is stated to be rejected. It is axiomatic. Legislation is operative proprio vigore on its enactment and effectuation. The operation of legislation is not contingent upon affirmation by the judicial branch, even where a challenge to its constitutionality is presented before the Courts. No person therefore, could reasonably harbour any manner of doubt that when legislation is under challenge, the challenged legislation is in eclipse to be upheld. A doubt. The appellate authority has rightly rejected the appellant's claim in this regard and has rightly reversed the order of adjudicating authority on a true and fair construction of Section 73(4) of the Act. The order of the Appellate Commissioner is impeccable and warrants no interference."
In fine, the appeal was rejected.
(See 2013-TIOL-1160-CESTAT-AHM)
