By TIOL News Service

AHMEDABAD, JULY 18, 2015 : THE appellant is registered with the Dept. and are availing the facility of CENVAT Credit on services like GTA Services, Maintenance and Repair Services, Erection, Commission and Installation Services etc.

Upon investigation, it was revealed that the appellant was not paying Service Tax on certain services. The appellant paid the ST amount of Rs.34,06,598/- along with interest before issue of SCN.

The SCN dated 13.4.2012 came to be confirmed under O-in-O dated 22.10.2013 along with equivalent penalty u/s 78 and the amounts paid were appropriated.

As the Commissioner(A) upheld the penalty, the appellant is before the CESTAT.

It is submitted that since the entire amount of Service Tax demand and interest was paid before issue of SCN there was no need for imposition of penalty u/s 78 of FA, 1994. It is also pleaded that on certain Services like GTA Services, Service Tax was to be paid under reverse charge mechanism for which appellant was entitled to CENVAT Credit; that in view of the revenue neutral situation there could be no intention to evade payment of Service Tax and accordingly no penalty u/s 78 of the Finance Act 1994 is imposable. Reliance is placed on the decision in Bhagwati Caterers Pvt. Ltd. 2014-TIOL-259-CESTAT-AHM.

The AR distinguished the case law cited and also submitted that since the appellant was recovering the Service Tax from their customers but not paying the same to the department there was no need for any leniency.

The Bench observed -

+ The appellant was recovering the Service Tax from the services. Further, they were registered with the Central Excise Dept. for providing several services including the services on which Service Tax was required to be paid on reverse charge basis.

+ Once appellant is registered with respect to services, it is understood that the due service tax should have been paid to the Central Excise Dept. when the same is received from the Service recipients or payable on reverse charge mechanism.

+ No Financial hardship has been claimed by the appellant as was the case before the Bench in the case of Bhagwati Caterers Pvt Ltd vs CST, Ahmedabad. (supra)

+ Appellant has also not filed required periodical returns. Revenue could detect non-payment of Service Tax as a result of special investigation. It is not the case where the appellant was not registered with Central Excise Dept. and could claim ignorance of law.

+ By recovering the Service Tax from their service recipients and not paying the same to the Dept. has to be considered as evasion of Service Tax with intention to evade when no periodical returns were filed.

Holding that there is no reason to interfere with the order passed by the lower authorities,the appeal was rejected.

(See 2015-TIOL-1458-CESTAT-AHM)