By Puloma Dalal, Jayesh Gogri, Mandar telang Chartered Accountants
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Penalty not leviable if service tax with interest paid before issuance of adjudication order.
Facts:
The appellants engaged in providing taxable services of “manpower recruitment and supply of agency services” was reimbursed provident fund in respect of manpower supplied and no service tax was discharged on this amount. It was contended that gross amount charged included provident fund component which was a statutory liability of service provider. Service tax with interest was paid before issuance of adjudication order. There was mass unawareness on the subject matter in view of various such notices floated by department. Whether the penalty u/s. 77 and 78 of the Finance Act, 1994 should be levied when they were under a bonafide belief regarding nonapplicability of service tax on reimbursement of provident fund amount, there was no case of fraud, collusion, wilful mis-statement or suppression of facts. Accordingly, the penalties should be dropped.
Held:
Having regard to the circumstances of the case and relying on the Hon’ble Supreme Court’s decisions in case of Anand Nishikawa Co. Ltd. 2005 (188) ELT 149 (SC) and Padmini Products 1989 (43) ELT 195 (SC), it was observed that there was no intention to evade tax, in view of payment of service tax with interest before issuance of adjudication order. Further, since the amount involved was trivial, the matter was not remanded back and was answered in favour of the appellants.
