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July 2012

Penalty — Service tax registration not obtained and Service tax not paid — However, the details of commission paid available in the balance sheet — The details were submitted as soon as asked by the Department — Substantial portion of Service tax paid — Nonpayment not considered as wilful — Penalty set aside.

By Puloma Dalal
Jayesh Gogri
Chartered Accountants
Reading Time 2 mins
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41. (2012) 26 STR 359 (Tri.-Del.) DCM Textiles v. CCE, Gurgaon.

Penalty — Service tax registration not obtained and Service tax not paid — However, the details of commission paid available in the balance sheet — The details were submitted as soon as asked by the Department — Substantial portion of Service tax paid — Non-payment not considered as wilful — Penalty set aside.


Facts:

The appellant a manufacturer of cotton yarn, for procuring export orders, paid commission to various agents located in different countries. No Service tax was paid on the same under reverse charge. The Department levied penalties along with tax and interest. The appellant pleaded that non-payment of taxes was due to bona fide belief that services rendered by foreign agents are not taxable within India. The Commissioner (Appeals) upheld the levy of penalty.

Held:

To levy penalty u/s.78, it is necessary to prove the mala fide intention of the assessee. In the present case, the appellant disclosed all the relevant information in the balance sheet. Moreover, all the requisite details were provided on being asked by the Department. Relying on Cosmic Dye Chemical 75 ELT 721 (SC), the Tribunal held that the appellant had disclosed all the information and therefore, penalty u/s.78 could not be imposed.

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