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2023 (9) TMI 926 - AT - Service TaxService or not - service of promoting and marketing the products - demand issued based on the data recovered from M/S SSOMPL is sustainable, without adducing any corroborative evidence - invocation of extended period of limitation - penalty u/s 78 of FA. Whether the activities undertaken by the Appellant would fall within the ambit of ‘Service as defined under Clause (44) of Section 65B of the Finance Act, 1994? - Whether the demand issued based on the data recovered from M/s.SSOMPL is sustainable, without adducing any corroborative evidence? - HELD THAT:- It is observed from the records that the Notice was issued to the Appellant based on the data recovered from the premises of M/s SSOMPL, during the course of investigation at their end. The impugned order has confirmed the demand based on this data and the statements recorded from Shri. Rajat Verma, Director of M/s.SSOMPL. It is observed that there is no information available on record to indicate that what type of commission mentioned above was received by the Appellant in this case. No investigation was carried out with the Appellant to ascertain the nature of service rendered by them to M/s.SSOMPL and whether the amount received was towards rendering of any taxable service or not. In the impugned order Service tax has been demanded on the gross amount of commission received by the Appellant and no distinction has been made between the commission earned by a Distributor from M/s SSOMPL based on his/her own volume of purchase and the commission earned by him/her on the basis of the volume of purchases of M/s SSOMPL products made by his/her sales group. As no investigation was conducted with the Appellant to ascertain whether the Appellant has rendered any taxable service as defined under, section 65B(44) of the Finance ACT, 1994, the demand confirmed in the impugned order merely on the basis of the data received from M/s.SSOMPL alone is not sustainable. Whether in the facts and circumstances of the case, extended period invocable or not? Consequently, penalty under Section 78 of the Finance Act, 1994 is imposable or not? - HELD THAT:- In the present appeal also the Appellant did not apply for Service Tax Registration, did not file ST-3 Returns and did not declare their activities to the jurisdictional central excise authorities. The contention of the Appellant is that on these ground alone it cannot be inferred that there was a wilful act with an intent to evade payment of service tax - It is observed that extended period cannot be invoked to demand service tax for mere inaction or failure or negligence on the part of the Appellant. There must be deliberate defiance of law to invoke extended period, which is not there in this case. The Notice has also not brought in any evidence of deliberate defiance of law warranting invocation of extended period of limitation. In the case of UNION OF INDIA VERSUS M/S RAJASTHAN SPINNING & WEAVING MILLS AND COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE VERSUS M/S. LANCO INDUSTRIES LTD. [2009 (5) TMI 15 - SUPREME COURT], Hon’ble Supreme Court held that if there is no element of deception or malpractice, neither extended period of limitation invocable nor penalty under Section 11AC would be imposable. In the case of M/S. MAHADEV LOGISTICS VERSUS CUSTOMS AND CENTRAL EXCISE SETTLEMENT COMMISSION (PRINCIPALBENCH) , THE COMMISSIONER, CENTRAL EXCISE, CUSTOMS & SERVICE TAX, NALWA STEEL & POWER LTD. [2017 (4) TMI 1180 - CHHATTISGARH HIGH COURT], the Hon’ble Chhatisgardh High Court held that the presence of mensrea is absolutely necessary for imposition of penalty under Section 78 of the Finance Act, 1994. The ratio of the decisions cited above is squarely applicable in this case. There is no mensrea or intention to evade payment of duty established in this case. In fact, there was no verification done at the Appellant’s end to ascertain their liability of service tax. Accordingly, the demand confirmed in the impugned order by invoking extended period is not sustainable. For the same reason, penalty under Section 78 is also not imposable. Appeal allowed.
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