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M/s Spectrum Power Generation Ltd. Versus CCE, C & ST, Hyderabad-I

Penalty u/s 78 of FA, 1994 - GTA services - Scientific and Technical Consultancy services - appellant had utilised the services of a foreign service provider for management and maintenance service during the period 2007-08 to 2010-11 and paid an amount of ₹ 1,88,17,627/- to the foreign service provider - contention of the Department is that the assessee by not taking registration for Management and Maintenance or Repair services received from foreign service provider and by not disclosing .....

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turns cannot be a ground for invoking the extended period - penalty set aside. - Penalty u/s 73(4A) and Section 77 - Held that: - Since the appellant has not filed proper returns and had not taken registration for the said service, appellant is liable to pay penalty u/s 77 - Since the appellant has paid service tax along with interest before issuance of SCN, Section 73(3) would apply and therefore the penalty imposed u/s 73(4A) is set aside. - Appeal disposed off - decided partly in favo .....

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with the Service Tax Department under the category of GTA services, Scientific and Technical Consultancy services. They had utilised the services of a foreign service provider for management and maintenance service during the period 2007-08 to 2010-11 and paid an amount of ₹ 1,88,17,627/- to the foreign service provider. The Department entertained a view that appellant is liable to pay service tax on these services under reverse charge mechanism. The appellant had not obtained registratio .....

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appropriated the amounts already paid by the assessee and imposed penalty of ₹ 10,000/- under Section 77 of the Finance Act, 1994 and equal amount of penalty of ₹ 20,48,335/- under Section 78 of the Finance Act, 1994 giving an option to pay reduced penalty of 25% (Rs.5,12,084/-) in case the service tax and interest is paid within 30 days of communication of the order. The appellant filed appeal before the Commissioner (Appeals) being aggrieved by the penalties imposed. The Commissio .....

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osed under Section 73(4A) of Finance Act, 1994 whereas Department has filed appeal being aggrieved by the view taken by Commissioner (Appeals) that penalty under Section 73(4A) would apply. Department prays to set aside the penalty imposed under Section 73(4A) and restore the penalties imposed under Section 77 and 78 of the Finance Act, 1994. 4. On behalf of the assessee, the Ld. Counsel Sh. R. Muralidhar submitted as follows: i) That the audit had taken place in February/March, 2012 for the yea .....

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(3) of Section 73 of the Finance Act, 1994. That the show cause notice has been issued after about four months invoking the extended period alleging suppression of facts. ii) It was argued by the Ld. Counsel that the assessee did not discharge the service tax on the said services only on the bonafide belief that these services were not taxable and therefore is not guilty of suppression of facts. The issue whether assessee is liable to pay service tax on payments made to foreign service provider .....

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s in the case of Gupta Metallics & Power Ltd., Vs. CCE, Nagpur [2016 (44) STR 681 (Tri.-Mumbai)] and Tech Mahindra Ltd., Vs. CCE, Pune-III [2015 (38) STR 1200 (Tri. - Mumbai)]. The Ld. Counsel submitted that in these cases the Tribunal has set aside the penalty imposed when the show cause notices were issued invoking extended period on the ground that the issue whether assessee is liable to pay service tax under Section 66A was contentious during the relevant period. iv) The judgments in the .....

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d under Section 73(4A) is wrong and no penalty can be imposed under Section 78 as the appellant had not paid the service only on bonafide belief that the services are not taxable. 5. On behalf of the Department, the Ld. AR, Sh. Nagraj Naik submitted that the Commissioner (Appeals) has observed in para 5 of the impugned order that Section 78 would not be applicable and that the appellant is liable to pay penalty only under Section 73 (4A). He strongly argued that the Commissioner (Appeals) has er .....

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esee itself amount to suppression of facts. That therefore, the show cause notice issued invoking the extended period of limitation is legal and proper. Although, the assessee paid the service tax along with interest prior to the issuance of Show Cause Notice as the assessee has suppressed the figures in their returns they are guilty of suppression of facts. The Commissioner (Appeals) ought to have imposed penalty under Section 78 of the Finance Act. The provisions under Section 73(4A) have been .....

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he entire service tax liability immediately on being pointed out by the audit party. Sub-section (4A) to Section 73 was introduced w.e.f. 08.04.2011. At that time, the non-obstante the not obstante clause in Section 73(4A) mentioned both sub-Sections (3) and (4). Later by amendment brought forth on 28.04.2012 the sub-Sections (3) & (4) were substitued with sub-Section (4) only. Thereby 'notwithstanding sub-section (3) has been deleted from Section 73 (4A). However, it can be seen that du .....

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that the assessee by not taking registration for Management and Maintenance or Repair services received from foreign service provider and by not disclosing the value of the said service in their returns are guilty of suppression of facts and are liable to pay penalty under Section 78 of the Finance Act, 1994. 8. The original authority had imposed equal penalty under Section 78 of Finance Act, 1994. However, Commissioner (Appeals) observed that since the assessee had paid service tax along with .....

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the true and complete details of transactions are available in the specified records, the person chargeable to service tax or to whom erroneous refund has been made, may pay the service tax in full or in part, as he may accept to be the amount of tax chargeable or erroneously refunded along with interest payable thereon under Section 75 and penalty equal to one percent, of such tax, for each month, for the period during which the default continues, up to a maximum of twenty-five per cent of the .....

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as detected by the audit and that assessee maintained true and complete details of transaction. Therefore, he set aside the penalty imposed by adjudicating authority under Section 78. 10. The Department has filed appeal against the order passed setting aside penalty under Section 78. The issue whether service tax is payable under Section 66A under reverse charge mechanism was contentious during the relevant period and was later settled by the judgment in the case of Indian National Shipowners As .....

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ower Ltd., (supra). The relevant paragraph is reproduced as under: 4. On consideration of the submissions made by both sides, we find that the appellant has admitted to short payment of the service tax liability and has paid the tax amount on being pointed out by the audit officers except for a small amount of ₹ 2.15 lakhs which was also paid off after issuance of show cause notice. At this juncture, we find that the contest in the appeal before us is only for the penalty imposed and as up .....

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e error in not recording the amount in the ST-3 return is seems to be acceptable. In the facts and circumstances of this case, by invoking the provisions of Section 80 of Finance Act, 1994, we set aside the penalty imposed by the adjudicating authority under Section 78 of Finance Act, 1994. 11. Following the said decisions, I am of the view that in the given set of facts, suppression of facts cannot be alleged on mere non-declaration in the returns when the issue whether service tax is payable o .....

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