The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Delhi bench has deleted the penalty on the assessee observing that the non-deposit of service tax under RCM was due to oversight or mistake.
The assessee, M/s Umed Bhawan Palace, is rendering service of accommodation in hotel and restaurant service. The period in dispute is July 2012 to March 2016. Pursuant to audit, the department observed that the appellant has not discharged service tax on three invoices of legal services/fee of advocate, totaling Rs. 41,000/-, attracting service tax under RCM Rs. 5540/-.
The appellant admitted their liability and deposited the service tax of Rs. 5540/- on 10/07/2017. However, alongwith the demand notice, the department imposed a further equal amount of penalty under Section 78, observing that had the audit not taken notice, the tax liability would have escaped.
Allowing relief to the assessee, Mr. Anil Choudhary, Member (Judicial) observed that “there is no deliberate non-compliance in depositing the tax under the RCM. That only due to oversite or clerical mistake the tax could not be deposited. Further, as the appellant is paying output tax and legal services being input service, they were entitled to Cenvat credit, and thus, the situation is revenue neutral. Accordingly, he prays that penalty imposed may be set aside.”
Quashing the penalty order, the Tribunal held that “Having considered the rival contentions, I find that there is no deliberate non-compliance and further the situation is wholly revenue neutral. Thus, there is no incentive for the appellant to evade payment of service tax under the RCM. Accordingly, I allow this appeal and set aside the penalty under Section 78.”
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