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5 Apr 2016

No Penalty for non-payment of service tax if consultant played fraud

Recently, honorable CESTAT in the case of Hemangi Enterprises v. Commissioner of Central Excise, Pune-I* (2016) 67 taxmann.com 289 (Mumbai-CESTAT) held that fraudulent act of consultant could not be attributable to appellant and no penalty could be levied.

The issue involved in this case is regarding the imposition of penalty on the applicant for the fraudulent act of the consultant who had pocked the amount of service tax which had been paid by the applicant to him. The consultant appointed by the applicant has embezzled the amount by playing fraud and the consultant desired to acquire more than they deserve to enrich himself. It is also on record that the appellant had paid any amount to the consultant for the payment of service tax to the department. Further, it is also on record that such returns were prepared by the consultant and signed by applicant believing them to be correct.

After applying the ratios of CCE v. Ganesh Enterprises (Final order Nos. A/2268-2269/2015 WZB/SMB dated 12.06.2015) & CCE v. Shri Sai Enterprises (Appeal No. ST/87821/2014, dated 13.07.2015) in respect of identical issue, honorable Mumbai CESTAT set aside the penalties imposed by the adjudicating authority after invoking the Section 80 of Finance Act, 1994.