2008 (2) TMI 89 - AT - Service Tax

Issues:
Confirmation of demand of service tax against the appellant as a "Security Agency", imposition of penalty under section 76 of the Finance Act, 1994, applicability of the Extra-ordinary Taxpayer Friendly Scheme, dispute regarding service tax liability prior to registration with the Department.

Analysis:
The judgment involves the confirmation of a demand for service tax against the appellant, who was classified as a "Security Agency." The Assistant Commissioner initially confirmed the service tax, imposed a penalty of Rs. 10,000 under section 76 of the Finance Act, 1994, and charged interest. Subsequently, the Commissioner reviewed the order, enhanced the penalty to the amount of tax, and confirmed additional interest. The appellant challenged this decision before the Tribunal.

The period under consideration in the appeal was from April 1999 to March 2004. The appellant argued that they were unaware of the service tax liability and pointed to the Extra-ordinary Taxpayer Friendly Scheme of 2004. This scheme stated that if the entire tax liability was paid along with interest by a specified date, no penalty would be imposed. The appellant paid the tax before the deadline and sought to set aside the enhanced penalty imposed by the Commissioner.

The Tribunal considered the argument presented by the appellant and the response from the learned SDR. The SDR contended that the appellant's registration with the Department in September 2003 made them ineligible for the benefits of the Extra-ordinary Friendly Scheme, citing precedents. However, the Tribunal distinguished the present case from the cited judgments, noting that they involved post-registration tax payments, unlike the appellant's situation, which pertained to the period before registration.

In its analysis, the Tribunal referenced previous decisions to support its finding. It highlighted a case where a service provider registered with the department was entitled to the benefits of the scheme if the past service tax liabilities were settled by a specified date. By applying the principles established in these precedents, the Tribunal concluded that there was no justification for the enhanced penalty imposed on the appellant. Consequently, the appeal was allowed, and the order of the Assistant Commissioner was restored.

In conclusion, the Tribunal's decision emphasized the importance of timely tax payments and adherence to the provisions of the Extra-ordinary Taxpayer Friendly Scheme in determining the imposition of penalties for service tax liabilities. The judgment provided clarity on the applicability of such schemes in cases involving service providers registered with the Department and underscored the significance of prior tax compliance in penalty assessments.