2006 (10) TMI 29 - AT - Service Tax

Penalty(Service tax)-Alleged that delay in payment of service tax- After considering the fact the penalty were not imposable especially in view of Extra Ordinary Tax Payer Friendly Scheme introduced by government

Summary

Issues: Liability to pay service tax for storage and handling of empty containers; Failure to pay service tax and file returns; Applicability of Tax Payer Friendly Scheme; Imposition of penalty.

Analysis:
The case involves the appellants engaged in the service of storage and handling of empty containers, which falls under the category of storage and warehousing services liable to service tax. The appellants failed to pay service tax for a specific period and did not file the required ST 3 return, citing confusion regarding the liability. A Board Circular clarified that storage and handling of empty containers are indeed covered under storage and warehouse services, prompting the appellants to register for service tax and pay the outstanding tax with interest. They argued that the delay was unintentional and sought leniency, pointing out the Government's Extra Ordinary Tax Payer Friendly Scheme, which allowed taxpayers to pay outstanding tax with interest and be exempted from penalties. They referenced a Tribunal decision supporting their claim that if payment was made before the introduction of the scheme, penalties should not be imposed.

Upon hearing both sides, the judge considered the submissions and acknowledged the confusion surrounding the circular issued by the Board. Despite the delay in paying service tax, the judge took into account the Government's Tax Payer Friendly Scheme and the precedent set by the Tribunal in a similar case. Relying on the decision in the case of Bharat Security Services & Worker's Cont., the judge decided to set aside the penalty that was imposed and allowed the appeal, emphasizing the applicability of the scheme and the Tribunal's ruling as grounds for leniency.

In conclusion, the judgment revolved around the liability of the appellants to pay service tax for their services, their failure to do so initially due to confusion, and their subsequent compliance following the clarification by the Board. The decision highlighted the importance of considering taxpayer-friendly schemes and relevant legal precedents in determining whether penalties should be imposed in cases of unintentional delays in tax payments.