2005 (6) TMI 543 - AT - Service Tax

Summary

Issues involved:
The judgment involves issues related to demands for service tax on cell phone service, penalties under Sections 76 and 78 of the Finance Act, 1994, and demand for interest.

Service Tax and Interest:
The appellants, providers of cell phone service, had no case regarding service tax and interest as settled by the decision of the Hon'ble Kerala High Court. The issue of service tax and interest was not in favor of the appellants.

Penalty u/s 80 of the Finance Act:
Regarding penalty, the appellants argued that no penalty should be imposed as per Section 80 of the Finance Act, which states that no penalty shall be imposable if there was a reasonable cause for the failure. The appellants believed that charges for SIM cards and activation were considered as sale of goods attracting sales tax, not service tax. They argued that the confusion regarding the taxability of these charges was a reasonable cause for the failure to pay service tax on time. The Tribunal found merit in this argument, noting that the issue was not free from doubt, and set aside the penalties imposed under Section 78, allowing the appeals on this ground.

Conclusion:
The Tribunal concluded that the appellants had a reasonable cause for the failure to pay service tax on charges for SIM cards and activation, as there was confusion regarding the taxability of these charges. The penalties imposed under Section 78 were set aside based on the genuine belief of the appellants and the unsettled nature of the issue.