2016 (11) TMI 1478 - AT - Service Tax

Repairing and maintenance service - Scope of service - Franchisee Service - Held that - the appellants services became taxable under the category of repairing and maintenance service w.e.f. 16.06.2005. The definition of repairing and maintenance service has been changed w.e.f. 16.06.2005 - Mere delay in payment of service tax, in my opinion, cannot be construed as suppression or mis-declaration of facts with intent to evade payment of tax. Further, the bonafideness of the appellant is evident from the fact of their getting registered with the Service Tax Department soon after change in the scope of definition on repairing and maintenance service and also from the fact that the entire receipt relating to the repair and retreading of tyres during the relevant period, had duly been reflected in their audited balance sheet. Penalty u/s 77 upheld - penalty u/s 78 set aside - appeal allowed in part.

Summary

Issues:
1. Service tax demand and penalties imposed on the appellant.
2. Barred by limitation for a certain period.
3. Eligibility of benefit for a small scale service provider.
4. Invocation of Section 78 of the Finance Act, 1994.
5. Appellant's bonafide actions and compliance with tax regulations.

Analysis:

1. The appellant, engaged in tyre retreading business, challenged the service tax demand and penalties imposed. The lower appellate authority modified the demand and penalties, holding a portion as refundable. The appellant had paid the revised demand and interest. The Revenue supported the lower authority's findings.

2. The appeal tribunal noted the services became taxable from a specific date and observed a change in the definition of services. The appellant's delay in payment was attributed to confusion regarding taxable value and small scale provider benefits. The tribunal found the explanation convincing and highlighted the absence of evidence contradicting the appellant's claim. The tribunal concluded that mere delay does not imply evasion, especially considering the appellant's registration post-definition change and proper financial disclosures.

3. The tribunal emphasized the appellant's compliance, evident from timely registration and accurate financial reporting. The tribunal reviewed payment documents and tax computations for multiple financial years, determining that the penalty under Section 78 was unwarranted. Consequently, the tribunal set aside the penalty under Section 78 but upheld the penalty under Section 77.

4. The tribunal's decision was based on the appellant's genuine actions and adherence to tax laws, leading to the partial allowance of the appeal. The operative part of the order was pronounced in open court, providing clarity on the tribunal's decision.

This detailed analysis showcases the tribunal's thorough examination of the issues involving service tax demand, penalties, limitation, small scale provider benefits, and the invocation of relevant sections of the Finance Act, 1994. The judgment highlights the importance of compliance, bonafide actions, and proper documentation in tax matters to avoid unwarranted penalties.