2010 (7) TMI 318 - AT - Service Tax

Penalty - Goods transport agency - Scrutiny of ST-3 returns filed by the assessee revealed that it had declared nil turn over - SCN issued - proposing to recover service tax for the services under the category GTA rendered by the assessee - submissions of the assessee that it had no mala fide intention and the non-payment of tax had been occasioned due to its bona fide belief that the liability was on its customers - Held that - authorities have not rendered a sound finding substantiated with any evidence to the effect that the appellants had not paid the tax on account of fraud suppression of facts willful misstatement etc. with intention to evade the tax due - appeal is partly allowed by vacating the penalty imposed on the appellant under Section 76 of the Act - Appeal is disposed of

Summary

Issues:
1. Liability to pay service tax by goods transport agency.
2. Imposition of penalty under Section 78 of the Finance Act, 1994.
3. Imposition of penalty under Section 76 of the Finance Act, 1994.

Issue 1: Liability to pay service tax by goods transport agency:
The case involved M/s. Rajahari Carriers & Finance Pvt. Ltd. (RCFPL), a goods transport agency (GTA), contesting a demand for service tax imposed by the Commissioner, Service Tax Hyderabad. The dispute arose when the assessee declared nil turnover but was later issued a show cause notice for recovery of service tax for services classified under GTA. The assessee argued that the liability to pay service tax was on the consignor or consignee, not on the GTA itself, especially when dealing with organized sectors like factories, companies, societies, etc. The assessee claimed they did not collect service tax from customers as they believed they were not liable. Despite paying the tax and interest, penalties were imposed by the Assistant Commissioner. In the appeal, the Tribunal noted the assessee's contention but upheld the demand and penalty imposed by the original authority, as the assessee did not challenge the initial order.

Issue 2: Imposition of penalty under Section 78 of the Finance Act, 1994:
The Commissioner imposed a penalty under Section 78 of the Finance Act, 1994, on the assessee. The Tribunal acknowledged the assessee's lack of mala fide intention and the belief that the liability rested with customers. However, as the assessee did not challenge the original order finding them liable for service tax and penalty under Section 78, the Tribunal refrained from interfering with the demand and penalty. The Tribunal noted the absence of evidence indicating fraud or willful misstatement by the assessee to evade tax, leading to the partial allowance of the appeal by vacating the penalty under Section 76 of the Act.

Issue 3: Imposition of penalty under Section 76 of the Finance Act, 1994:
The Tribunal addressed the imposition of a penalty under Section 76 of the Finance Act, 1994, by the Commissioner. It found this penalty unsustainable, as the original authority had chosen not to impose it. Moreover, both authorities failed to provide evidence supporting the imposition of penalties based on fraud, suppression of facts, or willful misstatement to evade tax. Consequently, the Tribunal partially allowed the appeal by vacating the penalty under Section 76 of the Act, leading to the disposal of the appeal.

The judgment by the Appellate Tribunal CESTAT, Bangalore, in the case involving M/s. Rajahari Carriers & Finance Pvt. Ltd. highlights the complexities surrounding the liability of goods transport agencies to pay service tax, along with the imposition of penalties under Sections 78 and 76 of the Finance Act, 1994. The decision underscores the importance of challenging initial orders and providing substantial evidence when contesting tax liabilities and penalties in such cases.