2010 (9) TMI 270 - HC - Service Tax

Penalty - Manpower recruitment or supply agency - Waiver of penalty u/s 80 - Commissioner (Appeals) had found as a matter of fact that the assessee had failed to pay the service tax on the value of taxable service realized by it after crossing the exemption limit and suppressed the said fact with intention to evade payment of service tax - Held that - assessee was under the bona fide belief that the service in question was not covered under the definition of manpower recruitment or supply agency - waiver of penalty by tribunal upheld

Summary

Issues:
Challenge to order under Section 35G of Central Excise Act, 1944 regarding penalty under Section 76 & 78 of Finance Act, 1994 and Tribunal's entitlement to conclude on tax liability awareness in case of intentional evasion of service tax.

Analysis:
1. The respondent was involved in providing taxable services under "manpower recruitment or supply agency" category as per the Finance Act, 1994. A show cause notice was issued proposing service tax recovery, interest, and penalties under relevant sections. The order-in-original confirmed service tax and imposed penalties. The respondent appealed to the Commissioner (Appeals) and then to the Tribunal, which confirmed service tax demand but set aside penalties under Sections 76 and 78 of the Act.

2. The appellant challenged the Tribunal's decision, arguing that penalties were justified based on intentional evasion of service tax. The Commissioner (Appeals) found that the assessee failed to pay service tax after crossing the exemption limit and suppressed facts to evade payment. However, the Tribunal believed the assessee had a bona fide belief that the service provided did not fall under the defined category, thus setting aside the penalties under Sections 76 and 78.

3. The Tribunal confirmed the service tax demand but focused on the assessee's belief regarding the service category for penalty considerations. Section 80 of the Act states that no penalty is imposable if the assessee proves reasonable cause for the failure. The Tribunal found the assessee had a reasonable cause due to a genuine belief about the service category, invoking Section 80 to delete the penalties under Sections 76 and 78.

4. The Tribunal's decision was based on the assessee's genuine belief regarding the service category, leading to the application of Section 80 and deletion of penalties. The Tribunal's interpretation of the evidence and application of Section 80 were deemed appropriate, with no legal infirmity found in the order. Consequently, the appeal challenging the Tribunal's decision was dismissed as no substantial question of law arose from the Tribunal's order.