2009 (12) TMI 551 - AT - Service Tax

Penalty - appellant did not contest the Service tax liability but deposited the same and also paid 25% of the Service tax as penalty, shows that the appellant is not interested in litigation but would like to abide by the law - allow the appeal by invoking Section 80 of Finance Act, 1994 and set aside the impugned order as regards penalty under Section 76 of Finance Act, 1994

Summary

Issues:
1. Liability for service tax on renting party plot on commission basis.
2. Applicability of penalty under Section 76 of the Finance Act, 1994.
3. Invocation of Section 80 of the Finance Act, 1994 for waiver of penalty.

Issue 1: Liability for service tax on renting party plot on commission basis:
The appellants were involved in facilitating the renting of a party plot on a commission basis. The Department contended that they were providing mandap-keeper services, thereby subjecting them to service tax. The appellants paid the full service tax amount along with interest before the issuance of the show cause notice. The Chartered Accountant representing the appellant acknowledged that the appellants did not contest the duty liability during the proceedings, despite the possibility of challenging it on the grounds of providing business auxiliary services. However, it was argued that since the full service tax, interest, and 25% penalty were paid within the stipulated time, the proceedings should be considered concluded as per CBE&C Letter F. No. 137/167/2006-CX-4, dated 3-10-07.

Issue 2: Applicability of penalty under Section 76 of the Finance Act, 1994:
The appeal primarily concerned the penalty under Section 76, with no dispute regarding the service tax demand or penalty under Section 78 of the Finance Act, 1994. The tribunal, considering that the appellant did not contest the service tax liability but instead complied with the payment requirements, waived the pre-deposit requirement and proceeded with the appeal for final disposal. The tribunal noted the appellant's willingness to adhere to the law and not engage in unnecessary litigation, leading to the invocation of a lenient view towards penalty imposition.

Issue 3: Invocation of Section 80 of the Finance Act, 1994 for waiver of penalty:
Given the circumstances where the appellant had paid the full service tax amount, interest, and 25% penalty before the show cause notice, and considering the absence of a challenge to the service tax liability during the proceedings, the tribunal invoked Section 80 of the Finance Act, 1994. By applying Section 80, the tribunal set aside the penalty under Section 76 of the Finance Act, 1994, emphasizing the appellant's compliance with payment obligations and their preference for legal conformity over litigation.

This judgment highlights the importance of timely payment of service tax obligations, the implications of penalty under the Finance Act, 1994, and the provisions for waiver of penalties under Section 80 based on compliance and adherence to legal requirements.