2009 (12) TMI 573 - AT - Service Tax

Penalty Rent-a cab service service tax levy debatable for some time Appellant brought under service tax levy after search by Department Penalty under section 78 of Finance Act, 1994 imposable - matter is remanded to the Adjudicating Authority for testing facts of the Appellant

Summary

Issues:
1. Penalty imposed under Section 78 of the Finance Act for non-compliance with Service Tax on rent-a-cab service.
2. Appellant's contention of confusion regarding levy of tax and request for penalty waiver.
3. Respondent's opposition to penalty waiver based on lack of bona fide confusion and discovery of suppression during search operation.
4. Adjudication of penalty under Section 78 of the Finance Act based on detailed investigation and non-challenge of levy under Section 73.
5. Comparison of Section 78 of the Finance Act with Section 11AC of the Central Excise Act and the applicability of the proviso for concessional penalty.
6. Remand of the matter to the Adjudicating Authority for further examination in line with the judgment in the case of K.P. Pouches (P) Ltd.

Analysis:
The judgment by the Appellate Tribunal CESTAT, New Delhi dealt with the penalty imposed under Section 78 of the Finance Act on the Appellant for non-compliance with Service Tax on the rent-a-cab service. The Appellant, represented by a consultant, argued that while acknowledging the correctness of the tax levy, they were confused during the debatable stage of the levy due to various provisions of the law, leading to a lack of mala fide intent. The consultant requested the waiver of the penalty, equivalent to the Service Tax amount. On the contrary, the Respondent opposed the waiver, citing that the Appellant had no bona fide confusion and only came forward to discharge the liability after a search operation revealed suppression, as indicated in para-10 of the Appellate order.

The Tribunal, after hearing both sides and examining the record, noted that a detailed investigation had been conducted, and although the levy was debatable for a period, the search operation led to the discovery of the suppression, resulting in the Service Tax levy under Section 73, which was not contested. Consequently, the Tribunal found the penalty under Section 78 of the Finance Act to be applicable. The Tribunal further discussed the amendment in Section 78 and its similarity with Section 11AC of the Central Excise Act, referring to a judgment by the Hon'ble High Court of Delhi in the case of K.P. Pouches (P) Ltd., emphasizing the need for explicit mention of options available to the Assessee in the adjudication order to avoid disputes regarding penalty concessions in the future.

In light of the above observations, the Tribunal decided to remand the matter to the Adjudicating Authority for a thorough examination of the facts in line with the judgment in the case of K.P. Pouches (P) Ltd., directing a fair opportunity of hearing to the Appellant and the disposal of the matter through a reasoned and speaking order. Consequently, the appeal was partly allowed by way of remand, confirming the Service Tax demand and interest, while indicating further proceedings to be conducted in accordance with the mentioned judgment.