2010 (10) TMI 281 - AT - Service Tax

Penalty - The appellant had been providing the service of repair and maintenance - The appellant had not taken any registration for service tax - The appellant in this case has not challenged his service tax liability - The ignorance of the law no other reason for failure to obtain service tax registration and discharge the service tax liability has been given - Also find that while the appellant s activity had come within service tax net w.e.f 16-6-05 even till March 2008 when the Department came to know about the appellant s activity he had not obtained service tax registration - Therefore in view of the circumstances of the case it cannot be said that the appellant was prevented from obtaining service tax registration and discharging the service tax liability due to any reasonable cause and hence the Commissioner (Appeals) s order denying the benefit of Section 80 of the Finance Act is correct - plea that simultaneous penalty under Section 76 and 78 cannot be imposed is not accepted the impugned order on these points is upheld the matter is remanded to the Commissioner (Appeals) for deciding the question of reduced penalty under first proviso to Section 78 of the Finance Act in accordance with the ratio of Hon ble Delhi High Court judgment in the case of K.P. Pouches (P) Ltd. v. UOI after ascertaining as to whether the appellant had discharged their entire tax liability alongwith interest prior to the issue of show cause notice.

Summary

Issues:
- Liability for service tax on repair and maintenance services
- Imposition of penalty under Section 76 and 78
- Applicability of Section 80 for waiver of penalty

Liability for Service Tax on Repair and Maintenance Services:
The appellant provided repair and maintenance services to a company, and the service became taxable from a certain date. The appellant did not register for service tax and did not pay the tax amount. The authorities issued a show cause notice for recovery of the service tax amount. The appellant challenged the imposition of penalties under Sections 76 and 78 but did not dispute the service tax liability.

Imposition of Penalty under Section 76 and 78:
The appellant argued for the waiver of penalties under Section 80, claiming ignorance of the law as the reason for not obtaining service tax registration. The tribunal noted that the burden of proving a reasonable cause for failure to discharge the tax liability lies with the assessee. The appellant's lack of registration even after the service became taxable indicated no reasonable cause for the failure. The tribunal upheld the Commissioner (Appeals)'s decision denying the benefit of Section 80.

Applicability of Section 80 for Waiver of Penalty:
Regarding the simultaneous imposition of penalties under Sections 76 and 78, the tribunal referred to judgments supporting the imposition of dual penalties. The appellant's argument against simultaneous penalties was rejected. The tribunal also considered the appellant's plea for reduced penalty under the first proviso to Section 78. It was noted that for reduced penalty, the interest on service tax should have been paid before the show cause notice. As there was ambiguity regarding the payment of interest, the matter was remanded to the Commissioner (Appeals) for further clarification.

In conclusion, the tribunal upheld the imposition of penalties under Sections 76 and 78, denied the benefit of Section 80 for penalty waiver, and remanded the case to determine the reduced penalty under the first proviso to Section 78 based on the payment of interest on service tax before the show cause notice.