2010 (10) TMI 505 - AT - Service Tax

Waiver of penalty - Life Insurance and auxiliary services - respondents are under a doubt that whether the service tax is payable on such commission paid to the agent on renewal of the policies which were issued prior to 16-8-08 or not and sought clarification from the CBEC and after obtaining the clarification, they have paid the service tax and in September, 2004 they paid the interest also - In these circumstances, respondents were under bona fide belief that whether the service tax is leviable or not on the respondents - Thus decided in the favour of the assessee

Summary

Issues:
Waiver of penalty under sections 76, 77 & 78 of the Finance Act, 1994 for non-payment of service tax on commission paid to agents for renewal of insurance policies issued prior to 16-8-2002.

Analysis:
The appeal filed by the Revenue challenges the waiver of penalty under sections 76, 77 & 78 of the Finance Act, 1994 by the lower appellate authority. The case involves a service provider in the category of Life Insurance and auxiliary services who did not pay the differential service tax for the period 08/02 to Jan., 2004 on commission paid to agents for renewal of insurance policies issued before 16-8-2002. A show cause notice was issued in 2007 imposing a penalty, which was initially imposed by the adjudicating authority but later dropped by the lower appellate authority. The Revenue appealed against this decision.

The Revenue argued that the service tax was not paid on time on commission paid to agents for policy renewals after 16-8-2002, making the service provider liable for penalty. Conversely, the respondent's advocate contended that the service provider was uncertain about the tax liability on such commissions and sought clarification from the CBEC. After receiving clarification, the service tax and interest were paid in 2004, leading to the belief that no penalty should be levied.

Upon hearing both sides, it was acknowledged that the service provider sought clarification from the CBEC regarding the tax liability on commissions paid for policy renewals issued before 16-8-2002. The Board clarified the issue at the Mumbai Head Office, and upon receiving clearance, the service tax was paid. The Tribunal noted that the service provider acted in good faith under a genuine belief about the tax liability. Referring to a similar case involving the same service provider, where penalties were dropped due to confusion over tax liability, the Tribunal upheld the lower appellate authority's decision to waive penalties under Section 80 of the Finance Act, 1994. Consequently, the Revenue's appeals were rejected, and the impugned order was upheld.

This judgment highlights the importance of seeking clarification on tax matters, acting in good faith, and the application of relevant provisions of the Finance Act, 1994 to determine penalty waivers in cases of genuine confusion or doubt regarding tax liabilities.