2010 (11) TMI 376 - AT - Service Tax

Penalty - Demand - Manpower recruitment and supply agency service - Fails to take the registration and fails to comply with the provisions of the Act is liable for penalty - In the present case in the beginning the Service Tax is for manpower recruitment agency thereafter the scope was extended and manpower recruitment or supply agency comes under the purview of service tax - in the contention of the appellant that they are under the bona fide belief that the appellants are not liable for Service Tax - Decided in the favour of the assessee

Summary

Issues:
Challenge against imposition of penalties under Sections 76, 77, and 78 of the Finance Act.

Detailed Analysis:

1. Appellant's Contention:
The appellant, a proprietary concern, challenged penalties imposed under Sections 76, 77, and 78 of the Finance Act. The appellant provided labor contractor services to a company and received a show cause notice for service tax payment. The appellant paid the tax and interest but argued they were not liable for penalties. They believed they were not obligated to pay service tax under a bona fide belief, citing changes in the definition of manpower recruitment and supply agency over time. Initially, the service only covered manpower recruitment agency, later expanded to include manpower recruitment and supply agency by a commercial concern, and eventually by any person. The appellant claimed they were not a commercial concern and thus not liable for penalties.

2. Revenue's Contention:
The Revenue argued that during the disputed period, manpower recruitment and supply agency services by any person were subject to service tax. The appellant, despite paying the tax and interest, failed to register with Revenue authorities and pay the tax on time, justifying the imposition of penalties.

3. Analysis of Section 80 Protection:
The Tribunal analyzed Section 80 of the Finance Act, which states that no penalty shall be imposed if the assessee proves a reasonable cause for the failure. Sections 76, 77, and 78 outline penalties for failure to pay service tax, failure to register, and intent to evade payment, respectively. The Tribunal noted the evolution of the service tax scope from manpower recruitment agency to manpower recruitment and supply agency by any person. Considering the changes in definitions and the appellant's belief that they were not liable for service tax, the Tribunal found merit in the appellant's argument. Consequently, the penalties imposed were set aside, and the appeal was allowed on this ground only.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalties imposed under Sections 76, 77, and 78 of the Finance Act based on the appellant's bona fide belief and the evolving scope of service tax regulations.