2011 (3) TMI 471 - AT - Service Tax

Penalty - CBEC Circular No. 87/05/2006-ST dated 6-11-2006 - So far as the education cess is concerned, his submission is that the appellant has already assessed that liability and paid which can be verified from the record itself and because the code number was not mentioned correctly the money paid by the appellant cannot be said to have not gone to treasury - matter remanded back for verification. Penalty u/s 78 - held that - there was no proposition in the show-cause notice for penalty under section 78. Therefore, the appellant succeeds on the count of levy of penalty under section 78 of the Finance Act, 1994 and such penalty is hereby set aside. Penalty u/s 76 - held that - In view clarification issued by the board and decision of High court in Auto World s case (2010 -TMI - 35231 - ALLAHABAD HIGH COURT) several controversies arose that is a reasonable cause that comes to the rescue of the appellant - penalties waived u/s 80 Penalty for non registration with service tax u/s 77 - penalty confirmed

Summary

Issues:
1. Levy of penalty under section 78 of the Finance Act, 1994 without proposition in show-cause notice.
2. Penalty under section 76 of the Finance Act, 1994 for service tax on business auxiliary service.
3. Levy of penalty under section 77 for failure to register.
4. Education cess erroneously levied without verifying error in the return.

Analysis:

Issue 1:
The appellant contested the penalty imposed under section 78 of the Finance Act, 1994, arguing that the show-cause notice did not include any proposition for such a levy. The Tribunal agreed, noting that the notice did not provide an opportunity for the appellant to defend against this penalty. Consequently, the Tribunal set aside the penalty under section 78.

Issue 2:
Regarding the penalty under section 76 for service tax on business auxiliary service, the appellant had paid the tax before the show-cause notice was issued, citing confusion regarding the scope of the levy. The Tribunal referred to a relevant Circular and a High Court judgment, concluding that the confusion in the law constituted a reasonable cause. As a result, the penalty under section 76 was waived.

Issue 3:
The penalty under section 77 was confirmed as the appellant had failed to register and faced proceedings under section 73 of the Finance Act, 1994. The Tribunal found no valid reason to believe there was no deliberate failure, thus upholding the penalty of Rs. 1,000 under section 77.

Issue 4:
In relation to the education cess erroneously levied, the Tribunal directed the adjudicating authority to reconcile returns with challans for the relevant period. Emphasizing the importance of ensuring that payments made by the appellant are accounted for, the Tribunal highlighted the need for procedural fairness. The Tribunal instructed the authority to consider relevant Circulars and ensure that the procedure does not hinder substantive justice. The appeal was partly allowed with these directions in mind.