2011 (1) TMI 716 - HC - Service Tax

Penalty - Revisional Authority initiated review proceedings against the said order and found that the reason given by the assessee is not a reasonable one and therefore the order of the Original Authority dropping the proceedings was set aside and imposed the penalty - it is not in dispute that the branch office at Bangalore was under the impression that the head office is paying the service tax on their behalf. When it was pointed out that no such payment is made, they got separate registration at Bangalore and paid the entire service tax with interest - The fact finding authority on appreciation of the entire material on record coupled with the fact that even before the issue of show-cause notice, the assessee has paid the service tax with interest, a case for wavier is made out - Appeal is dismissed

Summary

Issues:
Revenue's challenge against Tribunal's order setting aside penalty imposed by Revisional Authority but declined by Original Authority.

Analysis:
The case involved a security agency company operating in India at multiple locations, with its Head Office in Delhi, facing a demand for service tax in Bangalore. The Original Authority confirmed the demand but dropped penalty proceedings under sections 75A, 76, 77 & 78 of the Finance Act, 1994, extending the benefit of section 80. The Revisional Authority set aside the Original Authority's decision and imposed the penalty, leading to an appeal to the Tribunal. The Tribunal, after reevaluation, found no mala fide intention to evade service tax and upheld the Original Authority's decision, stating that once the Original Authority exercised powers under section 80, penalty imposition by the Commissioner in Revisional jurisdiction was illegal. The High Court agreed with the Tribunal's reasoning, emphasizing the absence of intent to avoid tax payment and the assessee's prompt payment of service tax and interest upon realization of the error. The Court dismissed the appeal, finding no substantial question of law for consideration.

The Court noted that the branch office in Bangalore believed the head office was handling service tax payment, rectifying the situation promptly upon discovering the error. The Court supported the Original Authority's decision to drop penalty proceedings under section 80, emphasizing the absence of any intention to evade tax payment. The Court highlighted the factual nature of the case, where the assessee's prompt payment of service tax and interest, coupled with the Original Authority's exercise of powers under section 80, justified the penalty waiver. As the appeal lacked merit, the Court dismissed it, along with the application for condonation of delay, finding no useful purpose in further proceedings.