2011 (5) TMI 426 - AT - Service Tax

Penalty provision of section 78 - whether sale of SIM cards shall be liable to service tax or not only cause delay in recovery of tax because the appellant was not paying tax under certain confusion - Held that - In absence of any malafied intension of the appellant and no material suggesting fraud/suppression or mistreatment committed by the appellant with interest to evade the tax due annul of penalty imposed under various sections of Finance Act 1994 confirming the penalty imposed under section 77 of the said Act. Consequently appeal partly allowed.

Summary

Issues:
1. Service tax demand confirmation
2. Imposition of penalty under section 78
3. Interpretation of penalty provisions
4. Judicial precedent on Business Auxiliary Service

Service Tax Demand Confirmation:
The appellant in this appeal did not contest the service tax demand imposed, leading to the confirmation of the Revision Order in that regard.

Imposition of Penalty under Section 78:
The appellant's representative argued that penalty cannot be imposed automatically unless the conditions of section 78 are met. The Revision Order did not establish how the appellant deprived the revenue of its legitimate due. The confusion regarding the tax liability on the sale of SIM cards caused a delay in tax payment, as there was a genuine belief based on judicial precedents that Business Auxiliary Service did not cover the sale of SIM cards. The Tribunal found no evidence of deliberate defiance of the law by the appellant, no malafied intention, fraud, suppression, or mistreatment to evade tax. Consequently, the Tribunal annulled the penalties imposed under various sections of the Finance Act, 1994, while confirming the penalty under section 77.

Interpretation of Penalty Provisions:
The Tribunal examined para 11 & 12 of the Revision Order and concluded that there was no indication that the appellant intentionally violated the law. Without evidence of deliberate defiance or fraudulent behavior, the Tribunal found it inappropriate to uphold the penalties imposed under different sections of the Finance Act, 1994.

Judicial Precedent on Business Auxiliary Service:
The appellant's belief that the sale of SIM cards did not fall under Business Auxiliary Service was supported by judgments from various forums. This belief, coupled with the confusion surrounding the tax liability, led to a delay in tax payment. The Tribunal considered this genuine belief and lack of fraudulent intent in annulling the penalties imposed under various sections of the Finance Act, 1994, except for the penalty under section 77.

In conclusion, the appeal was partly allowed, with the confirmation of the service tax demand and annulment of penalties under various sections of the Finance Act, 1994, except for the penalty under section 77.