2010 (9) TMI 788 - AT - Service Tax

Waiver of pre-deposit Penalty - appellant was engaged in rendering the services falling under the category of Architect services - appellants though had taken registration as service provider failed to file returns and pay the service tax in respect of service charges received by them during the said period - They have subsequently paid the service tax along with interest Held that - penalty of Rs. 100/- under section 76 and Rs. 100/- under section 77, leniency invoking the provisions of section 80 of the Finance Act, appellant was small scale service provider, their claim that they were entertaining the bona fide belief that they were not liable to pay service tax in terms of interim order cannot be doubted. the leniency shown by the original authority cannot be held unreasonable. order of the Commissioner enhancing the penalty is set aside and the order of the original authority is restored, Appeal is allowed with consequential relief as per law

Summary

Issues: Penalty imposition for delay in filing service tax returns and payment

Analysis:
The appellant, engaged in Architect services, failed to file returns and pay service tax for the period March 1999 to March 2001, despite being registered as a service provider. The original authority imposed a penalty of Rs. 100 under section 76 and Rs. 100 under section 77, invoking the provisions of section 80 of the Finance Act, 1994, even though the total service tax involved was Rs. 74,530. Notably, the original authority did not demand any service tax as it had already been paid. However, the Commissioner, on revision, enhanced the penalty under section 76 to the full amount of Rs. 74,530.

Upon review, the Tribunal considered the submissions from both sides and the records. It noted that the original authority had shown leniency due to the small scale of the appellant's business and the fact that they had a genuine belief, supported by a stay order from the High Court of Madras in a similar case, that they were not liable to pay service tax. The Tribunal found the appellant's belief to be reasonable given the circumstances. Consequently, the Tribunal set aside the Commissioner's order enhancing the penalty and reinstated the original authority's decision. The appeal was allowed with consequential relief as per law.