2010 (7) TMI 750 - AT - Service Tax

Security services - Penalty - appellant does not dispute confirmation of service tax but submits that it is not a case of invoking penal provisions against them inasmuch as there was a lot of confusion in the case as regards service tax and the appellants were under a bona fide belief that no service tax is required to be paid by them - Held that - nothing on record to show that the tax was not paid by the assessee on account of any mala fidies on their part in which case the benefit of provisions to section 80 of the Finance Act 1994 is required to be extended to them demand of service tax confirmed against the appellant penalties imposed upon them under various sections of the Finance Act set aside appeal is allowed

Summary

Issues:
- Liability for service tax prior to registration
- Imposition of penalties under various sections of the Finance Act, 1994
- Invocation of Section 80 of the Finance Act, 1994

Analysis:

1. Liability for service tax prior to registration:
The judgment addresses the issue of the appellant's liability for service tax before obtaining registration. The appellant provided security services during a period when service tax was applicable but only obtained registration later. The lower authorities confirmed non-payment of service tax during the period before registration and imposed penalties. The appellant did not contest the confirmation of service tax liability but argued that they believed in good faith that no service tax was due. The advocate highlighted the confusion around service tax obligations and noted that most of the tax was paid before the introduction of the Amnesty Scheme in 2004. The judgment acknowledged the confusion prevalent at the time regarding service tax and considered the appellant's bona fide belief. Despite confirming the service tax demand, the penalties imposed were set aside.

2. Imposition of penalties under various sections of the Finance Act, 1994:
The judgment delves into the imposition of penalties on the appellant under different sections of the Finance Act, 1994. The advocate for the appellant contended that penal provisions should not be invoked due to the confusion surrounding service tax obligations and the appellant's belief that no tax was due. The judgment noted the absence of evidence indicating mala fide intent on the part of the appellant for non-payment of tax. Consequently, the penalties imposed under various sections of the Finance Act, 1994 were revoked, considering the circumstances and the appellant's compliance with tax payment before the specified date.

3. Invocation of Section 80 of the Finance Act, 1994:
Regarding the invocation of Section 80 of the Finance Act, 1994, the judgment emphasized the need to extend the benefit of this provision to the appellant. Section 80 provides relief in cases where non-payment of tax is not due to mala fide intent. The judgment observed that there was no evidence suggesting mala fides on the part of the appellant for not paying the tax. Consequently, the benefit of Section 80 was extended to the appellant, leading to the setting aside of penalties while confirming the service tax demand. The judgment highlighted the importance of considering the circumstances and the absence of mala fides in determining the applicability of penal provisions and the extension of statutory benefits to the assessee.