2011 (8) TMI 736 - HC - Service Tax

Demand - once the assessing authority gave reasons for exercising his discretion vested under Section 80 of the Act., the revisional authority could have found fault with the exercise of discretion but he could not have interfered on the ground that he has not given any reasons for invoking the said jurisdiction - Held that assessing authority was justified in exercising discretion and taking lenient view in the matter and there was no case for interference by the revisional authority and the Tribunal was justified in setting aside the order passed by the revisional authority - Appeal is dismissed

Summary

Issues:
1. Challenge to the Tribunal's order setting aside penalty under the Finance Act of 1994.
2. Dispute regarding liability to pay service tax and penalty.
3. Interpretation of provisions related to penalty under Sections 76, 77, and 78 of the Act.
4. Consideration of whether a contract contrary to statute absolves liability from penalty.
5. Examination of whether a term of contract opposed to public policy under Section 23 of the Contract Act absolves liability from service tax payment.

Analysis:
The High Court judgment pertains to an appeal by the revenue challenging the Tribunal's decision that set aside the penalty imposed under the Finance Act of 1994. The case involved an assessee providing consultancy services without registering as a service provider under the Act, leading to a show-cause notice for recovery of service tax, interest, and penalty. The assessing authority accepted the tax offer with interest, considering that the customer was expected to pay the service tax. However, the revisional authority initiated penalty proceedings, questioning the exercise of discretion under Section 80 of the Act.

The Court noted that the revisional authority's initiation of proceedings was improper, as the assessing authority had provided reasons for exercising discretion. It was observed that the customer, an instrumentality of the State, had not paid any tax as per the agreement. The Court found the assessing authority's lenient view justified, and the Tribunal's decision to set aside the revisional authority's order was upheld. The Court concluded that the substantial questions of law framed did not apply to the case, leading to the dismissal of the appeal.

In conclusion, the judgment highlights the importance of assessing authority's discretion, the customer's role in tax payment as per the agreement, and the validity of the Tribunal's decision in setting aside the penalty imposed by the revisional authority. The case serves as a reminder of the legal intricacies surrounding service tax liability, penalty imposition, and contractual obligations under relevant statutes.