2012 (4) TMI 252 - AT - Service Tax

Waiver of penalty - rent-a-cab service - short payment of Service Tax of Rs.20,500 - Proprietor, who could not explain the details since he happens to know only Gujarathi and no other language. Further, he was also found to be non-conversant with the provisions of law. - On going through the records, it was found that there was an order issued under Section 96(1) of Finance Act, 2008, under the Dispute Resolution Scheme, 2008 - Since the amount indicated in the Dispute Resolution Scheme as well as in Order-in-Original case exactly same, apparently neither the appellant nor the department had taken note of the fact that there was already an order under Dispute Resolution Scheme and therefore, the proceedings initiated in the Show-Cause Notice dt.11.09.07 - Held that the appellant has been able to show reasonable cause under Section 80 of Finance Act - Decided in favor of the assessee

Summary

Issues:
1. Short payment of Service Tax revealed during scrutiny of balance sheet.
2. Imposition of penalty under Section 76 and Section 78 of Finance Act, 1994.
3. Ignorance of law by the appellant.
4. Order under Dispute Resolution Scheme not considered in the proceedings.
5. Appeal for waiver of penalty under Section 76 of Finance Act, 1994.

Analysis:

1. The case involved a Show-Cause Notice issued to the appellant due to a shortfall in the payment of Service Tax, as revealed during the scrutiny of the balance sheet. The actual income from providing rent-a-cab services was found to be more than what was reflected in the balance sheet, resulting in a short payment of Service Tax amounting to Rs.20,500. This led to the initiation of proceedings culminating in an Order-in-Original confirming the demand for Service Tax, interest, and imposing penalties under Section 76 and Section 78 of the Finance Act, 1994.

2. The appellant, represented by Shri Mahesh Patel, faced challenges in explaining the details of the case due to a language barrier and lack of familiarity with legal provisions. The appellant's appeal memorandum only requested a waiver of penalty without specifying the grounds or the type of penalty. Upon review, it was discovered that an order was issued under the Dispute Resolution Scheme in 2008, determining the Service Tax amount and restricting the penalty. Despite the appellant's deposit in compliance with the scheme, the Order-in-Original did not acknowledge this prior resolution, indicating a procedural oversight.

3. Considering the appellant's limited understanding of the law and the circumstances surrounding the case, the judge observed that the issue primarily pertained to the penalty under Section 76 of the Finance Act, 1994. Noting that a portion of the penalty under Section 78 had already been paid, and the Service Tax amount was settled, the judge found that the appellant had demonstrated reasonable cause under Section 80 of the Finance Act, 1994 for the waiver of the penalty under Section 76, even if there were discrepancies in the observations made earlier.

4. Consequently, the judge set aside the penalty of Rs.20,500 imposed on the appellant under Section 76 of the Finance Act, 1994, considering the appellant's circumstances, the compliance with the Dispute Resolution Scheme, and the overall context of the case. The judgment highlighted the importance of procedural adherence, clarity in legal submissions, and the equitable application of penalty provisions in tax matters.