2011 (12) TMI 397 - AT - Service Tax

Waiver of the penalty under Section 80 as the initial non-payment of the tax by the appellants on account of confusion in the interpretation of the statutory provisions JCDR while reviewing the original order has reversed the decision and has imposed a penalty - Held that - there is no satisfactory reason given to reverse the finding of the original authority in regard to extending the benefit under Section 80 to the appellants - no finding of any suppression, fraud etc. and the fact that the appellants have retained some amount out of the loan disbursed does not alter the character of the amount and this is the first instance where the tax was not paid on account of the confusion regarding the tax liability - Order-in- Revision is set aside and the original authority s order is restored - in favour of assessee.

Summary

Issues: Tax liability on amount received for loan disbursement services, penalty under Section 80 of the Finance Act, 1994

In this judgment by the Appellate Tribunal CESTAT, Chennai, the issue revolved around the tax liability of an appellant-bank on the amount received for loan disbursement services provided to farmers who purchased tractors from M/s TAFE. The appellant had paid service tax on the amount received for the service rendered for sanction and disbursement of the loan. However, a dispute arose regarding some amount retained by the appellants from the loan disbursed to M/s. TAFE towards the purchase of the tractor. The original authority waived the penalty under Section 80 of the Finance Act, 1994, due to confusion regarding the tax liability. The jurisdictional Commissioner, upon review, imposed a penalty, which was contested by the appellants. The Tribunal observed that there was no finding of suppression or fraud, and the confusion regarding tax liability was the reason for non-payment in this first instance. The Tribunal held that the original authority's decision to waive the penalty was justified, as there was no satisfactory reason provided by the Commissioner to reverse this finding. Therefore, the impugned Order-in-Revision was set aside, and the original authority's order was restored, allowing the appeal.

This judgment highlights the importance of considering the circumstances leading to non-payment of tax, especially in cases where confusion exists regarding tax liability. It emphasizes that penalties should be imposed judiciously, taking into account factors such as the absence of suppression or fraud. The decision underscores the need for a clear rationale when reversing decisions made by lower authorities, particularly when the original decision is based on valid reasons such as confusion over tax provisions.