2012 (8) TMI 99 - AT - Service Tax

Penalty under sections 76 and 78 of Finance Act, 1994 assessee submited that they were under the bona fide impression that they need to pay service tax only on the commission amount retained by the appellants and not on the value including the salary of personnel employed for providing services Held that - Appellants impression that they had to pay service tax on their commission only cannot be considered to be mala fide. Considering that the appellants are a small firm, and the levy was in the early stage and their realisation from the activity was only that of commission. Provisions of section 80 of Finance Act, 1994 invoked and penalty waived.

Summary

Issues:
1. Whether service tax should be paid on the entire value received by the Appellants, including the salary of personnel employed for providing security services.
2. Whether penalties imposed under sections 76 and 78 of the Finance Act, 1994 on the Appellants are justified.

Issue 1:
The Appellants, providing security services, initially did not include the salary paid to their employees in the value for service tax calculation. The Revenue issued Show Cause Notices for not paying service tax on the entire value received, including employee salaries. The Adjudication confirmed service tax amounts and imposed penalties under sections 76 and 78. The Commissioner (Appeals) upheld the order, leading to the current appeal. The Appellants contended they believed service tax was only applicable on the commission amount, not the total value. The Authorised Representative argued that tax should be paid on the gross value of services as per section 67 of the Finance Act, 1994. The Tribunal considered the Appellants' plea, noting their small firm status and lack of mala fide intent. Given the early stage of levy and the Appellants' limited earnings, penalties were waived under section 80 of the Finance Act, 1994, and the appeal was allowed.

Issue 2:
The penalties imposed under sections 76 and 78 of the Finance Act, 1994 on the Appellants were contested. The Appellants had already paid the demanded duty and interest but were disputing the penalties. The Tribunal acknowledged the Appellants' genuine belief regarding the tax calculation and the limited nature of their earnings. Considering these factors, along with the early stage of levy and the Appellants' small firm status, penalties were waived under section 80 of the Finance Act, 1994. The Tribunal found the penalties to be unjustified in this particular case and allowed the appeal, relieving the Appellants from the imposed penalties.

This comprehensive analysis of the judgment highlights the key issues involved, the arguments presented by both parties, and the Tribunal's reasoning leading to the decision to waive the penalties imposed on the Appellants.