2012 (8) TMI 751 - AT - Service Tax

Demand and penalty - Short payment of service tax Held that - Services have been rendered by a retired police officer who was not familiar with the law relating to Service tax - appellant was eligible for availing full exemption from Service Tax in terms of Notification No. 6/2005-S.T. - It is a clear case of ignorance in not opting to avail this exemption - sufficient cause for invoking the provisions of Section 80 of the Finance Act - appellant has chosen to collect Service Tax from parties who were willing to pay the tax and paid the same to the department. He has failed to collect the Service Tax from other clients who were not willing to pay - Service Tax liability is upheld - re-quantification of Service Tax liability by adopting cum-tax benefit in respect of cases where Service Tax has not been collected - The interest liability is also upheld on the re-quantified Service Tax liability - penalty imposed under Section 78 is set aside - amount already paid shall be adjusted towards the Service Tax liability and interest so re-quantified.

Summary

Issues:
1. Service Tax liability calculation and payment discrepancy.
2. Applicability of exemption for small scale service providers.
3. Invocation of Section 80 of the Finance Act for penalty waiver.
4. Benefit of cum-tax calculation for Service Tax liability.

Service Tax Liability Calculation and Payment Discrepancy:
The appellant, a provider of security services, faced discrepancies in Service Tax payment. The audit revealed a shortfall in tax payment compared to the total service charges recovered. The original authority confirmed a demand for the unpaid amount along with interest and imposed a penalty. The appellant contested the order, highlighting the turnover figures within exemption limits for certain years and claiming ignorance of the Service Tax law due to being a former police officer. The appellant argued for invoking Section 80 of the Finance Act due to the unintentional nature of the non-compliance.

Applicability of Exemption for Small Scale Service Providers:
The appellant contended that they were eligible for full exemption from Service Tax during specific years as their turnover fell within the exemption limits for small scale service providers. Despite collecting Service Tax from willing clients and paying it to the department, the appellant failed to avail the exemption due to ignorance. The Tribunal noted the appellant's ignorance but emphasized that the exemption could have been claimed, leading to a discussion on the applicability of Section 80 of the Finance Act to waive the penalty.

Invocation of Section 80 of the Finance Act for Penalty Waiver:
In analyzing the case, the Tribunal acknowledged the appellant's lack of familiarity with Service Tax laws but pointed out the missed opportunity to claim exemption during eligible years. Despite considering ignorance as a factor, the Tribunal deemed it a sufficient cause to invoke Section 80 of the Finance Act for waiving the penalty. The Tribunal upheld the Service Tax liability but set aside the penalty, emphasizing the appellant's unintentional non-compliance and the potential application of Section 80 in such circumstances.

Benefit of Cum-Tax Calculation for Service Tax Liability:
Regarding the re-determination of Service Tax liability, the appellant sought the benefit of cum-tax calculation to reduce the demand. The Tribunal agreed to re-quantify the Service Tax liability by adopting the cum-tax benefit for cases where Service Tax had not been collected. The interest liability on the re-quantified Service Tax amount was also upheld. The Tribunal ultimately disposed of the appeal by adjusting the amount already paid towards the re-quantified Service Tax liability and interest, while setting aside the penalty imposed under Section 78 of the Finance Act.