2012 (9) TMI 597 - AT - Service Tax

Maintenance or Repairing Service - service tax demand & penalty u/s 78 - Held that - The definition of Repairing and Maintenance Service has been changed with effect from 16.06.05 and the Appellant pursuant to the same, got registered on 04.08.2005. The reason for delay in payment of Service Tax, as explained by the Appellant, was due to a confusion with regard to determination of the taxable value of the services rendered by them and also on the eligibility of benefit provided to a small-scale service provider. The said explanation appears to be convincing, and nothing contrary to the said claim, has been brought on record by the Department. Mere delay in payment of the Service Tax cannot be construed as suppression or misdeclaration of facts with intent to evade payment of Tax. As the bonafideness of the Appellant is evident from the fact of their getting registered with the Department soon after change in the scope of definition on repairing and maintenance service and also from the fact that the entire receipt relating to the repair and retreading of Tyres during the relevant period, had been duly reflected in their audited Balance Sheet he penalty imposed on the Appellant under Section 78 of the Act, is not maintainable - in favour of assessee.

Summary

Issues:
Appeal against penalty under Section 78 of the Finance Act, 1994 for non-payment of Service Tax due to confusion in determining taxable value and small-scale benefit eligibility.

Analysis:
The Appellant, engaged in Tyre retreading and repairing, faced penalty under Section 78 of the Finance Act, 1994 for non-payment of Service Tax despite being registered. The confusion arose post the service becoming taxable from 16.06.2005. The Appellant argued that ambiguity in determining taxable value and small-scale benefit criteria led to the delay in payment. The Appellant contended that the value of old tyres and repair charges were separately invoiced, causing uncertainty in determining the taxable value. The Appellant highlighted that all receipts were duly reflected in their audited Balance Sheet, demonstrating transparency. The Appellant promptly paid the Service Tax upon clarification by the Department, indicating good faith.

The Revenue supported the findings of the Adjudicating Authority. However, the Tribunal observed that the Appellant's explanation for the delay appeared reasonable and no evidence of intentional evasion was found. The Appellant's timely registration post the service becoming taxable and the proper disclosure of receipts in the Balance Sheet indicated good faith. The Tribunal concluded that mere delay in payment does not equate to deliberate evasion. Consequently, the penalty under Section 78 was deemed unjustifiable. The Tribunal set aside the penalty, allowing the Appeal with any consequential relief as per law.

In conclusion, the Tribunal ruled in favor of the Appellant, setting aside the penalty imposed under Section 78 of the Finance Act, 1994. The judgment emphasized the importance of good faith compliance, considering the Appellant's confusion regarding taxable value determination and small-scale benefit eligibility. The Tribunal found no intent to evade payment, leading to the decision to annul the penalty and provide relief to the Appellant.