2012 (10) TMI 136 - AT - Service Tax

Setting Aside of Penalty - Agreement with financial companies for arranging finances for their customers thereby rendering business auxiliary services to finance companies, Service Tax along with interest is paid. - Held that - No penalty can be imposed on the, duty on which liability to pay arises later as there is no malafide intention and suppression of facts to pay duty in favour of assessee.

Issues:
1. Interpretation of service tax liability on commission received by the appellant.
2. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
3. Application of extended period for demanding tax and penalties.
4. Consideration of precedent decisions and applicability to the present case.
5. Time-barred demand for the period prior to a specified date.
6. Delay in payment of tax and failure to file returns.

Analysis:

1. The appeal addressed the service tax liability on the commission received by the appellant from assisting Maruti Finance Ltd. in granting motor vehicle loans. The issue arose from a show cause notice claiming service tax for a period prior to the date when the appellant started paying taxes. The adjudicating authority confirmed the demand for the earlier period and imposed penalties under various sections of the Finance Act, 1994. On appeal, the Commissioner (Appeals) increased the penalty under Section 76.

2. The appellant argued that since Maruti Finance Ltd. had already paid service tax on the commission received from financial institutions, no further tax should be imposed on the appellant. Citing a precedent case, the appellant contended that suppression cannot be alleged against an assessee in a similar position. Additionally, the appellant highlighted that taxes for a specific period were paid with interest on different dates, challenging the basis for imposing penalties.

3. The Revenue contended that the appellant had not proven that Maruti Finance Ltd. paid service tax on the amounts involved. They argued that the extended period for demanding tax and penalties could be invoked due to the appellant's failure to disclose information about the commission received. Penalties were imposed for delays in payment beyond due dates.

4. The Tribunal considered various precedent decisions, including cases where demands against similarly placed assessees were dropped. Based on these decisions, the Tribunal found that the demand for the earlier period was not maintainable and was time-barred. The Tribunal also noted the absence of mala fide suppression of information by the appellant, leading to the setting aside of penalties imposed.

5. The Tribunal ruled in favor of the appellant, setting aside the impugned order and allowing the appeal. The judgment emphasized the lack of liability for the earlier period, the payment of taxes with interest for the remaining period before the issue of the Show Cause Notice, and the absence of mala fide intent on the part of the appellant in delaying payments and filing returns.

This comprehensive analysis of the judgment covers the interpretation of service tax liability, imposition of penalties, consideration of precedent decisions, and the application of the extended period for demanding tax and penalties, providing a detailed overview of the legal issues involved in the case.

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