2012 (10) TMI 877 - AT - Service Tax

Demand and penalty - Whether non-obtaining of Registration by the respondent amounts to suppression limitation - Outdoor catering services - respondents contested the notice on merits as also on limitation - Commissioner (Appeals) held in favour of the respondents on the ground that for the period June, 2005 to March, 2006, benefit of Notification No. 21/04, dtd. 10.09.04 is available to the respondents Held that - Difference of opinion between members regarding following issues - Whether the Revenue s appeal is required to be allowed in respect of service tax only and part of the order vide which penalty stand set aside by Commissioner(Appeals) is required to be upheld - referred to third member.

Summary

Issues Involved:
1. Applicability of Notification No. 21/04-ST for exemption from service tax.
2. Eligibility for SSI Exemption under Notification No. 6/05-ST.
3. Invocation of extended period of limitation.
4. Imposition of penalties under Sections 77 and 78 of the Finance Act, 1994.

Detailed Analysis:

1. Applicability of Notification No. 21/04-ST for Exemption from Service Tax:
The primary issue was whether the respondent, engaged in providing outdoor catering services, was entitled to the exemption under Notification No. 21/04-ST. The Notification exempts services provided by an outdoor caterer if the caterer is located within the premises of an academic institution. The Revenue contended that the respondent was not located within the premises of the academic institution (Madhav Institute of Technology & Science, Gwalior) and therefore, not eligible for the exemption. The respondent admitted they were located outside the premises, thus disqualifying them from the exemption under Notification No. 21/04-ST.

2. Eligibility for SSI Exemption under Notification No. 6/05-ST:
The next issue was whether the respondent could claim the SSI exemption under Notification No. 6/05-ST for the period April 2006 to October 2006. The SSI exemption is available if the aggregate value of services does not exceed Rs. 4 lakhs in the preceding financial year. Since the respondent's gross receipts for the period June 2005 to March 2006 were Rs. 4,27,820/-, they exceeded the threshold, making them ineligible for the SSI exemption for the subsequent period.

3. Invocation of Extended Period of Limitation:
The original adjudicating authority invoked the extended period of limitation to confirm the demand of Rs. 86,198/- in service tax. The respondent did not contest this on the grounds of limitation. The Tribunal noted that the respondent's failure to register and file returns despite being aware of their obligations constituted suppression of facts, justifying the invocation of the extended period.

4. Imposition of Penalties under Sections 77 and 78 of the Finance Act, 1994:
The Tribunal had differing views on the imposition of penalties. One member (Judicial) opined that the complexity of the notification and the respondent's bonafide belief that they were exempt should mitigate the penalties. The other member (Technical) argued that the respondent's failure to register and file returns, despite clear statutory requirements, constituted suppression with intent to evade tax, warranting penalties under Sections 77 and 78.

- Penalty under Section 77: The Technical Member emphasized that this penalty is statutory and not linked to the intention to evade, thus should be imposed.
- Penalty under Section 78: The Judicial Member suggested no penalty due to the respondent's bonafide belief and lack of clear malafide intent. The Technical Member, however, proposed imposing the penalty but giving the respondent an option to pay 25% of the tax amount within 30 days, as per the provisions of Section 78.

Conclusion:
The Tribunal allowed the Revenue's appeal to the extent of confirming the demand of duty and interest. However, there was a difference of opinion regarding the imposition of penalties. The matter was referred to the Hon'ble President for appointing a third member to resolve the disagreement on whether penalties should be imposed and whether the respondent should be given the option to pay a reduced penalty under Section 78.