2013 (2) TMI 245 - AT - Service Tax

Business Auxiliary Services - Appellants are engaged in providing Business Auxiliary Services - was not paying any Service Tax till 8-7-2004 and after withdrawal of exemption given to Commission Agents in Budget of 2004 which it came into effect from 9-7-2004, the appellant took registration as a service provider of Business Auxiliary Service and started paying Service Tax from 9-7-2004 - Held that - Appellant entertained a bona fide belief that they are not liable to Service Tax since they were only acting as commission agent for the 3 customers - Amount of Service Tax and the interest was paid within one year except for 1 or 2 months would also show that the appellant is entitled to benefit of provisions of Section 73(3) of Finance Act, 1994 which provides that if the appellant makes the payment of Service Tax and interest, no further proceedings will be initiated - Amount received by the appellant from the customers was mainly commission especially when we take into account that the fact that the activities undertaken by the appellant consisted of collection of bills, wherein they were getting percentage for having collected the amount Appellant cannot be found fault with for entertaining a bona fide belief that they were acting as commission agent In favour of assessee.

Summary

Issues Involved:
1. Liability of Service Tax prior to 9-7-2004
2. Imposition of penalties under various Sections of Finance Act, 1994
3. Bona fide belief of the appellant regarding Service Tax liability
4. Registration of the appellant before and after 9-7-2004
5. Benefit of Section 73(3) of Finance Act, 1994

Analysis:

1. Liability of Service Tax prior to 9-7-2004:
The appellant was engaged in providing Business Auxiliary Service to various customers and did not pay Service Tax until 9-7-2004. Following the withdrawal of exemption for Commission Agents in 2004, the appellant registered as a service provider and began paying Service Tax. The Central Excise officers later claimed that the appellant owed Service Tax dating back to 1-7-2003. Despite promptly paying the outstanding tax and interest, a Show Cause Notice was issued in 2008, leading to penalty imposition under Sections 77 and 78 of the Finance Act, 1994.

2. Imposition of penalties under various Sections of Finance Act, 1994:
The appellant contested the penalties proposed under Sections 75A, 76, 77, and 78. The Revenue's appeal for penalty under Section 76 was allowed, while the appellant's appeal was rejected. The appellant argued that penalties should not have been imposed as there was no suppression of facts or mis-declaration on their part. The Tribunal considered the appellant's actions in promptly paying the tax and interest, leading to a decision in favor of the appellant.

3. Bona fide belief of the appellant regarding Service Tax liability:
The appellant claimed to have a genuine belief that they were not liable to pay Service Tax before 9-7-2004, evidenced by their immediate registration and tax payment after the exemption withdrawal. The Tribunal acknowledged the appellant's bona fide belief, especially considering their willingness to resolve the issue without dispute upon the officers' visit in 2008.

4. Registration of the appellant before and after 9-7-2004:
The appellant's registration as a service provider after the exemption withdrawal was considered voluntary and indicative of their belief regarding Service Tax liability. The Tribunal noted that the appellant's actions, including timely tax payment and lack of departmental influence, supported their claim of being commission agents for their customers.

5. Benefit of Section 73(3) of Finance Act, 1994:
The Tribunal found that the appellant's prompt payment of Service Tax and interest, within one year of the visit by officers, entitled them to the benefit of Section 73(3) of the Finance Act, 1994. This provision states that no further proceedings will be initiated if the tax and interest are paid. As the appellant's belief was deemed bona fide, the Show Cause Notice issued in 2008 was considered unwarranted, leading to the appeal being allowed and the penalty under Section 78 set aside.

This detailed analysis of the judgment provides insights into the legal reasoning behind the Tribunal's decision regarding the issues raised in the case.