2013 (3) TMI 57 - AT - Service Tax

Seeking waiver of penalty - assessee submitted that since the liability is determinable after 18-2-2006 it has discharged tax liability with interest in respect of both the appeals although it sought registration after the impugned period - Held that - Assessee were not able to assess service tax liability before the notified date to levy service tax on reverse charge mechanism in respect of services provided from abroad as decided in UOI v. Indian National Ship Owners Association 2009 (12) TMI 850 - SUPREME COURT OF INDIA - Since there was confusion prevalent in interpretation of law during material period and owing to fact that assessee had discharged service tax liability for period from 18-4-2006, extended period of limitation cannot be invoked - entire demand was upheld, but, penalty under section 78 set aside, as there was no deliberate case of fraud and prejudice caused to Revenue - Partly in favour of assessee

Summary

Issues:
1. Waiver of penalties due to resolution of confusion in law regarding service tax liability.
2. Applicability of penalties under section 77 and section 78 of the Act.

Analysis:
1. The judgment addresses the issue of waiver of penalties in light of the resolution of confusion in the law regarding service tax liability. The appellant sought to dispose of the appeal by waiving penalties, citing the decision of the Hon'ble High Court of Bombay affirmed by the Apex Court in a specific case. The appellant highlighted that the law's confusion was resolved with the judgment, making the liability determinable after a certain date. The appellant had already discharged the tax liability with interest for both appeals, even though registration was sought after the impugned period. The Tribunal acknowledged that in situations where the law is not settled and confusion persists, the extended period for invoking penalties is not applicable unless there is deliberate fraud causing prejudice to the Revenue. In this case, the confusion in the law was a reasonable cause for the waiver of penalty.

2. The judgment further delves into the applicability of penalties under section 77 and section 78 of the Act. The Tribunal, considering the totality of the situation, allowed both appeals partly, including the stay application, confirming the tax and interest while waiving penalties imposed under section 78 of the Act. However, penalties under section 77 were confirmed. The Tribunal's decision to waive penalties under section 78 while confirming penalties under section 77 was based on the reasoning that the confusion in the law regarding service tax liability constituted a reasonable cause for the waiver of penalties, except in cases of deliberate fraud causing prejudice to the Revenue. The Tribunal's order reflected this analysis by allowing the appeals partly and specifying the penalties to be waived and confirmed under the relevant sections of the Act.