2013 (3) TMI 202 - AT - Service Tax

Waiver of penalties seeked u/s 80 of Finance Act, 1994 - Non discharge on service tax liability - Held that - No doubt, indirect taxes permit shifting of incidence but does not immune a tax payer from tax liability in the event of non-recovery from consumers. No legal opinion was placed before the authorities below to prove bonafide. Nor such opinion or correspondence made with department to show innocence as placed. Therefore, it is not a fit case to be governed by Section 80 of Finance Act, 1994. As levy of penalty under Section 76 & 78 simultaneously is unwarranted. Therefore, there shall be waiver of penalty imposed under Section 76 while penalty under section 78 is confirmed. Since there was continuation of economic activity providing taxable service, penalty under Section 77 is also confirmed - as the assessee has come forward at a later stage to comply with the law, to reduce the litigation penalty under Section 78 reduced to 25% of Service Tax liability. This concession in penalty shall be permissible only if the Respondent pays 25% of service tax liability towards penalty under that section within 30 days of receipt of this order - allow Revenue s appeal partly.

Summary

Issues:
1. Whether there was a case under Section 80 of Finance Act, 1994 to waive penalties imposed under law.
2. Dispute regarding service tax liability and penalties.
3. Reasonable cause to invoke Section 80 of the Finance Act, 1994.
4. Levy of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

Analysis:
1. The Tribunal examined whether there was a case under Section 80 of the Finance Act, 1994 to waive penalties. The Revenue argued that the appellant had a defiant attitude towards compliance with the law. The respondent contended that due to the absence of a reimbursement clause in the contract, they were unable to realize the service tax element, even though service tax was realizable as an indirect tax. The Tribunal noted the defiance attitude of the respondent towards the law and found that there was no reasonable cause to grant immunity from penalty under Section 80, reversing the decision of the first appellate authority.

2. Regarding the service tax liability, it was undisputed by the respondent. The failure to discharge the service tax liability resulted in penalties becoming payable. The Tribunal observed that the respondent failed to respond to summons and did not provide information to the Authority, indicating scant regard for the law. The Tribunal held that the respondent's defiance attitude and failure to ascertain its tax liability did not warrant the application of Section 80 of the Finance Act, 1994. Therefore, the Tribunal confirmed the penalty under Section 78 while waiving the penalty under Section 76 and confirming the penalty under Section 77 due to the continuation of economic activity providing taxable services.

3. The Tribunal concluded that the respondent, by later complying with the law, would have the penalty under Section 78 reduced to 25% of the service tax liability if paid within 30 days. Failure to make this payment would result in the entire penalty imposed under Section 78 being realizable. The Tribunal partially allowed the Revenue's appeal based on the above considerations.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the Tribunal's reasoning behind its decision on each issue.