2007 (6) TMI 106 - AT - Service Tax

Penalty (Service tax) - Department contented that appellant liable for penalty on the ground of non-payment of service tax for the impugned period - Held that appellant is under bona fide belief about tax liability and penalty set aside

Summary

Issues:
Penalty under Sections 76 and 77 of the Finance Act, 1994 for failure to pay Service tax within the stipulated period.

Analysis:
The assessees, engaged in providing "Business Auxiliary Services," failed to pay Service tax for the period July 2003 to September 2004 within the stipulated period. The Asst. Commissioner issued a show cause notice asking why penalty should not be imposed under Sections 76 and 77. The Asst. Commissioner confirmed the demand of Service tax and imposed a penalty of Rs. 1,000/- each on all the appellants. The appellants argued that they were under a bona fide doubt regarding the payment of Service tax as it was not clarified by the Bank or authorities. They claimed to have paid the tax out of their pocket by borrowing money. The Department revised the penalty amount equivalent to Service tax, citing Section 76 of the Finance Act. The Commissioner did not find a reasonable cause for the doubt entertained by the appellants, attributing knowledge of tax payment to them from the registration of their business. The Commissioner enhanced the penalty amount equivalent to Service tax, but the appellants maintained their confusion regarding their liability. They argued that they paid the nominal penalty imposed by the original authority based on bona fide doubt. The appellants contended that they had the right to challenge the enhanced penalty under Section 80 of the Finance Act.

The Tribunal found that there existed a bona fide doubt and faith in the minds of the appellants regarding the liability of Service tax. Citing relevant case laws, the Tribunal set aside the Commissioner's order and allowed the appeals. The judgments referred to include Jayant Vasudeva Deshmukh v. CCE, Nasik, Aarti Advertising v. CCE & Customs, Nasik, and Flyingman Air Courier Pvt. Ltd. v. CCE, Jaipur. The Tribunal pronounced the decision on 12-6-2007, ruling in favor of the appellants and allowing the appeals.