2013 (12) TMI 265 - AT - Service Tax

Liability of service tax - Goods Transport Agency service - Whether the penalty imposed under Section 78 by original authority and confirmed by the Commissioner (Appeal) is sustainable in the law - Held that - original authority has accepted the reasonable cause shown by the appellants for failure for payment of service tax and the Revenue has not challenged the Order-In-Original in respect of dropping the penalty under Section 76 and 77 of the Finance Act. Therefore there is no reason not to apply the same reasonable cause for failure of payment of service tax in respect of penalty under Section 78 of the Finance Act. We accordingly hold that penalty under Section 78 also is not imposable - Decided in favour of assessee.

Summary

Issues:
1. Whether the penalty imposed under Section 78 is sustainable in law.

Analysis:
The appeal was filed by M/s Golcha Ingorganics Pvt. Ltd. against the Order-in-Appeal passed by the Commissioner Central Excise, Jaipur-II. The case revolved around the appellants receiving services from a Goods Transport Agency (GTA) for transporting raw material and finished goods, leading to a dispute regarding service tax liability. The Department issued a Show Cause Notice alleging non-payment of service tax, despite the appellants depositing the tax and interest upon being informed of their liability. The Additional Commissioner confirmed the tax amount and imposed a penalty under Section 78 of the Finance Act. The appellants contended that they were unaware of the service tax liability as recipients and had paid the tax before the Show Cause Notice was issued. They argued against the imposition of penalties, citing lack of wilful misstatement or intent to evade tax. The Revenue, however, supported the penalties imposed by the lower authorities.

Upon review, the Tribunal examined whether the penalty under Section 78 was justifiable. It was noted that the original authority did not impose penalties under Sections 76 and 77, citing reasonable cause for the failure to pay service tax. The provisions of Section 80 of the Finance Act were invoked, which state that no penalty shall be imposed if a reasonable cause is proven for the failure. As the Revenue did not challenge the dropping of penalties under Sections 76 and 77, the Tribunal concluded that the same reasonable cause applied to the penalty under Section 78. Consequently, the Tribunal held that the penalty under Section 78 was not sustainable and set aside the Order-in-Appeal, allowing the appeal filed by the appellants.

Overall, the judgment focused on the application of penalties under different sections of the Finance Act, emphasizing the requirement of proving a reasonable cause for any failure in tax compliance. The decision highlighted the importance of considering circumstances and intent while determining the imposition of penalties related to service tax liabilities.