2013 (12) TMI 1425 - AT - Service Tax

Penalty u/s 75A, 76 and 78 - Invokation of power u/s 80 - Business Auxiliary Service - Held that - appellant is not contesting the Service Tax amount and interest demanded. The appellant is a small service provider and the levy in question was in the initial stage of implementation. The very name of the service viz Business Auxiliary Service does not give any clarity and the entry covered different types of activities. So there was confusion in the minds of people about the actual scope of such service. For that reason, the appellant was not able to claim the Service Tax amount from the HDFC Bank and consequently there was some delay in remitting the tax to the Government. In this type of situation, it is proper to invoke powers under Section 80 of Finance Act, 1994. The Adjudicating Authority rightly did so and there was no reason to reverse such order and impose penalty on the appellant - Decided in favour of assessee.

Summary

Issues:
1. Liability to pay Service Tax on consideration received from a bank.
2. Invocation of penalty under Section 80 of the Finance Act, 1994.
3. Applicability of penalty under Sections 75A, 76, and 78 of the Finance Act, 1994.
4. Confusion regarding the scope of "Business Auxiliary Service" during the initial implementation stage.

Analysis:

1. The appellant, engaged in arranging finance and loans, did not pay Service Tax on consideration received from a bank between July 2003 and September 2004. A show cause notice was issued in June 2005, following which the appellant paid the Service Tax with interest. The Revenue confirmed the tax demand, but the penalty was waived under Section 80 of the Finance Act, 1994. The Commissioner (Appeals) later imposed penalties under various sections, leading to the appeal.

2. The appellant argued that confusion existed regarding the scope of "Business Auxiliary Service" when the Service Tax entry was introduced in 2004. Both the appellant and the bank believed tax was not payable initially, leading to the delayed payment. The original authority waived penalty under Section 80, which the Commissioner (Appeals) reversed. The appellant contended that the penalty imposition was unjustified.

3. The Revenue contended that despite advising the appellant to pay the Service Tax in May 2005, there was a significant delay in compliance. The argument that the appellant was unaware of the tax was rejected. However, the appellant did not contest the tax amount and interest demanded, acknowledging the confusion surrounding the levy during the initial implementation phase.

4. The Tribunal considered the confusion surrounding the "Business Auxiliary Service" and the appellant's status as a small service provider. Given the lack of clarity in the service's scope and the confusion prevalent at the time, the Tribunal found the invocation of Section 80 of the Finance Act, 1994, by the Adjudicating Authority appropriate. Consequently, the penalty imposed by the Commissioner (Appeals) was set aside, recognizing the circumstances leading to the delayed tax remittance.

In conclusion, the Tribunal allowed the appeal, overturning the penalty imposed on the appellants and highlighting the justifiability of invoking Section 80 under the Finance Act, 1994, in situations of confusion and initial implementation challenges.