2014 (1) TMI 408 - AT - Service Tax

Demand of service tax - Penalty u/s 77 & 78 - Demand of initial period - Outdoor catering service - Held that - respondents are not contesting the demand with interest the same has been paid when the revenue pointed out that respondents are liable to pay tax. The tax and interest has been paid prior to the show cause notice. We find that outdoor catering service comes under the purview of service tax w.e.f. 10.9.2004 and the period of present demand is initial period - As the demand is for the initial period when the service of outdoor catering comes under the purview of service tax, therefore, we find that the respondents are not liable for any penalty in view of the provisions of Section 80 - Decided partly in favour of assessee.

Summary

Issues:
- Appeal against imposition of penalties under Sections 76, 77, and 78 of the Finance Act.
- Whether the respondents are liable for penalty under Section 76 of the Finance Act.
- Interpretation of Section 80 of the Finance Act regarding the imposition of penalties.

Analysis:
The appeal before the Appellate Tribunal CESTAT MUMBAI involved a dispute over the imposition of penalties under Sections 76, 77, and 78 of the Finance Act. The Revenue filed the appeal against the order passed by the Commissioner (Appeals), which had allowed the appeal filed by the respondent. The case revolved around the respondent being held liable to pay service tax for outdoor catering services, along with interest and penalties. The respondents had paid the service tax and interest even before the show cause notice was issued, but they contested the imposition of penalties.

The Revenue contended that the impugned order did not discuss the issue of penalties adequately and also filed a miscellaneous application claiming that the respondent was liable for penalties under Section 76 of the Finance Act. On the other hand, the respondents argued that they were not aware of the provisions of service tax during the initial period in question, and they believed that running a canteen for employees did not constitute outdoor catering services. They maintained that the penalties were not justified due to their genuine belief and lack of awareness.

Upon examination, the Tribunal found that the outdoor catering service fell under the purview of service tax from a specific date and that the respondents had paid the tax and interest promptly upon notification by the Revenue. The Tribunal also analyzed Section 80 of the Finance Act, which provides for the non-imposition of penalties if the assessee proves a reasonable cause for the failure. Considering the circumstances of the case, particularly the initial period of the service tax implementation and the genuine belief of the respondents, the Tribunal concluded that the respondents were not liable for any penalty under Section 80 of the Finance Act.

In its final decision, the Tribunal allowed the appeal of the Revenue by restoring the order-in-original regarding the demand for service tax and interest. However, the Tribunal held that the respondents were not liable for any penalty, in accordance with the provisions of Section 80 of the Finance Act. The judgment clarified the legal position regarding penalties under the Finance Act and highlighted the importance of proving reasonable cause to avoid penalty imposition in certain situations.