2014 (2) TMI 331 - AT - Service Tax

Waiver of pre deposit - Penalty u/s 76, 77 & 78 - Commission received for marketing sim cards - Held that - The period involved in this case is from 01.04.05 to 31.03.09 and during the relevant period, there were various decisions of the Tribunal holding that the said activity of receiving commission or retaining part of the commission of sim cards would not amount to Business Auxiliary Services and no service tax liability arises. The said view stands reversed by the Hon ble Supreme Court in the case of Idea Cellular. At this juncture, we find that the appellant could have been under a bonafide impression that they are not liable to pay service tax on the commission received on sim cards as there were various decisions in favour of the assessee on the ground of waiver of pre-deposit of the amounts involved - Stay granted.

Issues:
1. Stay petition for waiver of pre-deposit of service tax, penalty, and interest amounts.
2. Liability for service tax on commission received from Idea Cellular Company.
3. Interpretation of relevant case law and Tribunal decisions.
4. Bonafide belief of appellant regarding service tax liability.
5. Granting of waiver for pre-deposit and stay of recovery pending appeal.

Analysis:
1. The appellant filed a stay petition seeking waiver of pre-deposit of amounts related to service tax, penalty, and interest. The specific amounts included Rs.4,35,848/- for service tax, penalty under various sections of the Finance Act, 1994, and interest as per the applicable provisions. The demands were confirmed, and penalties were imposed due to the appellant's alleged failure to discharge service tax liability on the commission received from Idea Cellular Company for marketing their sim cards.

2. The period under consideration was from 01.04.05 to 31.03.09. During this timeframe, previous Tribunal decisions had held that receiving commission on sim cards did not constitute Business Auxiliary Services, leading to no service tax liability. However, the Supreme Court's decision in the case of Idea Cellular reversed this view. The appellant may have genuinely believed they were not liable for service tax based on the earlier favorable decisions. Considering this, the Tribunal allowed the waiver application for pre-deposit and stayed the recovery pending appeal.

3. The Tribunal noted the evolving interpretation of the law regarding service tax liability on commission income. While past decisions favored the appellant, the subsequent ruling by the Supreme Court in the Idea Cellular case changed the legal landscape. The Tribunal acknowledged the appellant's reliance on the earlier decisions and their bonafide belief in not being subject to service tax. This case highlights the impact of changing judicial precedents on taxpayers' understanding of their tax obligations.

4. After hearing both parties and reviewing the records, the Tribunal recognized the appellant's reasonable belief based on the prevailing legal interpretations at the time. The decision to grant the waiver for pre-deposit and stay the recovery until the appeal's disposal reflects a balance between the taxpayer's legitimate expectations and the legal requirements following the Supreme Court's decision in the Idea Cellular case.

5. In conclusion, the Tribunal, comprising Mr. M.V. Ravindran, allowed the appellant's application for waiver of pre-deposit of the disputed amounts related to service tax, penalty, and interest. The stay on recovery was granted until the appeal is resolved, considering the appellant's reliance on prior favorable decisions and the subsequent change in legal interpretation by the Supreme Court. This judgment underscores the importance of considering the evolving legal landscape and taxpayers' reasonable beliefs in determining tax liabilities.

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