2014 (9) TMI 79 - AT - Service Tax

Rent a cab service - Penalty u/s 76 & 78 - Held that - Earlier decision of the Tribunal in the case of Kuldeep Singh Gill (2010 (4) TMI 283 - PUNJAB & HARYANA HIGH COURT) is in favour of the assessee, therefore we find that it is not a case for imposition of any penalty under Sections 77 and 78 of the Finance Act. The penalties imposed under the impugned order are set aside, otherwise the demand with interest is upheld - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of demand for service tax on rent-a-cab services
2. Applicability of penalties under Sections 76 and 78 of the Finance Act
3. Interpretation of Section 80 of the Finance Act regarding penalties

Confirmation of Demand for Service Tax on Rent-a-Cab Services:
The appellant appealed against an order confirming a demand for service tax on the grounds of providing taxable rent-a-cab services. The appellant, unregistered with Revenue authorities, rented out 30 Maruti vans to customers, leading to the demand. The appellant cited a Tribunal decision in their defense, but the Revenue argued that this decision had been overturned by the Hon'ble Punjab & Haryana High Court. The Tribunal, considering the High Court's decision, upheld the demand for service tax along with interest, finding no fault in the impugned order based on the changed legal precedent.

Applicability of Penalties under Sections 76 and 78 of the Finance Act:
The adjudicating authority had imposed penalties under Sections 76 and 78 of the Finance Act. However, Section 80 of the Finance Act provides an exception to penalty imposition if the assessee proves a reasonable cause for the failure in question. In this case, as the earlier Tribunal decision favored the assessee, the Tribunal concluded that there was no justification for imposing penalties under Sections 77 and 78. Consequently, the penalties were set aside, while the demand with interest was upheld, leading to the disposal of the appeal.

Interpretation of Section 80 of the Finance Act Regarding Penalties:
The Tribunal's analysis of Section 80 of the Finance Act played a crucial role in determining the applicability of penalties in the case. By considering the assessee's reasonable cause for the failure in light of the previous Tribunal decision, the Tribunal found no grounds for imposing penalties under Sections 77 and 78. This interpretation, coupled with the legal precedent set by the Hon'ble Punjab & Haryana High Court, guided the Tribunal in its decision-making process, ultimately resulting in the setting aside of penalties while upholding the demand for service tax with interest.