2007 (3) TMI 164 - AT - Service Tax

Penalty (Service tax) - Appellate claim for waiver of penalty imposed u/s 76 and 77 of FA, 1944 on the ground that there is confusion regarding impossibility of service tax as soon as it clear the payment has been made with interest - waiver of penalty allowed

Summary

Issues:
Appeal against waiver of penalty under Section 76 and Section 77 of Finance Act, 1994.

Analysis:
The Revenue appealed against the waiver of penalties imposed under Section 76 and Section 77 of the Finance Act, 1994. The Revenue argued that the Respondent should be treated equally under the law, emphasizing that mere payment of tax does not absolve one from the penal consequences of breaching the law. The Revenue cited a Larger Bench decision and contended that the lower Appellate Authority's order should be overturned.

The Respondent, appearing on their own behalf, highlighted that the levy of Service Tax was a new concept, subject to debate in various forums. They mentioned that the nature of the levy was under scrutiny by the High Court of Kolkata, which caused uncertainty in calculating and discharging tax liabilities. Despite cooperating with the Revenue and filing returns for different periods, the Respondent faced confusion due to the delayed issuance of registration by the Department, leading to uncertainty in determining their liability.

Upon hearing both sides, it was acknowledged that the levy was realized from the Respondent as per the law. However, the delay in discharging tax liabilities was deemed not deliberate or willful, considering the infancy stage of the levy and the confusion among taxpayers. The Respondent acted upon understanding their liability after being guided by public relation announcements, albeit belatedly. The applicability of Section 80 of the Finance Act, 1994, which exonerates penalties in case of reasonable cause, was emphasized. The decision of the lower Appellate Authority to waive the penalty was considered reasonable and not warranting penalty imposition.

The Tribunal noted that the lower Appellate Authority provided a well-reasoned order for waiving the penalty, and upholding this decision was deemed essential for justice. Consequently, the Tribunal dismissed the Revenue's appeal, affirming the lower Appellate Authority's order.