2015 (1) TMI 417 - AT - Service Tax

Imposition of penalty - franchisee service - Held that - Having regard to the fact that appellant is a proprietary concern, he is functioning in a small town Pandalam, Pathanamthitta District, Kerala and as soon as the liability was brought to his notice, he paid the tax with interest even before issue of show-cause notice and took registration, we consider that this is a fit case for waiver of penalty by invoking provisions of Section 80 of Finance Act, 1994. As regards the service tax, the liability has been accepted and interest has also been paid. Since only penalty is involved and we have already taken a view that this is a fit case for invoking Section 80 of Finance Act, 1994 - Decided in favour of assessee.

Summary

Issues:
1. Liability for service tax on franchisee service.
2. Applicability of Section 73(3) of Finance Act, 1994.
3. Imposition of penalty on the appellant.
4. Invocation of Section 80 of Finance Act, 1994 for waiver of penalty.

Analysis:

1. The appellant, engaged in providing diploma classes in Fire and Safety Engineering, was alleged to be providing franchisee services without paying service tax. The appellant voluntarily paid the entire service tax due with interest before the show-cause notice was issued. The appellant's representative argued that proceedings should not have been initiated, citing Section 73(3) of the Finance Act, 1994, and contended that penalty should not be imposed. The Tribunal considered the circumstances, including the appellant being a small-town proprietor who promptly paid the tax upon being informed of the liability. The Tribunal accepted the liability and interest payment, leading to the waiver of penalty under Section 80 of the Finance Act, 1994. Consequently, the appeal was allowed based on the waiver of penalty.

2. The Tribunal acknowledged the appellant's prompt payment upon notification of the liability, despite being a small-town proprietor. This prompt action, along with the acceptance of liability and interest payment, led the Tribunal to invoke Section 80 of the Finance Act, 1994, for the waiver of penalty. By considering the circumstances and the provisions of the Act, the Tribunal found the case suitable for the application of Section 80, resulting in the allowance of the appeal without the imposition of penalty.

3. The Tribunal, in its analysis, emphasized the fact that the appellant, upon being made aware of the liability, promptly paid the service tax with interest even before the issuance of the show-cause notice. Given the appellant's immediate compliance and the acceptance of liability, the Tribunal deemed it appropriate to waive the penalty under Section 80 of the Finance Act, 1994. The Tribunal's decision to allow the appeal was primarily based on the invocation of Section 80 and the unique circumstances of the case, where the appellant's actions demonstrated a willingness to comply with the tax obligations.

4. The Tribunal's judgment focused on the appellant's proactive approach in settling the tax liability promptly upon notification, thus warranting the waiver of penalty under Section 80 of the Finance Act, 1994. By considering the appellant's timely payment, acceptance of liability, and interest payment, the Tribunal concluded that the circumstances justified invoking Section 80 and exempting the appellant from penalty. This decision highlights the importance of compliance and prompt action in addressing tax liabilities, leading to a favorable outcome for the appellant in this case.