2015 (4) TMI 823 - AT - Service Tax

Penalty u/s 70& 77 - goods transport agency services - reverse charge mechanism - Held that - It is admitted fact that on 13.1.12 appellant took registration and paid service tax along with interest, not for the period in question but for 2006 also. This shows the appellant were under the bonafide belief that they are not liable to pay service tax under reverse charge mechanism as good transport agency service does not exceed ₹ 10 lakhs. Therefore, I hold that the show cause notice was not required to be issued under section 73(3) of the Finance Act, 1994. In these circumstances, penalties are not imposable on the appellant. Further, I find that appellant is not contesting the penalty imposed under section 78 of the Act. Therefore the benefit of this order will not be available for the penalty imposed under section 78 of the Act. In these circumstances, the penalties imposed on the appellant under section 70 and 77 are set aside. - Decided in favour of assessee.

Summary

Issues:
Appeal against penalties under section 70 and 77 of the Finance Act, 1994.

Analysis:
The appellant, a manufacturer of excisable goods, availed goods transport agency services without paying service tax on reverse charge mechanism. Upon registration and realization of the tax liability, they paid service tax with interest. The investigation revealed non-payment of service tax from 2007 to 2012, leading to the issuance of a show cause notice for tax, interest, and penalties under sections 70, 78, and 77. The appellant contested penalties under sections 70 and 77, claiming a bonafide belief that registration was unnecessary due to turnover below Rs. 10 lakhs for transport services. The appellant argued that the show cause notice was not required under Section 73 of the Act and sought penalty waiver.

The appellant's consultant emphasized the appellant's bonafide belief regarding registration requirements and prompt compliance upon realizing the obligation. In contrast, the respondent argued for upholding the penalties due to the delayed registration and non-payment of service tax. After hearing both parties, the tribunal acknowledged the appellant's belated registration and payment of service tax, even for previous years, indicating a genuine misunderstanding of tax obligations. The tribunal held that the show cause notice was unnecessary under section 73(3) of the Finance Act, 1994, given the circumstances. Consequently, the tribunal set aside the penalties imposed under sections 70 and 77, noting that the appellant did not contest the penalty under section 78. The decision allowed the appeal, providing relief from penalties under sections 70 and 77 while upholding the penalty under section 78.

In conclusion, the tribunal's judgment absolved the appellant of penalties under sections 70 and 77, considering the appellant's belated compliance, bonafide belief, and lack of contestation regarding the penalty under section 78. The decision highlighted the importance of genuine belief and timely rectification of tax liabilities in mitigating penalty impositions under the Finance Act, 1994.