2015 (6) TMI 269 - AT - Service Tax

Penalty under Sections 76, 77 and 78 - before issue of show-cause notice, the entire amount of tax was paid and before issue of adjudication order, interest was also paid - Held that - appellant was not aware of the provisions of law and as a result, continued to operate as they were operating earlier. The fact is that both the Revenue as well as the assessee are relying upon the balance sheet and the Profit & Loss Account for arriving at the quantum of service charges received and no other documents are admittedly available either with the assessee or with the Department. There is no dispute about the total liability or the total service amount received. The Accountant also promptly stated that they have made a mistake and they would pay the tax and interest. The intention behind introduction of provisions of Section 80 is precisely to ensure that assessees who did not pay the tax can make the payment with interest and lenient view can be taken as regards penalty in cases where there is lack of knowledge and reasonable cause. The very fact that the section continues to be in existence for a long time shows that the intention of the Government is to provide relief where there is a reasonable cause for failure to make payment and Hon ble High Court of Allahabad in the case of CCE Vs. Muniruddin 2013 (10) TMI 95 - ALLAHABAD HIGH COURT has taken a view that even ignorance of law can be one of the reasons, though cannot be sole ground for invoking Section 80. - appellant has made out a case for waiver of penalty by invoking Section 80 of Finance Act. Accordingly, penalties imposed under various sections of Finance Act, 1994 are waived - Decided in favour of assessee.

Summary

Issues:
1. Appellant's liability for service tax on Multi System Operator (MSO) services.
2. Imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.
3. Invocation of extended period for tax liability.
4. Applicability of Section 80 for waiver of penalties based on lack of knowledge and reasonable cause.

Analysis:
1. The judgment revolves around the appellant, a Multi System Operator (MSO) service provider, who failed to pay service tax after it was brought under the tax levy. The appellant, an individual proprietor, claimed ignorance of the tax introduction and non-collection of tax. The Accountant admitted the lack of awareness, leading to non-payment. Despite paying the tax and interest before the adjudication order, the challenge was against the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994.

2. The appellant contended that there was no intention to evade tax, as they promptly paid upon realization. They argued for penalty waivers under Section 80 of the Finance Act, questioning the lack of evidence supporting the authorities' claim of tax collection. Citing the decision in Ice Network Pvt. Ltd. Vs. CST, Bangalore, the appellant sought relief based on reasonable cause for non-payment.

3. The learned Assistant Commissioner argued for the rightful invocation of the extended period due to the appellant providing two services, emphasizing that ignorance of the law cannot justify tax non-payment.

4. The judgment analyzed the case considering the appellant's lack of awareness of the law, leading to continued non-compliance. It highlighted the reliance on financial statements for determining the tax liability, with both parties acknowledging the total service charges received. The judgment referred to the purpose of Section 80 to allow leniency in penalties for lack of knowledge and reasonable cause. Citing the case law and previous tribunal decisions, the judgment concluded that the appellant demonstrated a case for penalty waiver under Section 80, upholding the demand for service tax and interest while waiving the penalties imposed under various sections of the Finance Act, 1994.