2015 (7) TMI 189 - AT - Service Tax

Penalty u/s 70 & 78 - whether, in the facts and circumstances of the case, penalties under Sections 70 and 78 should be imposed or otherwise - Held that - Commissioner (Appeals) has very consciously considered the facts of the case, interpreted the terms reasonable cause and came to the conclusion that there is a reasonable cause for the respondent in non-payment of service tax at the relevant time and, therefore, exercising the power vested in him, he set aside the penalties. As regards the reliance of the Revenue on the hon ble apex Court judgment in the case of Dharmendra Textile Processors (2008 (9) TMI 52 - SUPREME COURT ), it is relevant to the penalties imposed under Section 11AC of the Central Excise Act, 1944. However, in the present case, the penalties are under Sections 70 and 78 of the Finance Act, 1994. As regard these penalties there is a clear provision under Section 80 of the Finance Act, 1994 wherein the power is vested in the authority to consider the waiver of penalty on satisfaction of reasonable cause for non-payment of service tax. - there is no infirmity in the order of the learned Commissioner (Appeals) and the same does not require any interference. The impugned order is upheld. - Decided against Revenue.

Summary

Issues:
1. Confirmation of demand of service tax
2. Imposition of penalties under Sections 70 and 78 of the Finance Act, 1994

Analysis:

Issue 1: Confirmation of demand of service tax
The appeal was against an Order-in-Appeal where the Commissioner upheld the confirmation of demand of service tax amounting to Rs. 12,68,768/- and interest under Section 75. The respondent had provided services of supply and fixing of swimming pool tiles at the Balewadi Stadium for Commonwealth Games and filteration and cleaning of a swimming pool deck and toilet area. The respondent had not paid service tax initially, claiming the services were provided to non-commercial premises. However, upon investigation, the service tax liability was confirmed. The Commissioner (Appeals) maintained the demand of service tax but set aside penalties under Sections 70 and 78. The Revenue appealed against this decision.

Issue 2: Imposition of penalties under Sections 70 and 78
The Revenue argued that since the respondent did not dispute the tax liability and had partly paid the same, the penalties under Sections 70 and 78 should not have been set aside. The Revenue cited a Supreme Court judgment to support its position. However, the Commissioner (Appeals) had set aside the penalties based on the concept of 'reasonable cause' for non-payment of service tax. The Commissioner provided detailed findings on the interpretation of 'reasonable cause' citing relevant legal precedents. The Commissioner concluded that the respondent had a bona fide belief that the services provided were exempt from service tax, leading to non-payment. The Commissioner exercised the power vested in him under Section 80 of the Finance Act, 1994, to consider waiver of penalties based on 'reasonable cause.'

The Tribunal upheld the decision of the Commissioner (Appeals), stating that the penalties under Sections 70 and 78 were appropriately set aside based on the 'reasonable cause' for non-payment of service tax. The Tribunal distinguished the case law cited by the Revenue, emphasizing the specific provisions under Section 80 of the Finance Act, 1994, regarding the waiver of penalties for 'reasonable cause.' Consequently, the appeal of the Revenue was dismissed, and the cross-objection filed by the respondent was disposed of accordingly.