2015 (9) TMI 47 - AT - Service Tax

Imposition of penalty - GTA service - whether the appellant had not paid the service tax, on reverse charge basis, in respect of GTA services so received by him with any malafide - Held that - The appellants have strongly contended that they are research body and were exempted from payment of excise duty or VAT, etc. As such, they were not aware of the provisions of payment of service tax on reverse charge basis, inasmuch as it was not the appellant who had provided the services. In such a scenario, they submit that they were under a reasonable bona fide impression that no tax is required to be paid by them. As soon as they were pointed out that they were liable to pay service tax, the same was paid immediately before the issuance of show-cause notice. - when there was a reasonable cause on the part of the appellant, the penal provisions are not required to be invoked - Impugned order is set aside - Decided in favour of assessee.

Summary

Issues:
Penalties imposed under service tax law for GTA services received by the appellant.

Analysis:
The appellant, engaged in research, production, and marketing of seeds, claimed exemption from excise duty and VAT on sales. They were unaware of the requirement to pay service tax under the Reverse Charge Mechanism for GTA services. Upon notification by Central Excise officers, they promptly paid the service tax along with interest. The issue revolved around whether the appellant's lack of payment was due to malafide intent.

Section 73(3) of the Finance Act, 1994, states that if an assessee pays the short-paid or non-paid service tax on their own or based on tax ascertained by a Central Excise Officer, no notice under subsection (1) shall be served. However, this provision does not apply in cases involving fraud, collusion, willful misstatement, or suppression.

The appellant argued that their exemption from excise duty and VAT led them to believe that service tax was not applicable to them. They contended that upon being informed of their liability, they promptly paid the service tax before any show-cause notice was issued. Citing precedents like Ratindranath K. Kanungo vs. Commissioner of Central Excise, Ahmedabad and Commissioner of Central Excise, Mumbai vs. Aquanet, the appellant highlighted that penal provisions are not invoked when there is a reasonable cause for non-payment.

The Tribunal found merit in the appellant's contentions and set aside the penalties imposed, acknowledging that the demand for duty and interest was not contested. The decision was based on the appellant's genuine belief in their exemption status and their prompt payment upon notification, aligning with the principles laid down in relevant legal precedents.

In conclusion, the judgment focused on the appellant's lack of awareness regarding the Reverse Charge Mechanism for service tax on GTA services, leading to a reasonable belief in their exemption status. The Tribunal's decision to set aside the penalties was supported by legal provisions and previous case law, emphasizing the importance of genuine intent and prompt compliance upon notification in such matters.