2015 (10) TMI 515 - AT - Service Tax

Waiver of penalty imposed under Section 76, 77 & 78 of Finance Act - Appellant contested to set aside penalties imposed under Section 76 and 78 of the Finance Act, 1944 Appellant serves as authorized distributor under the head Business Auxiliary Service Appellant states entire service tax deposited even though service tax was not reimbursed in full and non-payment of tax under confusion of taxability is justified - Revenue contends for restoring Section 76 penalty and states Appellants are liable for penalty under Section 77 & 78 and Commissioner (Appeals) has no discretion to reduce penalty imposed under Section 76 Held That - Considering the ambiguity prevailing on payment of service tax during the relevant period Appellant s contention merits justification for bonafide cause for invoking Section 80 - Reasonable cause has been established in the present case for waiver of penalties Decided in favour of the Assessee.

Summary

Issues: Appeal against penalties imposed under Section 76 and 78 of the Finance Act, 1944.

Analysis:
1. Facts of the Case: The appellant, a registered service tax entity, distributed channels to cable operators and received commissions. The adjudicating authority confirmed a service tax demand and imposed penalties under Section 76, 77, and 78. The Commissioner (Appeals) upheld the demand and penalties but reduced the penalty under Section 76. The appellant appealed to set aside penalties under Section 77 & 78, while the Revenue appealed against the reduction of penalty under Section 76.

2. Appellant's Arguments: The appellant argued that confusion existed regarding the taxability of services during the relevant period. They promptly registered and paid the entire service tax upon being informed by the department, even before receiving a show-cause notice. The appellant sought waiver of penalties under Section 80 of the Finance Act, citing bonafide reasons for non-payment during the confusion period. The appellant relied on various legal citations to support their case.

3. Revenue's Arguments: The Revenue contended that the service tax levy was justified, as the appellants had already collected the service tax based on cum tax value. They argued that since the levy was valid, penalties under Section 77 & 78 were applicable, and the Commissioner (Appeals) had no authority to reduce the penalty under Section 76.

4. Decision: The Tribunal considered the issue of waiver of penalties under Section 76, 77, and 78, as the appellants had paid the entire service tax promptly upon clarification by the department. The Tribunal found that the appellant's actions during the confusion period justified invoking Section 80 for waiver of penalties. Citing previous decisions, including a High Court ruling, the Tribunal held that there was a reasonable cause for penalty waiver. Consequently, the Tribunal set aside the penalties imposed under Section 76, 77, and 78, allowing the assessee's appeal and rejecting the Revenue's appeal.