2015 (11) TMI 523 - AT - Service Tax

Business auxiliary services - service tax on the commission received from banks and insurance company - Penalty u/s 77 10, 67, 854 - Therefore taxability of the said services was not free from doubt therefore the appellant in respect of these two services shown reasonable cause for waiver of penalty imposed under Section 77 and 78. Penalty of 25% of the service tax amount of 10, 67, 854/- and drop penalty imposed under Section 78 in respect of service tax paid on commission from bank/insurance company and handling charges of RTO. Penalty imposed under Section 77 for 10, 000/- shall stand reduced to 5, 000 - Decided partly in favor of assessee.

Summary

Issues:
1. Appellant not paying service tax on commission received from banks and insurance company.
2. Appellant not paying service tax on charges for RTO registration of vehicles.
3. Appellant not paying service tax on service charges for motor vehicles.
4. Imposition of penalties under Section 77 and 78 of the Finance Act, 1994.

Analysis:
1. The appellant, a service provider registered for Business Auxiliary Services and Authorized Service Station services, did not pay service tax on commission from banks and insurance companies, charges for RTO vehicle registration, and service charges for motor vehicles. The department issued a show cause notice proposing a service tax demand for various services. The appellant paid the service tax and interest before the notice was issued but contested the penalties under Sections 77 and 78.
2. The appellant's counsel argued for penalty waiver citing newness as a service station and ongoing legal disputes regarding taxability of certain services. The Revenue contended that the appellant knowingly avoided paying service tax despite awareness of tax liabilities. The appellate tribunal analyzed each service category separately.
3. The tribunal found the appellant aware of the taxability of motor vehicle services as they collected service tax but did not remit it to the government. The penalty under Section 78 was upheld at 25% of the service tax amount. However, penalties for commission from banks/insurance and RTO handling charges were waived due to ongoing legal disputes and reasonable cause shown by the appellant.
4. Ultimately, the tribunal partially allowed the appeal, reducing penalties and upholding penalties only for motor vehicle services. The penalty under Section 77 was reduced, and penalties under Section 78 were dropped for specific services where reasonable cause was established. The judgment balanced penalty imposition based on awareness of tax liabilities and ongoing legal uncertainties regarding certain services.