2015 (11) TMI 529 - AT - Service Tax

Demand of service tax - Repair and maintenance service - Penalty u/s 76, 77 & 78 - Benefit of Section 80 - Held that - Appellant is a partnership firm providing repair and maintenance services to M/s. Hindustan Aeronautics Ltd. which is Government undertaking company. The services have been provided under the legal contract and as per the contract there was no terms of service tax liability and the same was not pointed out by the service recipient i.e. Government of India undertaking. In view of this fact it is clear that in non payment of service tax there cannot be intension for evasion of service tax, particularly when recipient is Government of India undertaking. - appellant has explained the reason for failure to make service tax payment and without contest admittedly paid service tax and subsequently they discharged interest and penalty of ₹ 24,000/- under Section 77. I am therefore of the considered view that appellant have shown reasonable cause for non payment of service tax. Therefore in terms of Section 80 of the Finance Act, 1994, the appellant deserves waiver of penalty. I therefore waive the penalties imposed under Section 76 and 78 - However, demand of service tax , interest and penalty of ₹ 24,000/- under Section 77 confirmed by the Commissioner(Appeals) stand upheld - Decided partly in favour of assessee.

Summary

Issues:
1. Appeal against Order-in-Appeal upholding order-in-original with reduced penalty.
2. Dispute over penalties under Sections 76 and 78 for non-payment of service tax.
3. Claim of bonafide belief in non-liability for service tax due to contract terms.
4. Invocation of Section 80 of the Finance Act, 1994 for waiver of penalties.
5. Consideration of partner's statement as proof of reasonable cause for non-payment.

Analysis:
1. The appeal challenged the Order-in-Appeal upholding the order-in-original, except for a reduction in part penalty. The appellant, engaged in maintenance services for a government undertaking, failed to pay service tax initially but later complied with the demand. The appeal focused on contesting penalties under Sections 76 and 78 while accepting the service tax, interest, and part penalty already paid.

2. The dispute centered on whether penalties under Sections 76 and 78 should be waived. The Revenue argued that invoking the extended period for demand confirmed malafide intention, justifying the penalties. However, the appellant contended that the lack of explicit service tax terms in the contract with the government undertaking indicated a bonafide belief in non-liability.

3. The appellant's representative cited various judgments to support the claim of bonafide belief, emphasizing the absence of contractual norms regarding service tax liability. The partner's statement highlighted their unawareness of service tax requirements until notified by the department, showcasing a lack of malafide intent in the non-payment of service tax.

4. The appellant sought the waiver of penalties under Sections 76 and 78 by invoking Section 80 of the Finance Act, 1994, which allows for penalty waivers in cases of reasonable cause for non-compliance. The Tribunal considered the partner's statement and the circumstances leading to the non-payment, ultimately granting the waiver based on the reasonable cause shown by the appellant.

5. The Tribunal, after careful consideration of submissions and records, acknowledged the appellant's explanation for the non-payment of service tax as reasonable cause. Consequently, penalties under Sections 76 and 78 were waived, while the service tax demand, interest, and part penalty already paid were upheld. The partner's statement played a crucial role in demonstrating the appellant's bonafide belief and reasonable cause for the non-payment of service tax.