2015 (11) TMI 1479 - AT - Service Tax

Penalty u/s 76 & 77 & 78 - Enhancement of penalty - Held that - Issue relating to applicability of service tax on MICR services was under dispute and this issue was taken up by the Indian Banks Association with the Ministry of Finance. CBEC vide its letter No.137/1/2005-CXA, dated 25.02.2005 replied that Indian Banks Association s representation had been rejected and that IBA should advise all the member Banks to pay service tax with interest at the earliest. It is seen that on receipt of the advice of the IBA, the respondent paid service tax and also the interest thereon. In the circumstances, we are of the clear view that there was no wilful misstatement or suppression of facts in this case and there was reasonable cause for failure to deposit the service tax initially. Indeed, as noted above, having regard to the facts and circumstances, CESTAT vide its order dated 12.01.2009 set aside the penalty under Section 76 ibid and for the reasons alike, the Commissioner (Appeals) was fully justified in invoking Section 80 for waiving penalty under Section 78 ibid. Further, when the facts and circumstances do not indicate any wilful mis-statement or suppression, penalty under Section 78 ibid is not attracted. - Decided against Revenue.

Summary

Issues:
Appeal against Order-in-Appeal setting aside penalties under Sections 75A and 78 of the Finance Act, 1994.

Analysis:
The Revenue appealed against the Order-in-Appeal dated 15.12.2008, which upheld the demand but set aside penalties under Sections 75A and 78 of the Finance Act, 1994. The Commissioner (Appeals) invoked Section 80 to waive the penalties. The Revenue contended that the penalty under Section 78 is mandatory, and there is no discretion in imposing it. The respondent's advocate referred to a previous CESTAT order where penalties were set aside due to reasonable cause for not paying the service tax initially. The advocate mentioned confusion regarding the liability for service tax on MICR services, which was later clarified, leading to the payment of service tax and interest.

The case involved a Show Cause Notice issued for service tax demand for a specific period, which was adjudicated with penalties imposed. Subsequent revisions and appeals led to the setting aside of penalties under Section 76 and the payment of the demanded service tax and interest. A new Show Cause Notice was issued for differential service tax, leading to the imposition of penalties under various sections. The primary adjudicating authority confirmed the demand and imposed penalties. The Commissioner (Appeals) upheld the appropriation of service tax and interest but set aside penalties under Sections 75A and 78, invoking Section 80. The Revenue appealed solely regarding the setting aside of the penalty under Section 78.

The Commissioner (Appeals) noted the dispute regarding the applicability of service tax on MICR services, which was clarified by the CBEC's rejection of a representation by the Indian Banks Association. The respondent paid the service tax and interest upon receiving advice from the IBA. The absence of wilful misstatement or suppression of facts led to the waiver of penalties under Section 76 and justified the invocation of Section 80 to waive the penalty under Section 78. The absence of wilful misstatement or suppression indicated that the penalty under Section 78 was not applicable. Considering these circumstances, the Tribunal found no issue with the Order-in-Appeal and dismissed the Revenue's appeal.