2016 (1) TMI 158 - AT - Service Tax

Levy of penalty - waiver u/s 80 - Job Work - process of anodizing the aluminium frames sent to them by solar water heater manufacturers - appellant admitted that they were liable to service tax and interest thereon and the service tax with interest was paid during the months of June 2007 to March 2008 - Held that - appellant really did not know about the law and they had not even collected the tax and even then they discharged the liability with any question. Therefore, in my opinion, invocation of Section 80 by the original authority was in order. Unfortunately, the original authority did not discuss in detail about the aspects which convinced him to waive the penalty under Section 80 of Finance Act, 1994. In my opinion, having regard to the fact that appellant is a proprietory firm, undertaking a single activity of anodization and in view of the fact that for the Solar water heater, they were not following any procedure and raising invoice, I consider this is a fit case for waiver of penalty - Penalty waived - Decided in favor of assessee.

Summary

Issues: Liability for service tax on job work, waiver of penalty under Section 80 of Finance Act, 1994

Liability for Service Tax on Job Work:
The appellant was engaged in anodizing aluminum frames for solar water heater manufacturers and other manufacturers. They cleared goods under their own invoices for solar water heater manufacturers and used job work challans for other manufacturers eligible for CENVAT credit. The appellant admitted liability for service tax and interest, which was paid from June 2007 to March 2008. A show-cause notice was issued proposing penalties, which were waived by the original adjudicating authority under Section 80 of Finance Act, 1994. On appeal, the Commissioner(Appeals) imposed penalties under Sections 76, 77 & 78 of the Finance Act, leading to the current appeal.

Waiver of Penalty under Section 80 of Finance Act, 1994:
The appellant claimed that they were not aware of the legal provisions regarding liability for service tax, believing that products for harnessing solar energy were exempt. They argued that they discharged the liability promptly upon realizing their error. The appellant's counsel contended that the original authority's decision to waive the penalty was correct, citing the appellant's lack of knowledge and prompt payment upon being informed of their liability. The Assistant Commissioner argued that ignorance of the law is not an excuse and that taxpayers must stay informed and fulfill their tax obligations promptly.

Detailed Analysis:
The Tribunal considered whether there was a reasonable cause for the waiver of penalties. It noted that the appellant, being a sole proprietorship firm, had a genuine belief that products for harnessing solar energy were exempt from service tax. The Tribunal acknowledged that once the legal position was clarified, the appellant promptly paid the tax owed. The Tribunal found that the original authority did not provide detailed reasoning for waiving the penalty under Section 80 but concluded that given the appellant's circumstances and prompt compliance upon notification, the waiver was appropriate. The Tribunal emphasized that the appellant's lack of knowledge and immediate tax payment without collection indicated a genuine mistake rather than intentional evasion. It held that the waiver of penalties under various sections of the Finance Act was justified in this case.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal concerning the penalties imposed under different sections of the Finance Act. The decision highlighted the importance of genuine belief, prompt compliance upon notification, and the specific circumstances of the appellant in determining the appropriateness of penalty waivers under Section 80 of the Finance Act, 1994.