2007 (10) TMI 29 - AT - Service Tax

Bona-fide belief that services of arranging loans is not covered under Business auxiliary Service Non-payment of tax Tax and interest paid immediately on being detected by Revenue Penalty not imposable as there was no mala-fide on part of appellant

Summary

Issues:
1. Liability of the appellant to pay service tax under 'business auxiliary service' category.
2. Imposition of penalties under Sections 75A, 76, and 78 of the Finance Act 1994.
3. Applicability of Section 80 regarding penalty imposition.
4. Interpretation of bona fide belief and mala fide intention in tax payment.

Analysis:
1. The appellant, engaged in arranging finance/loans, was found liable to pay service tax under the 'business auxiliary service' category during a visit to their factory premises. The appellant accepted the lapse and paid the due tax and interest, which was deposited promptly upon notification by the Revenue.

2. Subsequent proceedings were initiated for the appropriation of the deposited tax and interest, along with the imposition of penalties under Sections 75A, 76, and 78 of the Finance Act 1994. The Assistant Commissioner confirmed the duty and interest but did not impose any penalty initially. However, the Commissioner later issued a show cause notice proposing penalties, leading to the imposition of penalties by the Commissioner in the impugned order.

3. The appellant contested the imposition of personal penalty by the Commissioner, arguing that there was a bona fide belief on their part regarding the tax liability. They also highlighted previous orders supporting their belief that the services provided were not covered under business auxiliary services, strengthening their position against penalty imposition.

4. The Tribunal agreed with the appellant's contention, considering the confusion surrounding the recent introduction of Service Tax and the absence of mala fide intention on the part of the appellant in not paying the tax. The Tribunal held that Section 80 was applicable, and the Assistant Commissioner had rightly exercised discretion under this section. Consequently, the Commissioner's order imposing penalties was set aside, and the order-in-original by the Assistant Commissioner was restored, allowing the appeal in favor of the appellant.