2006 (7) TMI 714 - AT - Service Tax

Summary

Issues:
Appeal against order confirming duty demand and penalty imposition.

Analysis:
The appellant did not challenge the service tax liability and interest but contested the penalty imposition. The appellant claimed there was a reasonable cause for non-depositing service tax due to a dispute over the interpretation of a specific notification. The issue revolved around the eligibility for exemption under Notification No. 12/2003 for materials consumed in providing services. The appellant relied on a letter from the Government of India, indicating the exemption available if records of material consumption were maintained. The appellant argued they followed the letter's directions and misunderstood the notification's provisions. The matter was previously settled by the Supreme Court in a related case. The Commissioner dismissed the appeal for reducing material costs from service tax liability, leading the appellant to pay the tax and interest. The Tribunal found the penalty imposition unwarranted due to confusion over the notification's benefit eligibility. Consequently, the penalty was set aside, and the appeal was allowed only concerning the penalty issue.