2007 (11) TMI 32 - AT - Service Tax

Service of Grinding of lumps in to powder Appellant ignorant about scope of new levy Business Auxiliary Service No suppression of facts Sufficient cause for non-payment of tax Penalty u/s 76 of Rs. 10,000 is set-aside

Summary

Issues:
Service tax liability for Business Auxiliary Services rendered, imposition of penalties under Section 76, 77, and 78 of the Finance Act, 1994, reduction and vacation of penalties by the Commissioner (Appeals), ignorance of new levy 'Business Auxiliary Service' by the appellants, applicability of Section 80 for penalty imposition.

Analysis:

1. Service Tax Liability and Penalties:
The case involved a demand for service tax of Rs. 1,51,393/- from a company for Business Auxiliary Services provided. The original authority imposed penalties under Section 76, 77, and 78 of the Finance Act, 1994. The Commissioner (Appeals) modified the penalties, vacating one under Section 78, reducing the penalty under Section 76, and upholding the penalty under Section 77. The company requested the Tribunal to decide the appeal on merits.

2. Non-Payment of Service Tax:
The company was engaged in grinding services but had not followed statutory formalities or paid the service tax due until a later date. They sought clarification on their tax liability, registered themselves in March 2005, and paid the arrears in July 2005 before the Show Cause Notice. The Commissioner (Appeals) considered the absence of suppression of facts, timely information submission, voluntary registration, and payment of arrears before the notice, leading to the vacation of penalty under Section 78 and reduction of the penalty under Section 76.

3. Ignorance of New Levy and Application of Section 80:
The Tribunal found that the non-payment of service tax was due to the company's ignorance of the new levy 'Business Auxiliary Service.' The Commissioner noted the absence of fact suppression, timely information provision, and payment upon clarification of tax liability. Considering the circumstances, the Tribunal invoked Section 80 to set aside the penalty imposed under Section 76, providing relief to the company. The appeal was disposed of, and the stay application was also resolved.

This comprehensive analysis outlines the key issues of service tax liability, penalties under different sections of the Finance Act, the company's compliance and ignorance factors, and the application of relevant legal provisions leading to the final disposal of the appeal by the Tribunal.