2008 (2) TMI 176 - AT - Service Tax

Assessee obtained the registration on 27-7-04 and did not pay the tax but they recorded the fees in their records - no material for suppression of facts with intent to evade payment of tax so penalty u/s 78 is not justified - new levy on coaching centre and there was a dispute regarding availability of the exemption benefit and the respondent paid the tax before issue of SCN so imposition of penalty u/s 76 is excessive so it is reduced

Summary

Issues:
- Appeal against setting aside penalty under Sections 76 and 78 of the Finance Act, 1994
- Justification for setting aside penalty under Section 78
- Imposition of penalty under Section 76
- Discretion of authorities in imposing penalty

Analysis:
1. The appeal was filed by the Revenue against the Order of the Commissioner (Appeals) where the penalty under Sections 76 and 78 of the Finance Act, 1994 was set aside using the power under Section 80 of the Act. The Commissioner (Appeals) set aside the penalty under Section 78 as the appellants were providing coaching services and were not initially aware of their service tax liability. However, they recorded all fees in their accounts and admitted the service tax liability after a visit by an officer and paid the tax before the show cause notice was issued.

2. The respondent obtained registration on 27-7-2004 but did not pay the tax until after a search was conducted on 9-2-2005. The respondent argued that there was a dispute regarding the levy of service tax on coaching centers. The Tribunal found that there was no suppression of facts with intent to evade tax as the fees were recorded, and hence, penalty under Section 78 was not justified. However, the Tribunal agreed with the Revenue's submission regarding the imposition of penalty under Section 76.

3. The Tribunal noted that the respondent had not paid the tax despite obtaining registration in July 2004. The Tribunal considered the dispute over the levy of service tax on coaching centers and the fact that the respondent paid the tax before the show cause notice. Citing a previous case, the Tribunal highlighted that authorities have the discretion to impose a penalty less than that prescribed under Section 76 of the Act.

4. Consequently, the Tribunal modified the Commissioner (Appeals) order by upholding the penalty of Rs. 10,000 under Section 76 of the Finance Act, 1994. The appeal was rejected except for the modification in the penalty amount. The order was dictated and pronounced in open court on 25-2-2008.