2008 (3) TMI 130 - AT - Service Tax

Air Travel Agents - not paid service tax in respect of the tickets booked by them for Hajj pilgrims - appellants had paid the major portion of the service tax before the issue of SCN and the balance amount even before the OIO was issued - it is proper to take a lenient view in the matter and feel that the provisions of Section 80 of the Finance Act could have been issued in this case penalties u/s 78 are set aside but appellants are liable to pay their interest

Summary

Issues:
1. Non-payment of service tax on air tickets booked for Hajj pilgrims.
2. Alleged suppression of service tax payment on tickets of other categories.
3. Imposition of penalties under Sections 76 & 78 of the Finance Act, 1994.
4. Request for setting aside penalties and interest.

Analysis:
1. The case involved the appellant, an Air Travel Agent registered under the Excise Authority, who failed to pay service tax on air tickets booked for Hajj pilgrims. The appellant argued that they were informed that service tax need not be collected for Hajj pilgrims, leading to non-payment. However, the Revenue contended that service tax was not paid on tickets of other categories as well, indicating a suppression of facts. The Original Authority confirmed the non-payment but noted that most dues were cleared before the show cause notice and Order-in-Original issuance.

2. Upon careful consideration, the Tribunal acknowledged the non-payment for Hajj pilgrims but observed that most dues were settled before legal actions. The appellant claimed the penalties were excessive and there was no intention to evade payment. The Tribunal found that leniency was warranted due to the substantial pre-notice payments and lack of deliberate evasion. Consequently, the penalties under Section 78 of the Finance Act were set aside, and the appeal was allowed, with interest payment still required.

3. The Tribunal emphasized that despite the initial non-payment, the appellant's proactive settlement of dues before formal actions demonstrated a lack of fraudulent intent. Considering the circumstances, a lenient approach was adopted, leading to the decision to annul the penalties imposed under Section 78. The Tribunal highlighted the importance of timely tax payment while recognizing the appellant's efforts to rectify the situation promptly.

4. In conclusion, the Tribunal's decision focused on the appellant's actions regarding service tax payment, particularly in relation to Hajj pilgrims and other ticket categories. By setting aside the penalties under Section 78 and allowing the appeal, the Tribunal balanced the need for compliance with the recognition of the appellant's corrective measures. The case underscored the significance of timely tax obligations and the potential leniency in penalty imposition based on the taxpayer's cooperation and rectification efforts.