2008 (2) TMI 206 - AT - Service Tax

Activity of facilitation and promotion of business of prepaid and postpaid connections of principal company - appellant also collecting bill on behalf of their Principals on commission basis - Revenue proceeded on ground that they didn t discharge tax liability under Business Auxiliary Services - Service Tax paid by the appellant can be taken as input credit in the hands of their Principal no revenue loss - provisions of Section 80 could be invoked - imposition of the penalty is very harsh

Summary

Issues:
1. Liability of service tax under "Business Auxiliary Services" category.
2. Allegations of suppression of facts and imposition of penalties.
3. Applicability of Section 80 of the Finance Act.
4. Consideration of genuine doubt regarding liability.

Analysis:
1. The appellant was engaged in facilitating and promoting the business of prepaid and postpaid connections and collecting bills on behalf of their Principals on a commission basis. The Revenue alleged non-discharge of service tax liability under the "Business Auxiliary Services" category, leading to a Show Cause Notice and subsequent confirmation of a demand of Rs 33,971 along with penalties under various sections of the Finance Act, 1994.

2. The appellant contended that they registered during an amnesty scheme and paid the service tax with interest upon realizing their liability. They argued that they were unaware of their tax liability, only receiving commissions without raising invoices. The lower authorities alleged suppression of facts and imposed penalties, upheld by the Commissioner (Appeals) citing delay in fulfilling interest liability post-amnesty scheme.

3. Upon careful consideration, the Tribunal found that the appellant genuinely doubted their liability and acted upon advice from their Principals to register and raise bills with service tax amounts clearly indicated. The Tribunal noted that the service tax paid could be considered input credit for the Principals, resulting in no revenue loss. In light of these circumstances, the Tribunal deemed it a suitable case for invoking Section 80 of the Finance Act, as the appellant had no intention to evade tax and could recover the tax from their Principals upon billing.

4. The Tribunal concluded that the penalties imposed were harsh, considering the appellant's actions to rectify their tax liability upon becoming aware of it. They found no merit in the lower authorities' orders, setting them aside and allowing the appeal with consequential relief. The Tribunal's decision aimed to address the genuine doubt regarding liability and the appellant's proactive steps to comply with tax obligations once informed.