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2008 (1) TMI 300 - AT - Service TaxPenalty u/s 76 & 78 - producing goods on job work for rail coach factory Not. 25/04 grants exemption to impugned activity & only w.e.f. 10.9.04 this service was included in Service Tax net - demanding imposed on the ground that the appellants were providing business auxiliary service w.e.f. 1.7.03 demanded amount has already been deposited by the appellant so there is no suppression reasonable cause for non-filing returns at due dates as per section 80 penalty are not imposable
Issues:
Challenge to imposition of penalty under Section 76 and Section 78 of Finance Act. Analysis: The appellant contested an appeal against an order confirming a Service Tax demand and penalties. The appellant did not dispute the demand but challenged penalties under Sections 76 and 78 of the Finance Act. The dispute arose from a show-cause notice demanding Service Tax for providing business auxiliary service from 1.7.03. The appellant argued they were producing goods on job work basis for a rail coach factory and were exempt under Notification No. 25/2004 until 10.9.04. The appellant voluntarily paid Rs.1,71,569/- with interest before the adjudication order, citing a bona fide belief in exemption and reliance on Section 80 of the Finance Act, which allows for no penalty if reasonable cause is proven for a failure. The Revenue contended that the appellant's failure to deposit the tax on time and file returns warranted penalties under Sections 76 and 78. The Tribunal found that the show-cause notice demanded Service Tax from 1.7.03 for business auxiliary service, but the appellant claimed exemption as a job worker until 10.9.04 under Notification No. 25/2004. The appellant was willing to pay tax post-10.9.04 and had paid Rs.1,71,569/- with interest before adjudication. Considering the appellant's arguments and actions, the Tribunal concluded there was no willful misstatement or tax evasion. Section 80 of the Finance Act absolves penalties if the assessee proves a reasonable cause for the failure, which the appellant did by showing a genuine belief in the exemption and timely payment post-notice. Given these circumstances, the Tribunal held that penalties under Sections 76 and 78 were unwarranted, setting them aside and allowing the appeal.
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