2008 (4) TMI 150 - AT - Service Tax

Penalty - Authorised Automobile Service Station - Appellant was helping their clients to get loan through Financial Institutions, for which they received commission from Financial Institutions duty was not paid on commission under bona fide belief that impugned service is not taxable - there was a confusion in the trade about leviabiity of tax on such activity - After the Board s Circular dated 6.11.06, the appellant voluntarily deposited the tax before issue of SCN penalty is not justified

Summary

Issues:
Imposition of penalty under Sections 76 and 78 of the Finance Act, 1994 for rendering services under the category of "Authorised Automobile Service Station" and receiving commission from Financial Institutions.

Analysis:
The Appellant filed an appeal against the penalty imposed under Sections 76 and 78 of the Finance Act, 1994 for providing services as an "Authorised Automobile Service Station" and receiving commission from Financial Institutions. The Central Board of Excise & Customs clarified through Circular No. 87/05/2006-S.T. that Service Tax is leviable on such activities. The Adjudicating Authority confirmed the tax demand and imposed penalties under various sections of the Act. The Commissioner (Appeals) upheld the Adjudication Order.

The Appellant argued that there was confusion regarding the levy of tax, which was resolved by the Board Circular dated 6.11.2006, following which the Appellant paid the tax before the show cause notice was issued. The Appellant claimed to have acted in good faith and invoked Section 80 of the Act. They cited precedents like the case of Vipul Motors (P) Ltd. Vs. CCE, Jaipur and the Financiers Vs. CCE, Jaipur to support their argument.

The Departmental Representative reiterated the Commissioner (Appeals)'s findings, stating that there was no confusion regarding the tax levy on the activity in question. They emphasized that the Board's Circular was issued on 6th November 2006, and the tax was paid by the Appellant on 6.2.2007, justifying the imposition of penalties under various sections of the Act.

Upon review of the records and the Board's Circular dated 6.11.2006, it was noted that there was confusion in the trade regarding the tax liability on the commission received by automobile dealers from Financial Institutions. The Appellant, registered under Service Tax as an Authorised Service Station, was directed to pay the tax by the Central Excise Authorities. Following the Board's Circular, the Appellant voluntarily paid the tax before the show cause notice was issued. The Tribunal's decision in the case of Vipul Motors (P) Ltd. supported that penalties were not applicable for delayed tax payments in such scenarios, invoking Section 80 of the Act due to the absence of mala fide intent on the Appellant's part.

Consequently, the penalties were deemed unwarranted, and the appeal was allowed, setting aside the penalties imposed under Sections 76 and 78 of the Finance Act, 1994.