2008 (5) TMI 99 - AT - Service Tax

Penalty bona fide belief whether commissioner received by automobile dealers from financial institutions is taxable under Business Auxiliary Service sufficient cause shown by appellants - enhancement of penalty in revision order is not justified there is no mala fide by appellants moreover tax was deposited with interest immediately on being pointed out by department server penalties not imposable for the part of tax not deposited before issue of SCN, penalties are justified

Issues Involved:
1. Enhancement of penalty by the Commissioner under Section 84 of the Finance Act, 1994.
2. Challenge to penalties imposed when duty was paid before the issuance of Show Cause Notice.

Issue-wise Detailed Analysis:

1. Enhancement of Penalty by the Commissioner:

M/s. Majestic Mobikes Pvt. Ltd. v. CST, Bangalore:
The appellant argued ignorance of service tax liability under "Business Auxiliary Services." The Original Authority waived penalties under Sections 76 and 77 and imposed a nominal penalty under Section 78 due to voluntary compliance. The Commissioner, using Section 84, enhanced the penalties, arguing the original decision was arbitrary and lacked reasonable cause for waiver. The Tribunal found the original order reasonable, emphasizing the appellant's voluntary compliance and the disproportionate nature of the enhanced penalties.

M/s. Sri Rama Enterprises v. CST:
The appellant, a lady running a security service, paid the short service tax before the Show Cause Notice. The Original Authority imposed a nominal penalty under Section 78 and waived penalties under Sections 76 and 77. The Commissioner enhanced penalties, arguing the Original Authority's decision lacked basis. The Tribunal found the enhanced penalties unjustified given the appellant's voluntary compliance and ignorance of the law.

M/s. Sai Motors, M/s. Prakash Motors, M/s. Planet Agencies Pvt. Ltd., and M/s. Dhruvdesh Honda v. CST:
The Original Authority waived penalties under Sections 76 and 77 and imposed nominal penalties under Section 78. The Commissioner, using Section 84, significantly enhanced the penalties, arguing the original penalties were insufficient. The Tribunal found the enhanced penalties disproportionate and unjustified, given the appellants' voluntary compliance and the genuine doubts regarding the taxability of commissions received.

Motor World Ltd. v. CST, Bangalore:
Similar to the previous cases, the Original Authority waived penalties under Sections 76 and 77 and imposed a nominal penalty under Section 78. The Commissioner enhanced the penalties, which the Tribunal found disproportionate and against the spirit of voluntary compliance encouraged by the Finance Act.

2. Challenge to Penalties Imposed When Duty Was Paid Before the Issuance of Show Cause Notice:

M/s. A.R. Travels v. CC & CE, Hyderabad-II:
The appellant paid the service tax before the Show Cause Notice due to ignorance of the law. The Original Authority imposed severe penalties without justification. The Tribunal set aside the penalties, emphasizing the appellant's voluntary compliance and lack of mala fide intent.

M/s. Adecco Flexione Workforce Solutions Ltd. & M/s. Adecco Flexione India Ltd. v. Commissioner, LTU:
The appellants paid the service tax before the Show Cause Notice. The Commissioner imposed penalties under Sections 75, 76, and 77. The Tribunal set aside the penalties under Section 76, upholding the others, recognizing the appellants' voluntary compliance.

M/s. Marshal Security v. CC & CE, Hyderabad-II:
The appellant paid the tax and part of the interest before the Show Cause Notice. The Tribunal reduced the penalty under Section 76 and upheld the penalty under Section 77, considering the circumstances of the case.

Summing Up:
1. Appeals in Serial Nos. 1 to 14, except Serial No. 12, were allowed.
2. In Serial No. 12, the penalty under Section 78 was reduced to Rs. 10,000, with other penalties upheld.
3. Appeals in Serial Nos. 15 and 16 were allowed.
4. In Serial No. 17, the penalty under Section 76 was reduced to Rs. 50,000, with the penalty under Section 77 upheld.

Conclusion:
The Tribunal emphasized the importance of voluntary compliance and the proportionality of penalties, setting aside or reducing penalties where appellants had paid the service tax before the issuance of Show Cause Notices and in cases of genuine ignorance or doubt regarding tax liability.

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