2008 (6) TMI 41 - AT - Service Tax

Challenge to penalty imposed u/s 76, 77 and 78 on the ground that service tax on outdoor catering was levied w.e.f. 10-9-2004 to 15-5-2005 and they were under the bona fide belief that they were not providing outdoor catering service at a place other than their own, hence he factory canteen do not fall under the taxable category of outdoor caterer - appellants have sufficient cause for waiver of penalty - Accordingly, penalty is set aside

Summary

Issues:
Challenge to confirmation of demand of service tax and imposition of penalty under Sections 76, 77, and 78 of the Finance Act.

Analysis:
The appellants contested the confirmation of the demand of service tax and the imposition of penalties under Sections 76, 77, and 78 of the Finance Act. They acknowledged the demand of service tax but disputed the penalty, arguing that they believed they were not providing outdoor catering services as the factory canteen was provided by the manufacturer. The appellants relied on Section 80 of the Finance Act, which states that no penalty shall be imposed if the assessee proves there was a reasonable cause for the failure. The Revenue contended that the appellants were liable for penalty as they had not registered with the Revenue authorities despite the levy of service tax on outdoor catering.

The Tribunal noted that the appellants were challenging the penalty imposition. It was observed that service tax on outdoor catering was applicable from a specific date, and the appellants believed they were not providing outdoor catering services as the canteen was provided by the service recipient. The Tribunal found that the appellants had a reasonable cause for their belief and, therefore, waived the penalty. Consequently, the penalty was set aside, and the impugned order was modified accordingly. The appeal was disposed of in favor of the appellants.

This judgment highlights the importance of establishing a reasonable cause for any failure in meeting tax obligations. It also emphasizes the significance of interpreting tax laws accurately to avoid penalties. The decision showcases how a genuine belief, supported by reasonable cause, can lead to the waiver of penalties under the relevant provisions of the Finance Act.