2008 (5) TMI 117 - AT - Service Tax

C/F Agent service provision amended in 2000 to cast liability of service tax on service provider instead of recipient - Assessee was under impression that Service tax was liable to be paid by the recipient of service not by him - during the relevant period there was ignorance of provisions and it was for this purpose that an amnesty scheme was introduced in the year 2004 - reduction of penalty by Commissioner by exercising discretion u/s 81 (sic) (Section 80), cannot be faulted with

Summary

Issues: Liability of service tax on provider, imposition of penalty under Sections 76 and 78, reduction of penalty by Commissioner

Analysis:
1. Liability of service tax on provider: The case involved a dispute regarding the liability to pay service tax, specifically focusing on the change in provisions from the recipient to the provider of the service in the year 2000. The respondent, a Clearing and Forwarding Agent, contended that they were unaware of this change and believed the tax was to be paid by the recipients. The Tribunal acknowledged the respondent's plea of ignorance and considered the historical context of the evolving service tax regime, noting the widespread lack of awareness during the relevant period. The Tribunal highlighted the introduction of an amnesty scheme in 2004, emphasizing the leniency extended due to the transitional nature of the service tax laws.

2. Imposition of penalty under Sections 76 and 78: The Assistant Commissioner had imposed penalties under Sections 76 and 78 of the Finance Act, 1994, for non-payment and suppression of facts to evade service tax. The respondent's penalty of Rs. 97,000 under Section 76 was reduced to Rs. 25,000 on appeal. The Revenue contended that the Commissioner had no authority to reduce the minimum penalty prescribed by the sections and argued that the reduction lacked justifiable reasons. However, the Tribunal upheld the Commissioner's discretion, citing Section 80 of the Finance Act, 1994, as the basis for the reduction. The Tribunal found no fault in the exercise of such discretion, considering the circumstances of the case, and dismissed the Revenue's appeal.

3. Reduction of penalty by Commissioner: The Tribunal's decision centered on the Commissioner's authority to reduce the penalty under Section 80 of the Finance Act, 1994. The Tribunal noted that the Commissioner's discretion in reducing penalties was appropriately exercised in light of the respondent's plea of ignorance, the historical context of the service tax regime, and the introduction of amnesty schemes. The Tribunal emphasized that the circumstances warranted leniency, and therefore, upheld the reduction of the penalty from Rs. 97,000 to Rs. 25,000. The Tribunal concluded that the Commissioner's decision was justifiable and in accordance with the provisions of the Finance Act, 1994, thereby dismissing the Revenue's appeal.

In conclusion, the Tribunal's judgment highlighted the importance of considering the historical evolution of tax laws, the context of ignorance prevalent during transitional periods, and the discretionary powers of authorities in imposing and reducing penalties under the relevant statutory provisions.