2008 (9) TMI 76 - AT - Service Tax

Allegation that appellants had rendered Business Auxiliary Service by providing office assistants without registering themselves with the department and without following the statutory formalities including payment of service tax - penalties had already been vacated by the Tribunal on a finding that the failures had occurred due to the ignorance on the part of the respondents tribunal s order require no interference revenue s appeal seeking to restore the penalty, is dismissed

Summary

Issues:
1. Appeal against vacating a penalty imposed under Section 78 of the Finance Act, 1994.
2. Dispute regarding liability to pay service tax.
3. Applicability of Section 80 of the Finance Act, 1994 in waiving penalties.
4. Ignorance of legal provisions leading to failures and penalties.

Analysis:
1. The appeal was filed by the Revenue against the vacating of a penalty of Rs. 4,09,702/- imposed on the appellants under Section 78 of the Finance Act, 1994. The main contention was that the assessee was aware of its liability to pay service tax as per the Act and only paid the defaulted tax after the department initiated action by issuing a show cause notice.

2. The case revolved around the liability to pay service tax for providing 'Business Auxiliary Service' without proper registration and statutory formalities. The appellants had provided office assistants to certain entities without fulfilling the tax obligations. The Commissioner vacated the penalty under Section 78 but sustained penalties under Sections 76 and 77. The Tribunal had previously observed that the failures were due to ignorance of legal provisions and had waived penalties based on the bona fide conduct of the respondents.

3. The respondents cited Section 80 of the Finance Act, 1994, which states that no penalty shall be imposed if the assessee proves reasonable cause for the failure. The Tribunal, considering the findings and submissions, decided to waive the penalties against the appellants in line with Section 80. Consequently, the impugned order was set aside, and the appeal was allowed, leading to the dismissal of the Revenue's appeal.

4. The Tribunal noted that the failures were due to the ignorance of legal provisions by the appellants, as established by their conduct and registration history. The waivers granted under Section 80 were based on the reasonable cause shown by the respondents. Therefore, there was no basis to restore the penalty imposed by the original authority, and the appeal filed by the Revenue was dismissed accordingly.