2008 (8) TMI 133 - AT - Service Tax

Architect service of architect became taxable w.e.f. 16.10.1998 - penalty imposed for non-payment of tax for the period from 16.10.1998 to 31.03.2002 - appellant had bona fide belief that for the work undertaken prior to 16.10.1998 he would not be liable for the service tax - Moreover, appellant paid the service tax along with the interest on being pointed out by the department therefore, there is no justification for imposition of penalties

Summary

Issues:
1. Applicability of service tax on architectural services.
2. Liability of the appellant for non-payment of service tax.
3. Imposition of penalty by the authorities.
4. Bona fide belief of the appellant regarding service tax liability.
5. Justification for setting aside penalties.

Analysis:
1. The appeal was filed against the Order-in-Appeal passed by the Commissioner of Central Excise (Appeals) Cochin, regarding the non-payment of service tax by a registered architect. The appellant contended that he believed he was not liable for service tax due to the nature of his work and the absence of service tax clauses in contracts with certain clients. The Tribunal noted that the architect's services became taxable from a specific date and that the appellant had entered into agreements before this date, leading to a genuine belief about non-taxability. The appellant eventually paid the tax with interest upon realizing the irregularity.

2. The Original Authority confirmed the payment made by the appellant but demanded a differential tax amount along with penalties for the alleged evasion. The Commissioner (Appeals) upheld this decision, emphasizing discrepancies in the appellant's tax filings. However, the Tribunal found that the appellant had a valid reason for the non-payment, as he rectified the situation promptly upon notification by the authorities. The Tribunal considered the appellant's actions as evidence of a bona fide belief in non-liability for the service tax.

3. The authorities imposed penalties equal to the amount of service tax evaded, citing the appellant's failure to pay the tax initially. The Tribunal, after reviewing the case laws cited by the appellant and the circumstances of the case, concluded that the penalties were unjustified. They noted the appellant's cooperation in paying the tax upon notification and his genuine belief in non-liability. Therefore, the Tribunal set aside the penalties imposed on the appellant.

4. The Tribunal's decision was based on the appellant's genuine belief regarding the service tax liability for work undertaken before the taxable period. They acknowledged the appellant's immediate compliance upon being informed of the irregularity, indicating good faith and lack of intent to defraud the Revenue. The Tribunal considered the appellant's situation and the absence of malafide intentions in determining the outcome of the appeal.

5. In conclusion, the Tribunal allowed the appeal, setting aside the penalties imposed on the appellant due to his genuine belief and prompt action upon notification of the tax liability. The Tribunal found no justification for the penalties under Section 78 of the relevant law, considering the circumstances and the appellant's cooperation in rectifying the non-payment issue.