2009 (2) TMI 11 - AT - Service Tax

Cable operator - delay in paying service tax - It is not a case where the respondents did not pay any service tax at all. They have paid service tax, as per their understanding on the value, excluding the amounts received by way of reimbursement amounts paid to the pay channels - there was sufficient cause on the part of the respondents in not paying the differential service tax which has been subsequently paid - appellant is entitled for benefit of Section 80 - no penalty is imposable u/s 76

Summary

Issues:
Department's appeal against setting aside penalty under Section 80 of the Finance Act, 1994 by Commissioner (Appeals).

Analysis:
The appeal by the Department was against the Commissioner (Appeals) order setting aside a penalty imposed on the respondent under Section 80 of the Finance Act, 1994. The respondent, a cable operator, collected a total amount from customers but discharged duty liability only on a portion of it. The respondent paid the disputed tax amount after it was pointed out by the Department. The Commissioner (Appeals) set aside the penalty imposed by the original authority, stating that the appellant had a bona fide belief that certain amounts collected and paid to pay channels were not liable for inclusion in the assessable value. The Commissioner held that there was reasonable cause for the failure to pay service tax on these specific amounts, thus granting the benefit of Section 80 of the Finance Act, 1994 and ruling out the imposition of a penalty under Section 76.

The Department's appeal contended that if there was doubt, the respondent should have sought clarification from the Department, which was not done. The Department argued that the respondent's intention was mala fide and that they would have evaded tax successfully if timely action had not been taken. The Department claimed that the respondent's stance was an after-thought to avoid the penalty. However, the Tribunal found that the original authority did not impose a penalty under Section 78 but under Section 76 for the delay in paying service tax. The Tribunal noted that the respondent had paid service tax based on their understanding, excluding certain reimbursement amounts paid to pay channels. The Tribunal agreed with the Commissioner (Appeals) that the respondent had misunderstood the Board's clarifications regarding similar services, leading to a reasonable cause for not paying the differential service tax initially. The Tribunal upheld the Commissioner's decision, rejecting the appeal and disposing of the cross-objection.

In conclusion, the Tribunal upheld the Commissioner (Appeals) decision to set aside the penalty under Section 80 of the Finance Act, 1994, as it found that the respondent had a reasonable cause for not paying service tax on specific amounts collected and paid to pay channels. The Tribunal dismissed the Department's appeal, affirming the legal and proper reasoning adopted by the Commissioner (Appeals) in granting the benefit of Section 80 and ruling out the penalty under Section 76.