2008 (11) TMI 94 - AT - Service Tax

Amount was collected from clients but not paid to govt. - levy of penalty and demand of interest on the amount collected - once it is held that the appellant is not liable to pay service tax, no penalty can be levied and interest is also not leviable Moreover, the amount collected from the clients has already been paid to the Government appellant stated that the provisions of Section 11D of CEA have never been invoked in SCN - therefore, demand of interest and penalty is set aside

Summary

Issues:
Levy of penalty and demand of interest on the amount collected by the appellant as service tax.

Analysis:
The appeal was filed against the Order-in-Appeal passed by the Commissioner of Central Excise, Customs & Service Tax. The appellants, engaged in manufacturing hoardings, started collecting service tax from clients following the inclusion of Advertising Agencies under Service Tax. The Original Authority concluded that the appellants were not liable to pay service tax during the relevant period, except for a specific amount collected but not remitted to the Government. A penalty and interest were imposed under Section 78 of the Finance Act, 1994.

The appellant contended that since they were not liable to pay service tax, no penalty should be levied. They argued that the collected amount had already been paid to the Government and questioned the imposition of penalty and interest, highlighting that Section 11D was not invoked in the Show Cause Notice. The appellant cited relevant case-laws to support their argument, emphasizing that recovery under Section 11D does not warrant penalties or interest.

The Departmental Representative supported the Original Authority's decision, emphasizing the financial benefit gained by the appellant from holding the collected amounts. They argued for the imposition of interest in addition to the amount collected, despite Section 11D not being explicitly mentioned in the Show Cause Notice.

The Tribunal, considering the arguments and case-laws presented, ruled in favor of the appellant. Citing precedents, the Tribunal held that if an entity is not liable to pay service tax, penalties and interest cannot be imposed on the collected amount. The absence of Section 11D invocation in the Show Cause Notice was crucial in the decision, leading to the appeal being allowed with consequential relief. The Tribunal's decision was based on established case-law principles, emphasizing the importance of legal procedures and precedents in tax matters.

This comprehensive analysis of the judgment highlights the intricacies of the legal arguments, the application of relevant case-laws, and the significance of procedural adherence in tax disputes, ultimately resulting in a favorable outcome for the appellant.