2008 (10) TMI 101 - AT - Service Tax

Delay in payment of tax bona fide belief pertaining to the category in which their services to be classified penalty u/s 76 set aside further, as there is no suppression of facts or value of taxable service, penalty u/s 78 is also set aside in respect of penalty u/s 75A, since this provision came into force only on 16-7-01, penalty u/s 75A is not imposable - since it is a failure on the assessee s part to follow the procedures, penalty of Rs. 1,000/- u/s 77 is upheld

Summary

Issues:
1. Imposition of penalties under various provisions of the Finance Act, 1994 for non-payment of service tax during the periods 1999 and 2000.

Analysis:
The appeal before the Appellate Tribunal CESTAT, Bangalore arose from an Order-in-Appeal confirming the service tax amount of Rs. 7200 on the taxable value of Rs. 1,44,000, which was not initially paid during the periods 1999 and 2000. The penalties imposed under different sections were challenged by the appellant. The learned Counsel argued that the penalty under Section 75(a) of the Finance Act was not applicable as the provision came into effect after the period in question. He also contended that the penalty of Rs. 100 per day for non-payment of service tax should be set aside due to a genuine dispute regarding the classification of services. The Counsel relied on the case law of Hindustan Steel Ltd. v. State of Orissa to support the argument that there was no intention to evade payment. Additionally, the appellant argued against the penalty under Section 78 for suppressing the value of taxable service, stating that there was no suppression of facts and no permission was obtained from the Commissioner of Service Tax as required by the Act.

The learned SDR justified the imposition of penalties, claiming that the dispute was not genuine, and the appellant did not hold a bona fide belief regarding the non-coverage of service tax. However, the Tribunal carefully considered the submissions from both sides. It noted that the service tax along with interest had already been deposited during the relevant periods. Consequently, the penalty under Section 75(a) was deemed not imposable. Regarding the penalty of Rs. 100 per day for non-payment of service tax, the Tribunal found that the appellant had a genuine belief about the classification of services, and therefore, this penalty was set aside. The Tribunal also took into account the reduction of the earlier demand to Rs. 7,200 from Rs. 4.8 lakhs during de novo proceedings, establishing the appellant's bona fide belief. As a result, the Tribunal held that the penalty under Section 76 for non-payment of service tax should be set aside. The penalty under Section 77 for failure to furnish prescribed returns was upheld, while the penalty under Section 78 for suppressing the value of taxable service was set aside due to the lack of suppression of facts and the absence of required permission from the Commissioner of Service Tax.

In conclusion, the Tribunal set aside the penalties under various provisions, except for the penalty of Rs. 1,000 imposed under Section 77 of the Act. The appeal was disposed of accordingly with consequential relief pronounced in the open court.